August 2, 2007
BLUE DIAMOND DISPOSAL, INC., PLAINTIFF-APPELLANT,
DIRECTOR, DIVISION OF TAXATION, DEFENDANT-RESPONDENT.
On appeal from a Final Judgment of the Tax Court of New Jersey, No. 5008-2004.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued Telephonically April 17, 2007
Before Judges S.L. Reisner, Seltzer and C.L. Miniman.
Plaintiff Blue Diamond Disposal, Inc. (Blue Diamond), appeals from a final judgment of the Tax Court of New Jersey affirming a final determination of the Director, Division of Taxation, that Blue Diamond performs garbage removal services, and as a consequence, those services were subject to the then-extant six-percent sales tax under N.J.S.A. 54:32B-3(b)(4). We affirm.
The facts are undisputed. Blue Diamond is a solid waste hauler licensed by the State of New Jersey. Among other services, it supplies empty dumpsters to property owners and their contractors, tenants, and others to permit them to dispose of solid waste located on their property. An empty dumpster remains at the property until the customer notifies Blue Diamond to remove it. Blue Diamond then picks up the dumpster and hauls the waste to a disposal site. The employees of Blue Diamond do not pick up trash from the ground and put it in the dumpster, nor do they clean the property in any other fashion. If the disposal site rejects the contents of the load, Blue Diamond returns the load to the customer.
On February 8, 2002, the Director notified Blue Diamond that the Division would perform an audit of its business. The audit period was July 1, 1998, through March 31, 2002. From the audit, the Division determined that Blue Diamond owed approximately $26,319.70 in unpaid sales taxes, interest and penalties. A notice of assessment was mailed on October 25, 2002, and Blue Diamond timely protested the assessment. After a February 18, 2004, conference with the taxpayer, the Division issued a final determination as follows:
Blue Diamond Disposal[,] Inc[.,] is providing the service of removal, transportation, and disposal of solid waste. Transactions Audit assessed Sales tax on [those services that] were not on a contractual basis for a term of 30 days or more. Taxpayer business constitutes the maintaining[,] servicing or repairing real property under N.J.S.A. 54:32B-3(b)(4) or maintaining[,] servic[ing] or repairing tangible personal property under N.J.S.A. 54:32B-3(b)(2). There is no provision in the Sales Tax Act to allow for a corporation that holds a Solid Waste Transporter License to be exempt from Sales Tax.
The parties before the Tax Court agreed that the issue to be decided was purely a question of law and the matter was decided summarily. The Tax Court judge concluded that the particular dumpster service provided by Blue Diamond was a "trash removal service" as defined in N.J.A.C. 18:24-13.2 and, because the service was for less than a thirty-day term, was subject to the tax on sales under N.J.S.A. 54:32B-3.
On appeal, Blue Diamond contends that it does not maintain, service or repair real property and, thus, is not subject to a sales tax under N.J.S.A. 54:32B-3(b)(4). It also urges that charges for the transportation of a customer's property to a disposal site are exempt from such taxation under the provisions of N.J.S.A. 54:32B-8.11.
Blue Diamond has the burden to prove that its services do not fall within the scope of N.J.S.A. 54:32B-3(b)(4). Newman v. Dir., Div. of Taxation, 14 N.J. Tax 313, 318-19 (Tax 1994), aff'd o.b., 15 N.J. Tax 228 (App. Div. 1995):
The act presumes that the enumerated services are taxable until the party challenging taxability can prove otherwise. Hospital Portrait Svc. [Co.] v. Director, Div. of Taxation, 6 N.J. Tax 305, 314 (Tax 1983), aff'd o.b. per curiam, 7 N.J. Tax 431 (App. Div. 1984), certif. denied, 101 N.J. 235 (1985). Moreover, the Director's assessment is presumptively correct, and plaintiff bears the burden to prove the contrary. Atlantic City Transp. Co. v. Director, Div. of Taxation, 12 N.J. 130, 146 (1953) ("The settled rule is that there is a presumption that an assessment made by the proper authority is correct and the burden of proof is on the taxpayer to show otherwise."). [Id. at 318.]
