NOT FOR PUBLICATION WITHOUT APPROVAL OF THE TAX COURT COMMITTEE ON OPINIONS
TAX COURT OF NEW JERSEY

M AL A S UNDAR **Richard J. Hughes Justice Complex** JUDG E **P.O. Box 975 Trenton, New Jersey 08625** 

**- 0975**  **609 815**

**- 2922, Ext. 54630 Fax 609 37**  **6- 3018**  **March 27, 2020**  **Mark Cherry, Esq. Cherry Hill, New Jersey 08034**  **Attorney for Plaintiffs Heather Lynn Anderson,**  **Esq. Deputy Attorney General**  **Attorney for Defendant**

**Re: SRNJ**  **Telecom, Inc . &**  **Dae Sik Su v.**  **Dir ., Div. of Taxation**  **Docke t N**  **o. 013681-2017 Dear Counsel:**  **This letter opinion**  **decides the summary judgment motion**  **filed by defendant (“Director”)**  **, seeking a**  **dismissal of the above**

**- captioned complain**  **t with pre**  **judice**

**. The essence**  **of the Director’s**  **motion is that the**  **impos ition of**  **an arbitrary sales tax**  **assessment of $50,000**  **by the Division of Taxation (the State agency which defendant heads, hereinafter**  **“Taxation”) upon**  **the corporate plaintiff (“SRNJ”) is valid**  **because SRNJ**  **never responded to Taxation’s auditor’s request f**  **or books and records , and**  **its proffer of information as to the purported assessment at**  **the administrative protest was inadequate and sorely lacking. 1**  **The Director’s Statement of**  **Material Facts not in Genuine Dispute in support of his motion was**  **a recitati on of**  **the certifications of the auditor (as t**  **o the audit procedure and result )**  **, and the conferee (as to the**  **administrative protest hearing and result ).**  **The auditor ’s**  **certifi cation was as follows:**  **SRNJ is an authorized Metro PCS cell phone**  **store and service retailer in Burlington, New Jersey. H e first notified SRNJ that**  **it was selected**

**1 Although**  **Dae Sik Su is also listed as**  **a plain**  **tiff, the disputed assessment was only against the corporate plaintiff. The court will therefore use “SRNJ” in this opinion rather**  **than “plaintiffs.” 2** 

**for audit ,**  **and in this connection ,**  **had to produce certain identified books and records. Since there** 

**was no response t**  **o this notice or to his follow-**  **up letters , he notified SRNJ that**  **its lack of**  **response would trigger an arbitrary assessment of $50,000. When SRNJ ’s**  **accountant called**  **him, he stated that he co uld not discuss the case with**  **out a formal authorization form**  **fro m**  **SRNJ in this regard** 

**. As there was no**  **further contact from SRNJ or its accountant, he imposed an**  **arbitrary sales tax assessment of $50,000 (for tax periods 01 /**  **01/2012 to 09/30/2015) plus penalties and interest for a total of $59,928.89, by a Notice of Fi**  **nal Audit Determination dated February 3, 2016.**  **The auditor included all the documents supporting**  **the assessment in his**  **certification. One such document was his audit report**  **, which included a sheet titled “Summary**  **of Gross Receipts” showing that the**  **gross receipts reported in SRNJ’s**  **Sales & Use tax (“**  **SUT ”**  **) returns did not match the**  **gross receipts reported on its Corporation Business Tax (**  **“ CBT**  **” )**  **returns for tax years 2011 to 2014 (the 2011-2014**  **CBT returns reporting $781,209 , $148,835,**  **$88,495, and $77,899 of receipts more than the receipts on the S UT retu**  **rns). The conferee**  **’s certifi**  **cation was as follows: SRNJ**  **administratively protest**  **ed the audit**  **determination on April 27, 2016 ,**  **and disagreed with the same since it was a “conduit for cell phone customer and cell phone**  **carrier, ” and that it “remitted all receipts into its checking account**  **which was directly withdrawn by the carrier. ”**  **At the conference hearing in August 2017**  **, SRNJ**  **provided E xce**  **l spreadsheets**  **that appeared to**  **the conferee to be**  **a sales journal**  **for 2014**  **. SRNJ**

**s tated that it had nothing more since all records**  **had been thrown away. Based on this, the**  **conferee determined that**  **SRNJ had**  **failed to maintain adequate**  **business records and**  **had failed to employ adequate internal controls as required by law. He therefore upheld the arbi**  **trary**
**assessment and**  **issued a final determination in this regard on October 19, 2017**  **( which sho**  **wed $66,400.87**  **as the amount owed due to accrued interest**  **). 3** 

