On certification to the Superior Court, Appellate Division.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
The Court considers whether plaintiffs were properly denied a farmland assessment for temporary greenhouses, pursuant to the Farmland Assessment Act (Act), N.J.S.A. 54:4-23.1 to -23.24, because various activities associated with retail sales took place within those structures.
The Gasko Family Farm (Farm) is a seventy-one acre tract of land in Monroe Township. Temporary, plasticcovered greenhouses are used on the Farm for planting and cultivating plant material. The dispute over the taX assessment has narrowed to four of these structures -- greenhouses 3, 4, 5, and 6. The public is invited into these greenhouses several times a year for the purpose of selecting plants for purchase. Greenhouse 1, which the Gaskos now agree is ineligible for farmland assessment status, is the only greenhouse containing an area dedicated exclusively for sales transactions. It houses cash registers, checkout counters and posted signs displaying prices. The majority of the plants sold through retail purchase are selected from displays located in greenhouse 1, and all purchases are consummated in greenhouse 1. As plants are purchased from greenhouse 1, employees replenish the displays by bringing forward plant stock from greenhouses 3 through 6. Greenhouses 3 through 6 do not contain any of the sales spaces present in greenhouse 1 and appear to be fully utilized for growing plants. They are equipped with irrigation and conveyor belt systems and their use is not altered in any way during those times that the structures may be entered by non-employees. The planting and spacing of plants are designed to make maximum use of the space for growing efficiency. The plants are arranged to promote growth, not for sales display.
The Farm is open to the public for a total of twenty weeks per year spread over approximately three intervals. Retail sales are the primary source of the Gaskos' revenue. During selling times, approximately 125 carts are available in greenhouse 1 for customer use. The Gaskos do not employ sales staff during the periods when the public is invited in, although the regular farm and greenhouse employees assist with sales. The parking lot can accommodate approximately forty vehicles and an overflow lot can accommodate approximately one hundred and fifty vehicles. The Gaskos advertise their business in local newspapers and maintain signage on the farm.
The Gaskos received a farmland tax exemption for the greenhouses until 1998. In 1998, a new tax assessor determined that the greenhouses contained disqualifying"sales space" under N.J.S.A. 54:23-12. The Gaskos appealed to the Middlesex County Board of Taxation (Tax Board), which reduced the assessment. The Township of Monroe (Township) appealed to the Tax Court. For 1999, 2000, 2001 and 2002, the assessor continued to find that the greenhouses did not qualify for farmland assessment and the Gaskos appealed. Each year, the Tax Board affirmed the higher assessment. The Tax Court consolidated the appeals for the years 1998 through 2001, and found that greenhouses 1, 3, 4, 5, and 6 contained sales space and therefore were disqualified.
The Appellate Division affirmed, finding that the Gaskos' marketing and sales activities affected all of the greenhouses and required the loss of farmland assessment for those structures.
HELD: The temporary greenhouses at issue in this case, in which the growing operation fully utilizes the greenhouses and no adjustments are made to address marketing or retail concerns, qualify for farmland assessment under N.J.S.A. 54:4-23.12(a), even though the public is allowed in to choose and remove plants for the purpose of purchasing them elsewhere.
1. The Farmland Assessment Act was authorized by constitutional amendment for the purpose of preserving New Jersey's disappearing farmland. The legislative purpose is effectuated through the creation of a property tax scheme favorable to farmland, which is granted a lower tax assessment based on its value as agricultural or horticultural land. The Act provides favorable tax treatment to farmland, but only to some farm buildings. Farm buildings are assessed at regular tax rates, except for"single-use agricultural or horticultural facilities." Single-use facilities are"designed or constructed so as to be readily dismantled" and are"of a type which can be marketed or sold separately from the farmland and buildings." They include, for example,"readily dismantled silos, greenhouses, grain bins" and other structures. Single-use facilities, however,"shall not include a structure that encloses a space within its walls used for housing, shelter, or working, office or sales space, whether or not removable." N.J.S.A. 54:4- 23.12(a). (Pp. 7 -- 9).
2. Here, it is undisputed that the temporary greenhouses would qualify as single-use facilities under the Act. At issue is whether the retail sales-related activity occurring in fully utilized growing greenhouses requires the loss of farmland assessments, regardless of whether that sales-related activity affects the physical arrangement or use of the buildings, or occurs in any particular physical space dedicated to a"sales" purpose. Although exemptions from the general property tax scheme are construed against exemption and the party claiming the exemption must bear the burden of proof, the Court concludes that the decisions below were overly restrictive in their application of N.J.S.A. 54:4-23.12(a)'s exemption. (Pp. 9 -- 10).
3. The Farmland Assessment Act was authorized to stem the conversion of farmland to other uses by assisting the farmers who remain to cope with the modern farming requirements. The Act does not discourage sales in connection with agricultural activity. By its own terms, various provisions in the Act contemplate sales activity as the natural consequence of farming activity. Therefore, it cannot be that temporary greenhouses are disqualified because some sales-related activities, which culminate in sales consummated elsewhere, may occur within the greenhouses without causing any deviation from the full-scale growing operation that takes place there. If the growing operation fully utilizes the greenhouses and no adjustments are made to address marketing or retail concerns, the greenhouses should not be regarded as"sales space" within the contemplation of the Act merely because the public is allowed in to choose, and remove plants."Sales space" perforce requires something more than incidental sales-related activities that do not alter the essential growing-operation activities going on in a working greenhouse. (Pp. 10 -- 13).
4. In Van Wingerden v. Lafayette Township, 18 N.J. Tax 81, 90 (1999), aff'd, 335 N.J. Super. 560 (App. Div. 2000), the Tax Court correctly interpreted N.J.S.A. 54:4-23.12(a) to mean that sales activity in or from a structure that otherwise qualifies for exemption does not, in itself, preclude qualification, and the structure will lose such qualification only if it encloses"sales space" as meant by the statute. To the extent that Van Wingerden held that the Act denies farmland assessment status to greenhouses that contain an"enclose[d] sales space" that breaches the notion of an integrated, single-use facility used for agricultural or horticultural purposes, the Court agrees. In this context, the Court understands the term"enclosed" in its commonsense meaning, that is, to encompass a clearly demarked area readily identifiable for confining sales transactions to that location, by which the single purpose nature of the structure is lost. (Pp. 13 -- 14).
5. Here, greenhouse 1 clearly contains enclosed"sales space." In greenhouses 3 through 6, however, all available space is used for plants and plant-growing related material. During the periods when the public is allowed access, they enter these greenhouses only to view, examine, and select plants to be brought to greenhouse 1 for purchase. In short, the greenhouse itself is not"enclosed sales space" nor does it contain within its walls any enclosed sales space where sales are consummated through payment and preparation of the product for transport. The Court rejects the contention that somehow the intensity of sales-related activity within greenhouses 3 through 6 has altered the essential nature of those structures. No money is exchanged in these greenhouses, no pricing information is posted, and no packaging of purchased items is performed for customers. It was error to have denied greenhouses 3, 4, 5, and 6 farmland assessment status for the tax years in dispute. (Pp. 15 -- 16).
The judgment of the Appellate Division is REVERSED.
CHIEF JUSTICE PORITZ and JUSTICES LONG, ZAZZALI, ALBIN, WALLACE and RIVERA-SOTO join in ...