See also GE Solid State, Inc. v. Dir., Div. of Taxation, 132 N.J. 298, 306 (1993).
"It is settled that '[a]n administrative agency's interpretation of statutes and regulations within its implementing and enforcing responsibility is ordinarily entitled to our deference.'" Wnuck v. N.J. Div. of Motor Vehicles, 337 N.J. Super. 52, 56 (App. Div. 2001) (quoting In re Appeal by Progressive Cas. Ins. Co., 307 N.J. Super. 93, 102 (App. Div. 1997)). "Absent arbitrary, unreasonable or capricious action, the agency's determination must be affirmed." Ibid. (citing R & R Mktg., L.L.C. v. Brown-Forman Corp., 158 N.J. 170, 175 (1999)).
"Although we recognize that deference is generally given to an administrative agency charged with interpretation of the law, we are not bound by the agency's legal opinions." Levine v. State, Dep't of Transp., 338 N.J. Super. 28, 32 (App. Div. 2001) (citing G.S. v. Dep't of Human Servs., Div. of Youth & Family Servs., 157 N.J. 161, 170 (1999); Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973)).
As previously noted, Blue Diamond contends that it does not maintain, service or repair real property and, thus, is not subject to a sales tax under N.J.S.A. 54:32B-3(b)(4). Between 1998 and 2002 the statute in question provided:
There is imposed and there shall be paid a tax of 6% upon:
(b) The receipts from every sale, except for resale, of the following services:
(4) Maintaining, servicing or repairing real property, . . . whether the services are performed in or outside of a building, as distinguished from adding to or improving such real property by a capital improvement, but excluding services rendered by an individual who is not in a regular trade or business offering his services to the public, and excluding garbage removal and sewer services performed on a regular contractual basis for a term not less than 30 days. [N.J.S.A. 54:32B-3 (1997) (amended 2006) (emphasis added).]
The Director promulgated specific regulations pertinent to the exclusion for garbage removal, the first of which provides: "Trash removal service, when performed on a regular contractual basis for a term of not less than 30 days, is not subject to tax." N.J.A.C. 18:24-13.1. The regulations define "trash" and "removal" in the following manner:
(a) Trash includes garbage or rubbish.
(b) Removal includes only the operation of picking up and physically removing contained waste from the premises and does not include activities related to maintaining or servicing property or any processing of the waste product. Removal would, therefore, not include sweeping parking lots, snow removal and construction site clean-up, or a process such as septic tank cleaning. [N.J.A.C. 18:24-13.2.]
The scope of review of these regulations is deferential and the Director's rulemaking enjoys "a presumption of validity." N.J. State League of Municipalities v. Dep't of Cmty. Affairs, 158 N.J. 211, 222 (1999) (League of Municipalities). Moreover, "[t]he party challenging their validity bears the burden of proving that the regulations are arbitrary, capricious or unreasonable." Ibid. See also In re Amendment of N.J.A.C. 8:31B-3.31, 119 N.J. 531, 543-44 (1990); N.J. Guild of Hearing Aid Dispensers v. Long, 75 N.J. 544, 561 (1978). This deference "stems from the recognition that agencies have the specialized expertise necessary to enact regulations dealing with technical matters." League of Municipalities, supra, 158 N.J. at 222. However, a regulation "must be within the fair contemplation of the delegation of the enabling statute." Ibid. (quotations omitted).
Applying these principles to the regulations before us, we cannot conclude that the regulations are arbitrary, capricious or unreasonable in encompassing rubbish removal services within the scope of the statutory exception for garbage removal services and collectively referring to both as "trash removal services." It seems eminently clear that what is placed in Blue Diamond's dumpsters comes within the regulatory definition of "trash." Because Blue Diamond picks up the dumpsters containing garbage or rubbish, its work comes within the definition of "removal," which is "the operation of picking up and physically removing contained waste from the premises." N.J.A.C. 18:24-13.2(b). However, since Blue Diamond, admittedly, does not engage in this work "on a regular contractual basis for a term of not less than 30 days," N.J.A.C. 18:24-13.1, it does not perform "trash removal services" that are exempt from sales taxes. Nonetheless, Blue Diamond argues that its "services do not constitute repairing, maintaining or servicing real property under relevant case law definitions or under ordinary language usage." We disagree.