**In response to the Director’s summary judgment motion, SRNJ**  **filed a brief as its opposition. In the portion titled “Procedural History and Statement of**  **Material Facts,” the brief asserted that**  **SRNJ was sold on August 31, 2015**  **, and its principal, plaintiff Dae Sik Su**  **, moved**
**to Texas . It**  **therea fter recited**  **the same facts that were contained in Taxation’s auditor’s**  **certification (as to the attempted contacts, lack o f response from**  **SRNJ , and imposition of the**  **arbitrary assessment) and the conferee’s certification (as to the adminis trative protest, hearing,**  **and issuance of the final determination). Additional facts were that during this litigation,**  **SRNJ provided the D**  **irector third**

**- party verifications of payments it had**  **made to the cell carrier and “bill collector**  **, ” which the Director rejected. Included with its brief were several pages of w**  **hat it termed “third party verifications”**  **; however, these documents were not accompanied by any**  **certification, nor were any of the asserted additional facts.**  **The Director’s reply brief argued that due to the procedural deficiencies in SRNJ**  **’s opposition, his material undisputed facts were deemed admitted. He also argued that**  **SRNJ failed**  **to provide definitive qualitative documentary evidence to support the**  **complaint or opposition to**  **the summary judgment motion, and further that the third**

**- party statements attached to**  **SRNJ’s brief were for periods before the audit tax periods and did not tie** 

**- in to the receipts reported on** 
**SRNJ’s S**  **UT /CBT returns. Therefore, the Director argued, summary judgment should be**  **granted in his favor since Taxation’s arbitrary assessment was properly imposed under t he law**  **and under the facts here. After the court provided**  **SRNJ’ s counsel an opportunity to correct these procedural**  **deficiencies ,**  **including its non**

**- response to the Director’s statement of material undisputed facts,** 
**SRNJ filed**  **a subsequent supplemental opposition. It included a heading “Statement of**  **Disputed/Undisputed Facts” and in one paragraph stated that it did not contest the Director’s** **4**

**Statement of Material Facts not in Genuine Dispute ;**  **rather ,**  **its “sole contention” was that th e**  **Directo r**  **had failed to consider “business records provided by a Third** 

**- Party Bill collector,” which**  **would have provided “a more accurate determination.” However, there w ere**  **neither new documents appended to this brief, nor any certifications in support of the doc**  **uments filed with the initial opposition brief.**  **Thus, the Director**  **’s supplemental reply brief (as permitted by the**  **court) reasserted that**  **summary judgment in his favor was appropriate.**
ANALYSIS **An order granting summary judgment shall be rendered if “the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, i**  **f any, show that there is no genuine issue as to any material fact challenged and that th**  **e moving party is entitled to a judgment or order as a matter of law.”**  **R. 4:46-**  **2(c). An issue of fact is genuine “only if, considering the burden of persuasion at trial, the evidence submitted by the parties on the m**  **otion, together with all legitimate in**  **ferences therefrom favoring the non**

**- moving party, would require**  **submission of the issue to the trier of fact.” Ibid.**  **Denial is appropriate where the evidence is of such a quality and quantity that reasonable minds could return a finding favorable to the**  **party opposing the motion. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 534, 540 (1995).**  **Under our court rules, when a party opposes a summary judgment motion (which motion**  **itself has certain requirements, all of which were followed by the Director, t he movant), it must**  **file a response to the movant’s statement of material facts**  **“ admitting or d**  **isputing” each such**  **statement of fact. R.**  **4:46**

**- 2(b). Failure to do so result**  **s in the movant’s**  **R. 4:46-**  **2(a) -compliant**  **statement of material facts to be**  **“deemed admitted,” but only for purposes of the summary judgment motion.**  **R. 4:46-**  **2(b). The non -movant**  **can include additional facts it contends are** **5**

**material and genuinely disputed. Ibid.**  **These facts should be listed in “separately numbered**  **paragraphs to**  **gether with citations to the motion record.” Ibid. Additionally, when opposing a properly supported summary judgment motion, the non** 

**** **movant cannot “rest upon the mere allegations or denials of the pleading.” R.**  **4:46- 5(a). Rather,**  **the response or opposition must be “by affidavits ,**  **” or as required by R.**  **4:46-2(b), and must**  **identify the specific facts in genuine dispute. R.**  **4:46- 5(a).**  **If not, “summary judgment, if appropriate, shall be entered.”**  **Ibid. If an affidavit is presented**  **indicating that “facts essential**  **to justify the opposition” could not be submitted without a supporting affidavit, the court can deny the summary judgment or make any other appropriate order. Ibid.**  **Here, under the supplemental opposition, SRNJ**  **state s**  **that it**  **does not contest the Director’s statement of material undisputed facts. To that extent, it correc**  **ted the R.**  **4:46-2(b) deficiency. However, because it included an assertion that the Director failed to con**  **sider the**  **third**

