On appeal from the Tax Court of New Jersey, Docket Numbers 8825-2006, 8826-2006 and 8827-2006.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Carchman, Parrillo and Lihotz.
In these three consolidated cases, plaintiffs Trump Plaza Associates, Trump Taj Mahal Associates and Trump Marina Associates (collectively plaintiffs) appeal from the Tax Court's grant of summary judgment in favor of the defendant Director, Division of Taxation (the Director or Division). Plaintiffs had not been aware that they had been mistakenly charged an embedded sales tax on their purchases of electricity, which should have been exempt from such tax. The Tax Court denied plaintiffs' request to equitably estop the Director from asserting the four-year statute of limitations applicable to refunds based on the embedded tax. N.J.S.A. 54:32B-20(a). We conclude that plaintiffs have failed to establish sufficient facts to apply the extraordinary relief of estoppel against a taxing authority, and we affirm.
These are the relevant facts adduced from the record.
As part of the energy tax reform legislation effective January 1, 1998 a six percent sales and use tax was imposed on the sale of utility services, including electricity. N.J.S.A. 54:32B-3(b)(7); P.L. 1997, c. 162. Electricity purchased under an Off-Tariff Rate Agreement (OTRA), entered into prior to January 1, 2008 however, was exempt from sales tax. N.J.S.A. 54:32B-8.47(b).
Normally, sales tax charges must be "stated, charged and shown separately" pursuant to N.J.S.A. 54:32B-12(a). However, the Legislature specifically mandated that "[a]ll sellers of energy or utility service shall include the tax imposed by the 'Sales and Use Tax Act' within the purchase price of the tangible personal property or service." N.J.S.A. 54:32B-14(e).*fn1
In 1996, plaintiffs each entered into such a contract known as an OTRA, or service agreement, with Atlantic City Electric (ACE), effective March 17, 1997.*fn2 The OTRAs were filed with and approved by the BPU before January 1, 1998. Although the record is silent on this issue, the parties presumed that when ACE modified its computer programs to charge an embedded sales tax according to the newly enacted legislation, it failed to properly account for what should have been the continuing exemption for customers governed by OTRAs.
According to Frederick T. Cunningham, Vice President of Legal Affairs for Trump Plaza, Stephen S. Oskiera, Vice President of Finance for Taj Mahal, and Daniel M. McFadden, Vice President of Finance for Trump Marina, ACE did not charge or collect sales tax on electricity purchased by plaintiffs under the OTRAs from March 17, 1997, through December 31, 1997.
Beginning on January 1, 1998, and through the expiration of the OTRAs on March 17, 2004, ACE collected and remitted sales tax on electricity purchased by plaintiffs under the OTRAs and none of the invoices separately itemized the sales tax. Both plaintiffs and the Director agree that the electricity purchased by plaintiffs from ACE should not have been subject to sales tax. ACE and another provider, Public Service Electric and Gas Company (PSE&G), entered into OTRAs with thirteen and twelve of their customers, respectively, and improperly collected sales tax from each of those customers for electricity purchased under the agreements. In an effort to promote "economic development" in this State, the BPU adopted specific standards for the OTRAs, which allowed customers to negotiate a lower rate in exchange for the agreement to utilize the supplier exclusively.
Plaintiffs were not aware that ACE was charging sales tax "until sometime in the Spring of 2005 when Trump's [present] counsel suggested that Trump investigate whether ACE was improperly imbedding sales tax on its invoices to Trump."
Lori Armstrong, regional account coordinator for ACE, confirmed that each of the plaintiffs had OTRAs filed with the New Jersey BPU and that amounts paid between January 1, 1998 and March 31, 2001 included an embedded 6% sales tax.
On July 20, 2005, plaintiffs filed claims with the Division for refunds of sales tax paid to ACE for electricity purchased under their respective OTRAs during the period of April 1, 2001, through March 17, 2004. The Division granted the refunds by letter dated January 20, 2006.
One year later, on July 21, 2006, plaintiffs filed similar claims for refunds of sales tax paid under the OTRAs during the period of January 1, 1998, through March 31, 2001. The Division denied the refund requests of $539,614.21 for Trump Plaza, $1,486,783.62 for Taj Mahal and $670,231.59 for Trump Marina, by letters dated September 22, 2006. The Division denied the refunds because the requests were filed out of time.
As to the issue of sufficient diligence to uncover the embedded tax, plaintiffs detailed the internal accounting procedures required by the Casino Control Commission. According to McFadden, each entity employed a Director of Facilities, who was "directly responsible for the annual budget" and who received, reviewed and approved each invoice issued by ACE during the audit period; no director or manager identified or reported any discrepancy between the amount paid to ACE and the budget for energy consumption. McFadden ...