On appeal from the Tax Court of New Jersey, Docket No. 5278-2005.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Sabatino and Alvarez.
The Director of the Division of Taxation ("the Director") appeals the Tax Court's order of November 3, 2006, granting summary judgment to respondent, Davidoff of Geneva (CT), Inc. ("Davidoff"). The order dismissed the Director's claim that Davidoff, a Connecticut-based wholesale dealer of cigars and tobacco products, was subject to the New Jersey Tobacco Products Wholesale Sales and Use Tax Act, N.J.S.A. 54:40B-1 to -14, (the "TPT"), during calendar years 1995 through 2000. The Tax Court also denied the Director's request to reopen discovery. We affirm.
Davidoff is a nationwide wholesale dealer of cigars and other tobacco products. The company is based in Stamford, Connecticut. At the relevant times, Davidoff employed six sales representatives covering the entire United States.
Davidoff owns no property in New Jersey and has no offices in this State. The parties agree, however, that Davidoff products are regularly sold by third-party retailers and consumed in, among other places, New Jersey. In May 1994, Davidoff registered to do business in this State, defining its business as the "wholesale distribution of tobacco products." That same year, Davidoff applied for a license to operate in New Jersey as a cigarette distributor or wholesale dealer. The company renewed this license annually through April 2002. Davidoff began conducting wholesale cigarette sales in New Jersey in 1997, and filed Non-Resident Cigarette Dealer Sales Returns on a monthly basis for the next five years.*fn1
During the six-year taxable period that is at issue here, Davidoff collected the following receipts from its cigars and other tobacco products as the result of purchases by customers from New Jersey: $499,452 in 1995, $1,104,263 in 1996, $1,223,587 in 1997, $1,228,326 in 1998, $754,808 in 1999, and $639,627 in 2000. For that entire taxable period, Davidoff filed returns under the New Jersey Corporation Business Tax Act ("CBT"), N.J.S.A. 54:10A-1 to -41, and paid the CBT taxes that it owed to the State for those years.*fn2
Davidoff applied for and was granted a Certificate of Authority in 1994 to collect our State's sales and use tax, N.J.S.A. 54:32B-1 to -55. Davidoff has never collected that tax, presumably because it has not yet engaged in sales activities in this State that would be subject to that particular tax.*fn3
In April 2000, Davidoff obtained a Certificate of Authority to collect the TPT. Despite having that authorization, Davidoff did not collect or pay the TPT tax, again because it believed that the nature of its operations did not trigger any liability under the TPT.
In 2000, the Director undertook an audit of Davidoff, as part of a broader effort to investigate general compliance with the TPT. The audit was performed by Matthew Goff, a Division of Taxation ("Division") auditor located in Des Plaines, Illinois. Goff completed his audit report of Davidoff on July 28, 2003, about three years after he was assigned the matter.
At multiple times during the course his audit, Goff requested that Davidoff provide him, among other things, with New Jersey customer lists and New Jersey sales data. Goff contends that he never received this information, despite several oral and written requests.*fn4 Consequently, Goff asserted in his report that Davidoff "refused to cooperate and provide any type of customer list, run, or sales detail."
Based on Goff's limited interactions with Davidoff officials, the audit report summarized his understanding of Davidoff's position that it did not owe New Jersey taxes under the TPT:
[Davidoff] feels that they are neither a distributor nor wholesaler under the New Jersey [TPT] and are therefore not responsible for collecting the tax. They maintain that the sales transactions to customers are completed outside the state of New Jersey and therefore not subject to imposition of the tax. As is the "industry practice" of cigar distributors, they feel that their customers should assume responsibility and pay taxes on their purchases . . . . [Emphasis added.]
Goff disagreed with Davidoff's characterization of its business. He acknowledged that Davidoff "purchases it[s] cigars from foreign manufacturers and has no physical ...