**- party information**  **that it provided, it presumably is raising a material fact in genuine dispute**  **in support of its argument that the arbitrary assessment was unreasonable. In this r egard, the**  **absence of supporting certifications violates R.**  **4:46- 5(a), and by its incorporation,**  **R. 4:46-**  **2(b). Nevertheless,**  **when the non**

**- movant submits pleadings**  **that do not conform**  **to, or comply**  **with ,**  **R. 4:46-**  **2(b) or**

**- 5(a), the court is not mandated to simply ignore the non**  **-movant’s**
**responses and accept the movant’s assertions alone**  **. Compliance with court rules is essential, whether a party is represented by counsel or is self** 

**- represented**  **; however, courts should not**  **dismiss complaints with prejudice , nor**  **grant summary judgment (as the Director seeks here)**  **, due to procedural deficiencies. Indeed, the summary judgment rules**  **provide that where the non** 

**** **movant does not make the requisite response (with suppor ting affidavits or certification**  **) , the**  **court can grant summary judgment to the movant “if appropriate.” R.**  **4:46- 5(a).**  **Thus, that a** **6**

**movant’s statement of material facts is not disputed does not necessarily**  **mean that the movant’s**  **motion for summary judgmen t**  **should be granted.**  **See , e.g.,**  **Black United Fund of N .J.,**  **Inc. v. City of East Orange, 17 N.J. Tax 446, 448** 

**- 49 (Tax 1998) (“**  **an unopposed**  **motion will not be granted unless the court is satisfied that the legal standards for granting the m**  **otion have been met”),**  **aff’d , 339 N.J. Super. 462 (App. Div. 2001).**  **Rather , in deciding whether**  **a grant of**  **summary judgment is appropriate, the court must “r**  **eview the competent evidential materials submitted by the parties to identify whether there are genuine issues of material f**  **act and, if not, whether the moving party is entitled to summary judgment as a matter of law.”**  **Bhagat v. Bhagat ,**  **217 N.J. 22, 38 (2014) (citation omitted)** 

**. Additionally, even if a motion is deemed uncontested,**  **a judge must make**  **findings of fact and conclusions of law which co** 

**- relate to those facts to determine whether**  **the movant is entitled**  **to the relief claim ed** 

**in the**  **summary judgment motion. See**  **R. 4:46-**  **2(c); R.**  **1:7- 4(a). The court’s**  **responsibility includes an “obligation to” decide all critical issues. Pressler & Verniero,**  **Current N.J. Court Rules, cmt. 1 on**  **R. 1:7-**  **4(a) (20 20**  **). Thus, although**  **R. 4:46-**  **2(b) deems as admitted sufficiently supported material facts**  **that are not “specifically disputed” by the non**  **-movant, R.** 
**1:7- 4(a) requires the “motion judge [to] correlate those facts to legal conclusions. The cour**  **t rules do not provide any exception from this obligation where the motion is unopposed.**  **R. 1:7** 

**- 4(a);**  **R. 4:46-**  **2(c).” Allstate Ins. Co. v. Fisher, 408 N.J. Super. 289, 299-300 (App. Div. 2009).**  **Finally, when considering summary judgment motions, all legitimate**  **inferences must**  **favor the non -movant.**  **R. 4:46-**  **2(c). The court must “consider whether the competent evidential**  **materials presented, when viewed in the light most favorable to the non**

**- moving party in**  **consideration of the applicable evidentiary standard, are sufficient to permit a rational factfinder**  **to resolve the alleged disputed issue in favor of the non**

**- moving party.”**  **Brill , 142 N.J.**  **at 523** 

**. 7** 

**It is thus the movant’s “ burden to exclude any reasonable doubt as to the existence of any genuine**  **issue of material fact ” rega**  **rding the claims asserted. Judson v. Peoples Bank and Tr**  **. Co. , 17**  **N.J. 67, 74 (1954) (citation omitted). Here,**  **SRNJ do**  **es not oppose the Director’s summary judgment motion on grounds**  **that Taxation cannot impose an arbitrary assessment, or that as imposed, i**  **t is unlawful.**  **Cf. Peoples**  **Exp. Co., Inc. v. Dir**

**. , Div. of Taxation, 10 N.J. Tax 417 (Tax 1989) (granting the Director’s**  **motion to dismiss a complaint for untimely filing and rejecting taxpayer’s argument that a rbitrary**  **assessments are simply e stimated**  **, and therefore, the statute of limitations does not run). Rather,**  **it is**  **contesting the reasonableness of the arbitrary assessment on grounds th at th**  **e Director failed to give credence to**  **the information**  **i t**  **has provided.**  **The law is that a person required to collect sales tax must**  **retain adequate business records for examination and inspection by Taxation. N.J.S.A. 54:32B-16; N.J.A.C. 18:24-2.3; N.J.A.C.** 
**18:24- 2.4. Absent records, Taxation is afforded broad authority in determining the tax**  **due from any information that may be available, including external information. N.J.S.A. 54:32B**  **-19 2**  **; Yilmaz, Inc. v. Dir** 

**. , Div. of Taxation, 22 N.J. Tax 204, 231, 235 (Tax 2005),**  **aff’d , 390 N.J.**  **Super. 435 (App. Div. 2007**  **). See also**  **Alpha I, Inc. v. Dir** 

**. , Div. of Taxation, 19 N.J. Tax**  **53 (Tax 2000) (indicating that where**  **a taxpayer destroys records prematurely, it places itself in**  **jeopardy for additional tax).**

**2 N.J.S.A. 54:32B-19**  **states that if a sales tax return “is not filed, or if a return when filed is inco rrect**  **or insufficient, the amount of tax due shall be determined by” Taxation “from such information a s**  **may be available. If necessary, the tax may be estimated on the basis of external indices, such as**  **stock on hand, purchases, rental paid, number of rooms, location, scale of rents or charges, comparable rents or charges, type of accommodations and service, number of employees or other**  **factors.” 8** 

**The Tax C ourt is required to “determine all issues of fact and of law de novo.” N.J.S.A.** 
**2B:13- 3(b). This means that this court grants a “new hearing or a hearing for the second time,**  **contemplating an entire trial in the same manner in which matter was originally hea rd and a**  **review of previous hearing.” Chevron U.S.A., Inc. v. City of Perth Am boy**  **, 9 N.J. Tax 571, 581 (Tax 1988).**  **Here, the ultimate fact to be resolved is the reasonableness of the amount of the arbitrar**  **y assessment,**  **not the fact of its imposition . Due to this court’s de novo review powers, SRNJ is**  **not barred from proffering**  **any and all proofs (documentary or testimonial)**  **that it thinks will**  **show that the arbitrary sales tax assessment amount i**  **s unreasonable. This is so even if its proofs**  **did not satisfy Taxation’s conferee, and even if such proofs were not proffered to T axation during**  **the administrative protest. Although**  **Taxation’s final determinations are afforded a presumption of correctness,**  **this does not mean that a taxpayer cannot be allowed to prove what the proper**  **assessment should be. The Director argues**  **that SRNJ failed to “provide any cogent, de finite, positive and**  **certain documentary evidence to support the complaint or their arguments in opposition t o” his**  **summary judgment motion, and “thus fail [ed]**  **to show how [his] assessment was ‘aberrant’ as**  **required by the leading case of ”**  **Yilmaz . In other words, the Director says, since SRNJ**  **concededly has no books and records, it cannot possibly prove what the proper sales tax assessment should be,**  **and therefore, Taxation’s arbitrary assessment must be aff**  **irmed via his summary judgment motion. However, SRNJ is arguing that it has third** 

**- party information**  **that will show**  **SRNJ’s gross receipts**  **, and that**  **those receipts should be the basis for imposition of**  **the sales tax**  **, if any**  **. Thus, its opposition is not bas ed on naked assertions, especially where**  **Taxation’s auditor certified that SRNJ is an**  **authorized Metro PCS cell phone store and service 9** 

**retailer. A taxpayer is not barred from using a third** 

**- party**  **’s information as**  **proof when**  **contesting the reasonableness of an arbitrary assessment.**  **3 Whether such**  **proof is**  **credible is for this court to decide**  **at/ during trial. Notably, the findings in**  **Yilmaz ,**  **which the Director**  **heavily relies upon**  **, were based on trial**  **proceedings and the credibility of the**  **evidence adduced therein –**  **not on a summary judgment**  **motion . Therefore, the Director’s reliance on**  **Yilmaz as support for**  **the grant of summary judgment in his favor is simply unpersuasive.** 
CONCLUSION **For the aforementioned reasons, the court does not find it appropriate to grant the Director summary judgment**  **as a matter of law , despite the procedural deficiencies in SRNJ’s opposition** 

**. Rather, and based on this court’s de novo review authority, SRNJ should be allowed the**  **opportunity to adduce proof as to what the reasonable sales tax assessment should be. Therefore, the**  **Director ’s summary judgment motion is denied** 

**. The matter will be set**  **for trial at a date to be decided** 

**. Very Truly You**  **rs,**
**Mala Sundar, J.T. C.** 

**3 Taxation**  **also uses third**

**- party information during its cash audits**  **to verify or corroborate a taxpayer’s books and records.**  **See e.g. Charley O’s**  **, Inc. v. Dir., Div. of Taxation, 23 N.J. Tax 171, 176 (Tax 2006) (auditor agreed with the taxpayer’s record of**  **purchases since it approximated the “amount he had estimated based on information obtained by [Taxation] . . . from third part**  **y suppliers, particularly vendors of” alcohol).**