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Tapas De Espana, Inc v. Director

February 28, 2012


On appeal from the Tax Court of New Jersey, Docket No. 012791-2009.

Per curiam.


Submitted December 5, 2011 -

Before Judges Parrillo, Alvarez and Skillman.

Plaintiff Tapas de Espana, Inc., a corporation which formerly operated a restaurant located in West New York, appeals an August 12, 2010 grant of summary judgment to defendant, Director, New Jersey Division of Taxation (Director), affirming the Director's final determination of unpaid sales and use tax (SUT) and corporation business tax (CBT). For the reasons that follow, we affirm.

The Director audited plaintiff with regard to CBT due and owing from October 2001, through September 2004, and SUT due and owing from January 2002, through December 2005. The parties stipulated that the sample period would be plaintiff's fiscal year, from October 2003 through September 2004. Despite prior notification that an audit would be conducted, plaintiff was unable to produce source records, such as detailed cash register tapes and guest checks. Upon review of plaintiff's CBT returns for the audit period, the Director found plaintiff's reported markup of 1.58% to be unusually low; the Director also discovered a discrepancy of over $150,000 between plaintiff's cash register receipts in its general ledger and those recorded on its cash register tapes.

Accordingly, because of the scant available source records and the $150,000 discrepancy, the Director performed a markup analysis. The last two weeks of December 2005 were chosen as the sample period.

After an audited markup was generated, and the markup applied to reported purchases for each year, the resulting change in sales established an SUT deficiency of $146,457.36 plus penalties and interest, as well as a CBT assessment of $180,292.43 plus penalties and interest. A notice of assessment of final audit determination dated September 18, 2006, was served on plaintiff.

Plaintiff filed an administrative protest on October 20, 2006, objecting to the sample period as not representative because it included Christmas. Plaintiff also contended that the Director made various errors in calculation, resulting in an inflated markup, as it should only have been 1.76%.

The Director reviewed plaintiff's submissions, and adjusted its audited findings, reducing the markup from 2.4119% to 2.2227%. The Director did not, however, make adjustments where no backup documentation was supplied, including plaintiff's claim that insufficient allowance was made for waste, theft, and spoilage.

Plaintiff appealed the Director's February 20, 2009 final determination to the Tax Court. As recalculated, plaintiff's liabilities were $96,458 plus penalties and interest on SUT and $68,114 plus penalties and interest on CBT.

On April 27, 2010, the Director filed a motion for summary judgment seeking affirmance of her final determination. On June 1, 2010, plaintiff filed what is characterized as a "cross-motion for denial of summary judgment." Despite this characterization, plaintiff's papers consisted of merely opposition to the Director's application and a demand for discovery of the Director's "audit manuals." The Tax Court judge conducted a telephonic hearing, denied plaintiff's request for additional discovery, and awarded the Director summary judgment. We affirm essentially for the reasons stated in Judge Hayser's cogent and thorough eleven-page written opinion, adding only the following brief comments.

On appeal, plaintiff asserts that material issues of fact exist which should have prevented the grant of summary judgment. Plaintiff also asserts that the trial court erred in concluding that plaintiff miscalculated its tax liability, and made an additional error in refusing to grant discovery.

Summary judgment is granted if the record shows "there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). In making the determination, the judge must ask "whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the ...

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