On appeal from the Tax Court of New Jersey, whose opinion is reported at 17 N.J. Tax 327 (1998).
Before Judges Petrella, Braithwaite and Coburn.
The opinion of the court was delivered by: Braithwaite, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Plaintiff, GNOC, Corp. t/a The Grand ("GNOC"), appeals from a summary judgment granted by the Tax Court that dismissed its complaint seeking to set aside the determination of defendant, Director, Division of Taxation ("Director") *fn1 . The determination directed GNOC to pay the State of New Jersey $158,466 in sales and use taxes pursuant to the New Jersey Sales and Use Tax Act, N.J.S.A. 54:32B-1 to -29 (the "Act"). This appeal concerns the applicability of the Act to complimentary alcoholic beverages provided by GNOC to its patrons at its hotel-casino in Atlantic City for the taxable period of January 1, 1991 through September 30, 1994.
On appeal, GNOC contends: (1) a prior agreement between plaintiff and the Director remains in effect and bars the Director from taxing the alcoholic beverages given to patrons; 2) the Director's interpretation of this agreement "tortures both the language of the agreement" and the Act; (3) the Director deprived plaintiff of due process "in failing to identify the basis for his assessment as to complimentary alcoholic beverages;" (4) "plaintiff's purchase of the alcoholic beverages provided to casino patrons on a complementary basis" constitutes a non- taxable sale for resale; and (5) based on the above arguments, plaintiff's motion for summary judgment should have been granted. We reject these contentions and affirm.
We need not recount at length the background and facts relevant to this appeal. They are set forth fully in the Tax Court's published opinion in a companion case decided on the same day. See Boardwalk Regency Corp. v. Director, Div. of Taxation, 17 N.J. Tax 331 (Tax 1998), rev'd, 18 N.J. Tax 328 (App. Div. 1999).
This matter has its genesis in the Director's determination that GNOC owed the State of New Jersey $135,732.40 for sales and use taxes for providing complimentary alcoholic beverages to its patrons. The Director notified GNOC of his determination by way of a written assessment. The assessment did not include a break-down of the amount due; it merely included the amount of the tax liability, interest, and the amount credited. By way of "explanation" of the assessment, the notice included a list of applicable statutes. The explanation page was titled: "Sales & Use Tax N.J.S.A. 54:32[B]-1 et. seq." On March 30, 1995, GNOC submitted a formal protest and request for an administrative hearing.
The protest was based on a statutorily authorized closing agreement entered into between the Director and the casino industry in 1981, and subsequently amended in 1986 and 1988. See N.J.S.A. 54:53-1. The relevant language of the 1981 agreement provides as follows:
2. No sales tax will be imposed in the provision of complimentary meals. However, a use tax pursuant to N.J.S.A. 54:32B-6 will be imposed upon the "cost" of a meal. For these purposes, the cost of the meal would be deemed to be 25% of the amount those meals are sold to the public by the casino. However, no sales and/or use tax will be imposed upon the provision of complimentary liquor. Further, no sales and/or use tax will be imposed for any period prior to January 1, 1981.
In 1986, the parties amended their agreement. The relevant portion of the agreement provides:
2. No sales or use tax will be imposed in the provision of complimentary meals or complimentary liquor effective January 1, 1986. For purposes of this amended agreement "complimentary meals" shall mean any transaction where the patron is not required to pay any cash consideration for any portion of the price (including any possible sales tax) of food or (non-alcholic) beverage.
3. With respect to issuance of coupons to be used by bus patrons or others which are utilized to satisfy a portion of retail price of the meals consumed by such patrons, sales tax will be imposed upon the full value of said meals pursuant to N.J.S.A. 54:32B-2(c); and said sales tax shall be collected from the patrons and remitted pursuant to N.J.S.A. 54:32B-12, -14, -17 and -18. For purposes of this amended agreement the term "coupon" shall mean any coupon, token or other emolument which entitles the holder to a discount or credit on the purchase price of meals or (non-alcholic) beverage but shall not include coupons or other documents which are accepted in total satisfaction of the purchase price (including any possible sales tax) of such meals or beverage as described in Paragraph 2, above.
In 1988, the agreement was amended again. The amendment was to Paragraph 3 of the 1986 agreement and provides:
3. With respect to issuance of coupons to be used by bus patrons or others, sales tax will be imposed upon the price charged for a meal including nonalcoholic beverages, less the face value of the coupon pursuant to N.J.S.A. 54:32B-3(c); and said sales tax shall be collected from the patrons and remitted pursuant to N.J.S.A. 54:32B-12, -14, -17 and -18. For purposes of this amended agreement the term 'coupon' shall mean any coupon, token or other emolument which entitles the holder to a discount or credit on the purchase price of meals or non- alcoholic beverage for which the casino receives no reimbursement.
Essentially, the agreement and its amendments address how the Director will treat complimentary meals provided by the casino to its patrons under the Act. In 1981, the parties agreed that a percentage of the cost that would have been charged to the public if the complimentary meal had actually been sold would be subject to a use tax. At the time of the 1986 amendment, fully complimentary meals were exempt from the Act, but meals for which a portion of the cost was paid for with casino coupons were subject to sales tax on the full value of the meals. Thus, the 1986 amendment exempted only fully complimentary meals and alcoholic beverages from tax. Finally, the 1988 amendment subjected the "price" of the meal, less the discount provided by the coupon, to the sales tax. "[T]he 1986 and 1988 agreements abandoned an effort to collect taxes for fully complimentary meals in exchange for an agreement by the plaintiff to collect and pay the sales tax for partially 'comped' meals and [non- alcoholic] beverages." Boardwalk Regency, supra, 18 N.J. Tax at 333.
In the Tax Court opinion in this case, the judge set forth the status of sales and use taxes with respect to the sale of alcoholic beverages at the time of the agreement, and after July 1, 1990. He observed:
With regard to alcoholic beverages, the sale of such beverages by a retailer to a customer was specifically exempted from the six percent "retail" sales tax of N.J.S.A. 54:32B-3 beginning July 1, 1980 through July 1, 1990. See N.J.S.A. 54:32B- 8.34, repealed by L. 1990, C. 40 § 11. Instead, alcoholic beverages were taxed only under the Alcoholic Beverage Wholesale Sales Tax Act, N.J.S.A. 54:32C-1 et seq., at 7.3 percent of the wholesale price charged to the retailer. See N.J.S.A. 54:32C- 3.
In July 1990, N.J.S.A. 54:32B-8.34, the exemption of alcoholic beverages from the six percent "retail" sales tax, was repealed by the Legislature. At the same time, the Legislature repealed the Alcoholic Beverage Wholesale Sales Tax Act. Thus, since July 1, 1990, the receipts from any "retail sale" of alcoholic beverages have been specifically subject to New Jersey's six percent ...