Parts Purchased for Pretzel Warmers Cases Are Subject to Use Tax
In the New Jersey Case of J&J Snack Food Sales Corp. vs. Director, Division of Taxation, Tax Court (Sundar, J.T.C.), 35-5-2448, the Court ruled that parts purchased by the Plaintiff used to make pretzel warmers/display cases are subject to use tax.
Defendant’s imposition of use tax on parts purchased by plaintiff for which no sales tax was paid, and which parts were used to make pretzel warmers/display cases, is proper, even if the warmers are subsequently shipped to plaintiff’s out-of-state customers. Neither the parts, nor the assembled warmers are “stored” or “withdrawn from storage”, therefore, they are not excluded from the use tax. The warmers are not part of the manufacturing process of the frozen pretzels, plaintiff’s primary business and operation; therefore, the parts are not exempt from tax. The court also found that the equitable doctrines of laches and estoppels do not apply to the assessment because defendant’s prior audit, which did not impose use tax on the same transactions, was based on a misinterpretation of case law, plaintiff did not prove any detrimental reliance, and no extreme circumstances exist that outweigh the public interest in imposing statutorily required tax assessments. The court, however, removed the interest and penalty included in the assessment under N.J.S.A. 54; 49-11(a). Defendant’s summary judgment motion was granted in part, and plaintiff’s cross-motion for summary judgment was denied. [Decided December 31, 2013].
Reference: New Jersey Law Journal, Case & Analysis, 215 N.J.L.J. 89 (January 13, 2014)
Filed under: Business Litigation; Taxation; Sales & Use Tax
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