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Burlington Coat Factory Warehouse v. Director, Division of Taxation

Superior Court of New Jersey, Appellate Division

November 26, 2013

BURLINGTON COAT FACTORY WAREHOUSE, Plaintiff-Appellant,
v.
DIRECTOR, DIVISION OF TAXATION, Defendant-Respondent.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted October 1, 2013

On appeal from the Tax Court of New Jersey, Docket No. 007820-2008.

Stravitsky & Associates, L.L.C., attorneys for appellant (Bruce J. Stravitsky, on the brief).

John J. Hoffman, Acting Attorney General, attorney for respondent (Lewis A. Scheindlin, Assistant Attorney General, of counsel; Jill C. McNally, Deputy Attorney General, on the brief).

Before Judges Messano and Hayden.

PER CURIAM

Plaintiff Burlington Coat Factory Warehouse installed an inventory material handling system (the system) and new restrooms in its warehouse facility. After paying a sales tax on services associated with the two projects pursuant to N.J.S.A. 54:32B-3, plaintiff filed a refund claim, asserting that, because the system and restrooms were capital improvements to real property, the services provided were exempt.

In a letter dated March 7, 2008 (denial letter), defendant, the State of New Jersey Division of Taxation (Division), granted plaintiff a partial refund in the amount of $31, 156.20, finding that services performed in conjunction with demolishing the existing restrooms and installing new ones were exempt from sales tax. However, the Division declined to issue a refund for the balance of the taxes paid, $396, 568.56. In the denial letter, the Division explained:

[The] labor charges associated with the inventory material handling system are taxable services as installing personal property, or maintaining, servicing, repairing tangible personal property . . . [because the] taxpayer [. . .] failed to substantiate that the labor charges associated with the inventory material handling system increased the capital value of the real property and significantly increased the useful life of the real property.

Further, the Division found that plaintiff's accounting treatment of the system, i.e., it had depreciated the system using six- or ten-year useful lives, suggested the system was tangible personal property, not real property. Alternatively, the Division concluded that, if the system was real property, the labor charges would be "taxable services as maintenance, servicing, or repair of real property . . . ."

Plaintiff filed its complaint in the Tax Court, and the matter proceeded to trial. Following the close of plaintiff's case, the judge granted the Division's motion to dismiss, concluding that plaintiff failed to present sufficient evidence to establish it was entitled to a refund.

Plaintiff now appeals, positing several procedural and substantive arguments. We have considered the arguments raised in light of the record and ...


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