On appeal from the Tax Court of New Jersey, Docket No. 46-2005.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Payne, Simonelli and Hayden.
Air Brook Limousine, Inc, a company that provides regular, charter, and special transportation, both interstate and intrastate, appeals from a determination by the Tax Court that it was required to pay Sales and Use Tax (SUT) on the purchase and repair of its sedan-style cars and limousines for the period from January 1, 1998 through December 31, 2001, because those vehicles did not constitute "buses," thereby qualifying them for a tax exemption under N.J.S.A. 54:32B-8.28. As a consequence, after adjustments, a total assessment was levied of $589,119.56, consisting of $212,645.59 in taxes, $21,264.50 in penalties and $355,208.93 in interest. Air Brook also appeals the court's rejection of its prayer for abatement of penalties and interest. We affirm.
During 2002, the Division of Taxation received an anonymous tip that Air Brook was not paying the SUT that it was required to pay on certain of its vehicles. The Division conducted an audit of the company for the period from January 1, 1998 through December 31, 2001, concluding that Air Brook's sedans and limousines, as well as parts for those vehicles, were subject to the SUT, and that the tax had not been paid. Following the audit, the Division assessed against Air Brook the additional taxes that it found to be due in a notice dated December 13, 2002.
Air Brook filed a protest with the Division's Conferences and Appeals Branch. On October 19, 2004, a conferee made a final determination that Air Brook was not exempt from the SUT for its vehicle purchases and repair parts. On January 14, 2005, Air Brook appealed the decision to the Tax Court, and on November 3, 2008, it moved for summary judgment. The Director of the Division of Taxation filed a cross-motion. Oral argument took place, and on January 5, 2011, a judge of the Tax Court issued a written opinion which concluded, as had the conferee, that N.J.S.A. 54:32B-8.28's exemption from payment of SUT for "buses" did not apply to sedans and limousines.
In reaching its decision, the court accepted the argument of the Director of the Division of Taxation that the SUT exemption statute should be read to give its terms their ordinary meaning, and as a consequence, "bus" should be regarded as referring solely to a large motor vehicle designed to carry many passengers, usually along a regular route, and not to a sedan or limousine utilized primarily for charter service. The court rejected Air Brook's argument that N.J.S.A. 54:32B-8.28 should be read in pari materia with definitions contained in the State's public utility laws, found in Title 48 of the New Jersey Statutes, and the motor vehicle laws, found in Title 39, concluding, after painstaking statutory analysis, that there was "no merit to the contention that the term 'bus' as used in N.J.S.A. 54:32B-8.28 was intended by the Legislature to incorporate the meaning of the word 'autobus' as used in the public utility statutes or the word 'omnibus' in the motor vehicle statutes." The court continued:
A court is permitted to resort to rules of statutory construction, such as reading two statutes in pari materia, only when "the plain language of a statute is not clear or if it is susceptible to more than one possible meaning or interpretation." Marino [v. Marino], 200 N.J. , 329-30 [(2009)]. The rule is applicable when the statutes "relate to the same person or thing, to the same class of person or thing, or have the same purpose or object." Id. at 330, quoting 2B Sutherland on Statutory Construction § 51:3 (7th ed. 2008).
Here, the court held that the purposes of the statutes were different. The purpose of the SUT Act was to raise revenue, whereas the public utilities statutes and motor vehicle laws were enacted to ensure the safety and welfare of the public.
Additionally, the court found that the Director's reading of the exemption statute to apply only to what ordinarily would be considered to be a bus was reasonable. The court reasoned:
It is true that Air Brook's sedans and stretch sedans are regulated as autobuses, and not as limousines. Presumably, the Legislature believed that the nature of the service offered by Air Brook compels such regulation for reasons of public safety and welfare. As acknowledged in [In re] Wilner's Livery Service, [Inc.], 159 N.J. Super. , 232-33 [(App. Div. 1978)], there is probably little difference in the actual services offered by limousine services and charter buses. There is a different method for calculating charges, ibid., and limousine service is subject to municipal rather than state regulation. Id. at 230; N.J.S.A. 48:16-17. It is probable that limousine service was originally conceived of as being local in nature, with less need for the more burdensome state safety and insurance requirements. . . .
