On appeal from Superior Court of New Jersey, Law Division, Essex County, L-8461-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 6, 2011
Before Judges Reisner, Simonelli and Hayden.
In this contract dispute, plaintiff Meridian Management Corporation (Meridian) appeals from a February 8, 2011 order, entered after a bench trial, dismissing its complaint against defendant New Jersey Transit Corporation (NJT). We affirm.
These are the most pertinent facts. In 2002, NJT issued an invitation for "firm fixed price" bids for janitorial services for the East Concourse at Penn Station in New York City. The bid documents contained the following standard language:
NJ Transit is a public agency and exempt from paying Sales and Federal Excise Taxes. Bidders shall not include these taxes in their bid price.
Meridian, a Florida-based company that specialized in providing "facilities maintenance" services for "government facilities," was the successful bidder, obtaining a contract to perform the work from 2002 to 2005, and a later extension to 2008.*fn1 NJT paid Meridian over $11 million dollars for its work. There is no dispute that NJT paid Meridian the entire amount that it billed under the contract pursuant to the fixed price quoted in its bid.
The contract contained the following standard language, precluding the contractor from charging NJT sales taxes, and requiring the contractor to pay "any taxes as a result of this contract":
Section 9. Taxes and Applicable Laws.
The Contractor Meridian agrees that any taxes to be paid as a result of this Contract will be paid by the Contractor and that NJ TRANSIT'S obligation is limited to payments for the goods, materials or services in accordance with the unit prices stated herein. As a public agency, NJ Transit is exempt from State use & sales taxes and Federal Excise Taxes. They must not be included in the Contractor's price quotations or invoices. The State of New Jersey's Federal Excise Tax Exemption is 22-75-0050K and the State of New Jersey's State Excise Tax Exemption Number is 21-60000928.
Although section 9 specifically referred to NJT's tax exemption, Meridian's vice-president of administration, Thomas Brownfield, assumed this language meant that Meridian was also exempt from paying sales taxes for services it purchased from subcontractors in carrying out the contract. Based on that understanding, Meridian directed its subcontractors not to charge Meridian sales taxes for the services the subcontractors provided to Meridian. However, Meridian was eventually audited by the New York State taxing authorities, which required Meridian to pay approximately $400,000 in sales taxes for those subcontracted services.
In 2008, Brownfield sent NJT a letter demanding that NJT reimburse Meridian for the sales taxes that New York required Meridian to pay. By letter dated March 11, 2008, NJT declined to pay, asserting that the contract only addressed NJT's tax liability, Meridian was responsible for knowing its own tax obligations, and NJT was not responsible for Meridian's error. In his testimony, Brownfield asserted that the $400,000 Meridian paid in New York sales taxes was a "total loss" to ...