In construing a statute, we must "effectuate the intent of the Legislature." Lesniak v. Budzash, 133 N.J. 1, 8 (1993). First, we examine the text of the statute to decide whether there is only one reasonable interpretation. Richard's Auto City, Inc. v. Dir., Div. of Taxation, 140 N.J. 523, 531 (1995). In doing so, we give the words and phrases in the statute their well understood meanings unless the statute explicitly indicates a special meaning. State v. Mortimer, 135 N.J. 517, 532, cert. denied, 513 U.S. 970, 115 S.Ct. 440, 130 L.Ed. 2d 351 (1994). If the statute is clear on its face, we do not look beyond the terms of the statute to determine legislative intent. State v. Sutton, 132 N.J. 471, 479 (1993).
We may also consider another long-established interpretive principle. "The canon of statutory construction, expressio unius est exclusio alterius -- expression of one thing suggests the exclusion of another left unmentioned -- sheds some light on the interpretative analysis." Brodsky v. Grinnell Haulers, Inc., 181 N.J. 102, 112 (2004). "An affirmative expression ordinarily implies a negation of any other." Moses v. Moses, 140 N.J. Eq. 575, 583 (E. & A. 1947). See also Chevron U.S.A. Inc. v. Echazabal, 536 U.S. 73, 80, 122 S.Ct. 2045, 2049, 153 L.Ed. 2d 82, 89 (2002); DiProspero v. Penn, 183 N.J. 477, 495 (2005); Allstate Ins. Co. v. Malec, 104 N.J. 1, 8 (1986); Borough of Fort Lee v. Dir., Div. of Taxation, 14 N.J. Tax 126, 132 (Tax 1994). "A 'general rule of [statutory] construction [is] that enumerated exceptions in a statute indicate a legislative intent that the statute be applied to all cases not specifically excepted.'" Cyktor v. Aspen Manor Condo. Ass'n, 359 N.J. Super. 459, 472 (App. Div. 2003) (quoting State v. Reed, 34 N.J. 554, 558 (1961)).
The statute in question, N.J.S.A. 54:32B-3(b)(4), excludes trash-removal services from the imposition of sales taxes when the services are performed "on a regular contractual basis for a term not less than 30 days." Under the principle of expressio unius est exclusio alterius, that exclusion carries a necessary concomitant inclusion of all other trash removal services upon which sales taxes are to be imposed.
Blue Diamond contends that L & L Oil Service, Inc. v. Director, Division of Taxation, 340 N.J. Super. 173, 186 (App. Div. 2001), and D.P.S. Acquisition Corp. v. Director, Division of Taxation, 16 N.J. Tax 292 (Tax 1997), aff'd, 17 N.J. Tax 592 (App. Div. 1998), do not support imposition of sales taxes on its dumpster services, because the facts of these cases are distinguishable from those before us. L & L was engaged in the business of pumping oil, sludge and antifreeze from the storage tanks of gasoline service stations, industrial properties and residential properties. L & L Oil Serv., supra, 340 N.J. Super. at 190. We held that L & L's services were not repair services "under either the Tax Court's definition in Newman[, supra, 14 N.J. Tax at 323,] or under ordinary language usage." Id. at 185.
Moreover, we disagree[d] with the Tax Court's application of the statutory term of "maintaining" to L & L's operations. Maintaining also connotes more the concept of repair or preventive maintenance as opposed to emptying a tank so that it can be refilled. Waste oil removal can be seen at most as a service that allows the tank owner to continue to use the tank to store waste or even to avoid accidental leakage. [Id. at 185-86.]
