Opinion ID: 2381224
Heading Depth: 1
Heading Rank: 5

Heading: Is There a Minimal Connection?

Text: We agree with the Director and the Appellate Division that a sufficient showing has been made to satisfy this requirement. Concededly, there is no litmus test that will resolve the issue for all cases. We can best look to available precedent. The taxpayer relies primarily on National Bellas Hess Inc. v. Illinois Rev. Dep't, 386 U.S. 753, 87 S.Ct. 1389, 18 L.Ed. 2d 505 (1967), and Miller Bros. Co. v. Maryland, 347 U.S. 340, 74 S.Ct. 535, 98 L.Ed. 744 (1954). Both of those cases, involving sales taxes, were seen as involving the almost total lack of contacts between the seller and the state of delivery. National Geographic Soc. v. California Bd. of Equalization, 430 U.S. 551, 559, 97 S.Ct. 1386, 1391, 51 L.Ed. 2d 631, 639 (1977). But where there is some definite link, some minimum connection, between [the State and] the person    it seeks to tax, the nexus will be met. Id. at 561, 97 S.Ct. at 1393, 51 L.Ed. 2d at 640 (quoting Miller Bros., supra, 347 U.S. at 344-45, 74 S.Ct. at 538-39, 98 L.Ed. at 748). Thus, in Scripto, Inc. v. Carson, 362 U.S. 207, 80 S.Ct. 619, 4 L.Ed. 2d 660 (1960), local solicitation by commission salesmen sufficed to provide the nexus. In terms of constitutional analysis, the question turns on how the taxpayer has come into the state to work the market. We think here, at a minimum, that: (1) the presence of Avco Pa.'s employees in the State to collect their overdue accounts evidenced a vigorous, systematic and persistent effort, aided by a substantial physical presence, to exploit the New Jersey market. See Clairol, Inc. v. Kingsley, 109 N.J. Super. 22 (App.Div.), aff'd, 57 N.J. 199 (1970), dismissed for want of a substantial federal question, 402 U.S. 902, 91 S.Ct. 1377, 28 L.Ed. 2d 643 (1971); Tuition Plan of New Hampshire v. Taxation Div. Director, 4 N.J. Tax 470 (1982); (2) the use by the taxpayer of its affiliate offices in New Jersey to receive payments made possible the realization and continuance of valuable contractual relations between Avco Pa. and its New Jersey borrowers. Standard Pressed Steel Co. v. Washington Dep't of Revenue, 419 U.S. 560, 562, 95 S.Ct. 706, 708, 42 L.Ed. 2d 719, 722 (1975); and (3) the ongoing use of New Jersey's courts and process to enforce its obligations demonstrates that the taxpayer's activities enjoyed the protection and services for which the State is entitled to something in return. See National Geographic, supra, 430 U.S. at 561, 97 S.Ct. at 1392, 51 L.Ed. 2d at 640. [3] The taxpayer chooses to emphasize, as does the dissent, that the taxpayer does not maintain an office in New Jersey, nor own or lease property here, or have resident representatives. Had any of those factors been present, it would be paying the higher rates due under the Corporation Business Tax Act    for the privilege of having or exercising its corporate franchise in this State, or for the privilege of doing business, employing or owning capital or property, or maintaining an office, in this State. N.J.S.A. 54:10A-2. It is precisely the absence of these factors that requires us to explore the constitutional reach of the CIT, for their absence has not always been dispositive of the issue. The requisite nexus was held to be shown when the out-of-state sales were arranged by the seller's local agents working in the taxing State, Felt & Tarrant Co. v. Gallagher, 306 U.S. 62, 59 S.Ct. 376, 83 L.Ed. 488 (1939); General Trading Co. v. Tax Comm'n, 322 U.S. 335, 64 S.Ct. 1028, 88 L.Ed. 1309 (1944), and in cases of maintenance in the State of local retail store outlets by out-of-state mail-order sellers. Nelson v. Sears, Roebuck & Co., supra [312 U.S. 359, 61 S.Ct. 586, 85 L.Ed. 888 (1941)]; Nelson v. Montgomery Ward, 312 U.S. 373, 61 S.Ct. 593, 85 L.Ed. 897 (1941). In Scripto, Inc. v. Carson, 362 U.S. 207, 80 S.Ct. 619, 4 L.Ed.2d 660 (1960), the necessary basis was found in the case of a Georgia-based company that had 10 wholesalers, jobbers, or `salesman' conducting continuous local solicitation in Florida and forwarding the resulting orders from that State to Atlanta for shipment of the ordered goods, id., at 211, 80 S.Ct. 619, 4 L.Ed.2d 660, although maintaining no office or place of business in Florida, and having no property or regular full-time employees there. [ National Geographic, supra, 430 U.S. at 556-57, 97 S.Ct. at 1390, 51 L.Ed. 2d at 637 (emphasis added).] The dissent chides us for recalling these words of Scripto, which are reaffirmed in National Geographic. It calls attention to the number of wholesalers, salesmen, and jobbers who were active in Florida. However, the significance of Scripto lies not in the number of those persons, but in the fact that none was an employee of Scripto. They devoted only a part of their time to Scripto sales. Scripto, supra, 362 U.S. at 211, 80 S.Ct. at 621, 4 L.Ed. 2d at 664. Even then, without in-state offices, without full-time resident employees, the Court found the minimum connections to be more than sufficient. In considering then not what is absent, but what is present, we find distinctive contacts with the State of New Jersey not found in the precedent the taxpayer invokes. Unlike the mail order house in National Bellas Hess, or the department store in Miller Brothers, this seller of financial services has entered the taxing state to dun its customers, has used affiliated in-state offices for customers to drop payments, has used New Jersey credit service agencies, and has invoked the State's process to enforce its contracts. Surely the New Jersey borrowers did not consider themselves visited with only the slightest presence when Avco Pa. knocked on their doors to collect its money. Surely the New Jersey taxpayers are entitled to something in return for the benefits that the State conferred upon the foreign lender. [4] We therefore believe that, applying the principles that the Supreme Court has laid down, it is well within the realm of permissible judgment to conclude that there are sufficient minimum contacts between the taxpayer and the State to justify the imposition of the tax.