Nevertheless, the vehicles at issue are what are ordinarily known as "cars," "limousines," or "stretch limousines," and not as buses. It is difficult to ignore that Air Brook has a name that incorporates the term "limousine" and not "bus." . .
However it may be regulated, Air Brook describes itself in ordinary language as a limousine service. (Footnote omitted.)
As a consequence, the court determined that Air Brook had not carried
its burden of establishing that its purchase of sedans and stretch
sedans, together with their parts, was exempt from taxation*fn1
as the result of the operation of N.J.S.A. 54:32B-12(b).
The court issued another opinion on February 25, 2011, rejecting Air Brook's further prayer in equity for abatement of the penalties and interest on those penalties that had been assessed. In ruling against Air Brook, the court noted that it had never petitioned the Director for an abatement. Nonetheless, the court assumed on the basis of the Director's briefing of the issue that such a request would have been denied, and in the interest of finality, it determined to address the matter.
In doing so, the court noted that one penalty, in the amount of $10,632.25, termed the "amnesty penalty" pursuant to N.J.S.A. 54:53-18b was statutorily not waivable. The remaining $10,632.25 penalty was assessed pursuant to N.J.S.A. 54:49-4a, which provided "[u]nless any part of any underpayment of tax required to be shown on a return or report is shown to be due to reasonable cause, there shall be added to the tax an amount equal to 5% of the underpayment." In that regard, Air Brook argued that the question of whether its sedans and limousines were exempt from the SUT was an issue of first impression, and thus its failure to pay the tax should be excused as reasonable in the circumstances. However, the court agreed with the Director that Air Brook's apparent belief that its vehicle purchases were not taxable was not rooted in the language of the statute or the regulations, and thus the Director's constructive refusal to waive the late payment penalty was neither unreasonable nor arbitrary. The court also concluded that no equitable relief from "excessive interest" was warranted, because the Director lacked the statutory authority to grant a further abatement pursuant to N.J.S.A. 54:49-11(a). Further, the court noted that Air Brook could have elected to pay the tax and requested a refund, in which case no interest payment would have been due, rather than proceeding as it did. There was thus no inequity in assessing interest on the amount found to be due.
On the same day, the court entered a final judgment granting summary judgment in favor of the Division. This appeal followed.
The following facts are undisputed as to the period covered by the Division's audit of Air Brook, January 1, 1998 through December 31, 2001.
Air Brook is a transportation company that was incorporated in New Jersey in 1971. Since its founding, Air Brook has provided regular, charter, and special route transportation throughout the northeast, but primarily in New Jersey. It is authorized to provide these services in New Jersey and throughout the forty-eight contiguous states under operating authorities issued by the New Jersey DOT and, initially, by the ICC. Air Brook has two wholly owned subsidiaries: Air Brook Airport Express, Inc. and Central Transit Lines, Inc. These entities hold similar operating authorities, under which Air Brook also provides transportation services.
During the audit period, Air Brook was authorized by the New Jersey DOT to operate regular route service between a Ridgewood Park and Ride facility and Newark Airport and between a Montvale Park and Ride facility and the Airport. It was authorized under certificates initially issued by the ICC to conduct regular route service between Rockland County, New York and Atlantic City, and also between Newark, LaGuardia and Kennedy Airports. Additionally, it was authorized by the ICC to conduct charter and special service consisting of nonscheduled door-to-door transportation of eleven or fewer passengers in any one vehicle between Bergen, Hudson, Passaic, and Essex Counties in New Jersey and Kennedy and LaGuardia Airports in New York.
During the relevant period, Air Brook owned vehicles in five different sizes: full-size motor coaches, minibuses, vans, stretch sedans, and standard sedans. It used vehicles of all sizes for its regularly scheduled route services between Newark Airport and the Ridgewood and Montvale Park & Rides. According to the Tax Court, Air Brook "maintains historical data on its regular routes to estimate anticipated passenger loads and, based on these estimates, determines which type of vehicle to use for any given regular route trip." Air Brook's vehicle fleet, services, and revenue for the audit period were as follows: