This post was originally published on Forbes Oct 14, 2015
If you ever bought one of those big soft pretzels at a mall or a stadium, you probably didn't worry about where the "pretzel warmer" that held it at the proper temperature for your enjoyment came from. I'm going to tell you anyway. J&J Snack Food Sales Corp makes soft pretzels under a variety of brands including Suprerpretzel, Mr. Pretzel and Seriously Twisted.
(1) mere storage and withdrawal from storage of the Warmers plaintiff manufactures in New Jersey exempts the Warmers from use tax; (2) the Warmers are use tax exempt because plaintiff uses the Warmers as part of the manufacturing and processing of pretzels; (3) the Division should be equitably estopped from its assessment because of its 1992 Final Determination; (4) the Division should not be permitted to assess plaintiff use tax on the Warmers based on the equitable principle of laches;
The Tax Court determined plaintiff's purchase, assembly and distribution of the Warmer parts in New Jersey fell within the Act's broad ambit and were therefore subject to a use tax, regardless of whether they were shipped to in-state or out-of-state customers. We agree.
Plaintiff first challenges the application of N.J.S.A. 54:32B-6(A) by arguing the Tax Court erred in presuming its purchase of Warmer parts was a “retail sale.” N.J.S.A. 54:32B-2(e) defines “retail sale” as “any sale, lease, or rental for any purpose, other than for resale, sublease, or subrent.” (emphasis added). Plaintiff alleges the Warmer parts are purchased for resale, “as a component part of a product produced for sale by the purchaser,” whether the Warmers are loaned or sold and, therefore, no use tax applies.
However, plaintiff did not present this argument to the Tax Court, notwithstanding that the opportunity to do so was available. We note that plaintiff consistently argued two separate theories, in the alternative, for the Warmers' exemption from the use tax, each denied by the Tax Court. We will decline consideration of an issue not properly raised before the trial court, unless the jurisdiction of the court is implicated or the matter concerns an issue of great public importance. Zaman v. Felton, 219 N.J. 199, 226-27 (2014) (citing Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973) ). Neither situation exists here and, therefore, we decline to consider plaintiff's contention on this point.
The equitable estoppel and laches arguments go back to the 1992 audit. Laches is an equitable remedy “'invoked to deny a party enforcement of a known right when the party engages in an inexcusable and unexplained delay in exercising that right to the prejudice of the other party.". It seemed pretty solid to me. J&J was audited for 1992 and adjusted their practices and then they are told something different. The Court, however, did not find any "inexcusable delay".
Had the case arisen in Wyoming, a Wyoming court might have found differently on this issue. A recent Wyoming ruling dealt with broadband equipment brought into the state to be prepared for out-of-state use. The Wyoming Department of Revenue held that temporarily storing and sorting broadband equipment in the state was not a taxable use, because the owner would ultimately use the equipment for its intended purpose out-of-state. If the New Jersey court had adopted this reasoning, things might have ended more favorably for J&J.