On appeal from the Tax Court of New Jersey, whose decision is reported at 19 N.J. Tax 85.
The opinion of the court was delivered by: Baime, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Baime and Carchman.
The novel question presented by this appeal is whether a ten percent impost fee imposed by the New Jersey Sports and Exposition Authority on tickets to Nets professional basketball games at the Meadowlands Sports Complex is exempt from taxation. The impost fee is separately stated on the face of each ticket and is collected by plaintiff on behalf of the Authority, pursuant to a licensing agreement between the two entities. In a reported opinion, the Tax Court concluded that the impost fee is not subject to any statutory exemption. Meadowlands Basketball v. Division of Taxation, 19 N.J. Tax 85 (2000). We affirm the Tax Court's judgment.
The Authority was created by the New Jersey Sports and Expositions Authority Act (N.J.S.A. 5:10-1 to -38). The articulated legislative objectives of the statutory scheme are to establish and operate stadiums for staging sporting events and other expositions, and to attract and accommodate professional athletic teams. N.J.S.A. 5:10-2. The Authority is empowered to "fix" charges "for the use, occupancy or services of its projects," and to grant concessions "for things furnished or services rendered." N.J.S.A. 5:10-5(k). The revenues derived from the Meadowlands Arena are to be earmarked for maintenance and improvements of the facility and the surrounding complex, and for compensation to local governmental entities for loss of property tax revenues. N.J.S.A. 5:10-6(c).
Plaintiff is a member of the National Basketball Association and owner of the Nets. In 1978, the Authority and plaintiff entered into an agreement under which plaintiff was licensed to use the Meadowlands Arena to stage its home games. Among other things, the agreement entitled the Authority to impose "an admission impost of ten percent . . . of the price of each ticket sold for admission to the arena . . . ." The impost fee is to be separately stated on the face of each ticket, and is to be charged to patrons and collected by the plaintiff.
Following an audit by the Division of Taxation, the Director sent plaintiff a notice of deficiency for $516,337.53. The assessment represented the sales tax due and interest on the amount of the impost fees collected. Plaintiff challenged the assessment, claiming that it was levied by a State agency, and was exempt from taxation under N.J.S.A. 54:32B-9(a)(1). We will discuss this subsection at length later in this opinion. It suffices at this point to note that the exemption provided by N.J.S.A. 54:32B-9(a)(1) excepts from taxation amounts charged by a State agency as a "vendor of services or property of a kind not ordinarily sold by private persons." Plaintiff presented evidence indicating that "private persons" generally do not operate sports and exposition arenas.
The Director did not contest this point. He argued, instead, that the Authority did not qualify as a "vendor of services or property." The Director further argued that amounts charged by a State agency for admission to an "athletic game" were taxable under N.J.S.A. 54:32B-9(f), unless the proceeds "inured exclusively to the benefit of elementary or secondary schools." Because it was undisputed that the impost fees levied by the Authority and collected by plaintiff were not used for that purpose, the Director asserted that such amounts were subject to taxation. The Tax Court adopted the Director's position and entered judgment in favor of the Division.
The starting point for our discussion is N.J.S.A. 54:32B- 3(e). Under that subsection, a six percent sales tax is imposed on admission charges to athletic events. N.J.S.A. 54:32-9 governs "exempt organizations." Subsection 9(a)(1) covers exemptions for public entities.
(a) Except as to motor vehicles sold by any of the following, any sale, service or amusement charge by or to any of the following or any use or occupancy by any of the following shall not be subject to the sales and use taxes imposed under this act:
(1) The State of New Jersey, or any of its agencies, instrumentalities, public authorities, public corporations (including a public corporation created pursuant to agreement or compact with another state) or political subdivisions where it is the purchaser, user or consumer, or where it is a vendor of services or property of a kind not ...