We also concluded "that L & L's providing of periodic waste oil removal service is [not] the maintaining, improvement or repair of real property." Id. at 186. However, we concluded "that the term 'servicing' in N.J.S.A. 54:32B-3(b) was intended to and does include the providing of a service, such as removal of waste fluids from a tank which remains in use for the benefit of its owner or user." Ibid. Hence, L & L's service was subject to taxation.
In D.P.S. Acquisition, the Tax Court rejected the taxpayer's claim that it was engaged in the business of garbage removal services on a contractual basis for a term in excess of thirty days. D.P.S. Acquisition, supra, 16 N.J. Tax at 299. The court held that the use of self-propelled machines to sweep parking lots, where the swept material was placed in a dumpster on the property, was a service subject to sales tax under N.J.S.A. 54:32B-3(b)(4) as an outdoor maintenance service. Ibid.
We are not persuaded that these cases are distinguishable from the service of providing a dumpster to a customer and then removing the trash-filled dumpster from the customer's property. That service is as much a service to real property as the service of emptying an oil storage tank or sweeping parking lots because the trash which goes into the Blue Diamond dumpster was located on a customer's real property before it was put in the dumpster and hauled away.
Blue Diamond also argues that its employees do not physically handle the trash, unlike the employees in L & L Oil Service and D.P.S. Acquisition. It is of no moment that Blue Diamond's employees do not physically handle the trash because its employees operate the machinery that deposits containers on its customers' property, removes the containers when its customers request removal, takes the containers to a disposal site, and then returns the containers to the inventory of Blue Diamond. We are not persuaded that such a distinction should exempt Blue Diamond from the holdings in L & L Oil Service and D.P.S. Acquisition.
Blue Diamond next contends that it is exempt from imposition of sales taxes by virtue of N.J.S.A. 54:32B-8.11 (1997) (amended 2006). That statute provided that "[r]eceipts from charges for the transportation of persons or property, except of energy, are exempt from the tax imposed under the Sales and Use Tax Act." Ibid. It argues that its sole business is the transportation of its customers' tangible personal property. It points to the undisputed certification of its president as establishing that the property it transports belonged to its customers at all times until accepted by the disposal site. As such, it contends that it is entitled to the benefit of the exemption. However, the Tax Court judge found that "[t]he fact remains that [Blue Diamond] arrives at a customer's location and takes their unwanted garbage away. In that capacity, [Blue Diamond] is not merely a transport company.
Transportation is only incidental to the primary service [Blue Diamond] renders -- garbage removal." We agree.
The Tax Court's conclusion that transportation is only incidental to the services Blue Diamond provides to its customers finds support in our case law. In D.P.S. Acquisition, supra, 16 N.J. Tax at 300, the court looked to "the predominant use to which an item is put, or the predominant service performed," in concluding that the taxpayer's predominant service was sweeping its customers' parking lots, not removal of the swept material. In KSS Transportation Corp. v. Baldwin, 9 N.J. Tax 273, 279-80 (Tax 1987), aff'd sub nom., KSS Transp. Corp. v. Director, Division of Taxation, 11 N.J. Tax 89 (App. Div.), certif. denied, 118 N.J. 184 (1989), the Tax Court adopted the predominant-use test to determine whether an aircraft was used for common carriage and, thus, entitled to an exemption from use taxes. The conclusion of the Tax Court here, that Blue Diamond's dumpster service was not engaged in purely a transportation service, is consistent with the predominant-use test.
Finally, even if the Tax Court had not found that the predominant service was garbage removal, Blue Diamond still would not be entitled to the exemption for transportation. The services it provided were not purely transportation services because Blue Diamond provided the containers into which its customers placed trash, containers that might remain for an indefinite time on a customer's property. Where both taxable and exempt services are invoiced, the exempt services must be separately stated or the entire charge is presumed to be taxable. N.J.S.A. 54:32B-12(a); N.J.A.C. 18:24-27.2(a). See, e.g., Maher Terminals, Inc. v. Dir., Div. of Taxation, 212 N.J. Super. 164, 168-69 (App. Div. 1986). Blue Diamond did not separately state transportation charges on its invoices and thus is not entitled to the exemption.
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