Ironbound Intermodal Industries Inc. v. Director, Division of Taxation, No. 012089-2008; Tax Court; opinion by Brennan, J.T.C.; decided and approved for publication July 19, 2013. DDS No. 35-5-0754 [14 pp.]

Plaintiff Ironbound Intermodal Industries, a New Jersey corporation located in Newark, challenges the Sales and Use Tax (SUT), N.J.S.A. 54:32B-1 et seq., assessments of defendant director of the Division of Taxation regarding its business activities. These activities include the storage of intermodal containers and chassis, and maintenance and repair for containers and chassis used in the shipping industry. The containers are used in the import and export of cargo in and out of Port Newark and are designed to carry cargo on both land and sea.

Ironbound's three facilities do not contain piers or wharves and are not capable of stevedoring, the process of loading and unloading containers on and off vessels. They are located between four-tenths of a mile and three miles from Port Newark. Though not part of Port Newark, Ironbound is in the Port District, an area that serves as the defining geographic scope of the Port Authority of New York and New Jersey. It serves the same industry and provides the same services as the marine terminals located within Port Newark. It supplements the services of Port Newark marine terminals by providing necessary and convenient storage, repair and maintenance services and has contributed to the expansion of the import/export industry in New Jersey.

Businesses within Port Newark that perform the same services as Ironbound are exempt from the SUT. The director deemed Ironbound not qualified for the exemption due to the locations of its facilities and the lack of stevedoring.

Ironbound filed a complaint with the Tax Court contesting the director's assessments for two separate audit periods. It moved for summary judgment seeking a determination that the container storage services, chassis repair services and replacement parts provided at its facilities are exempt from SUT based on 54:32B-8.12 because its operations are integral, necessary and convenient to the loading, unloading and handling of cargo at a marine terminal facility. The director cross-moves for summary judgment.

Held: Despite the location of Ironbound's facilities and the lack of stevedoring services, it is a marine terminal facility as intended by the Legislature and, therefore, the container storage and chassis repair services provided at its facilities are exempt from the Sales and Use Tax based on the exemption in N.J.S.A. 54:32B-8.12.

The Tax Court says review of the director's assessments must be made in light of the presumptive validity of his determinations under the act. Further, the SUT is an "Act of inclusion." Statutory exemptions from it are to be narrowly construed. A taxpayer seeking the benefit of a tax exemption bears the burden of proving that it meets the elements of the exemption.

The court says the plain language of 54:32B-8.12 indicates that the exemption from the SUT applies to certain specified activities conducted at a marine terminal facility. Because the Legislature did not include a definition for "marine terminal facility" in the SUT statutes, the exemption provided by 54:32B-8.12 is not facially clear and unambiguous. The court therefore must consider extrinsic factors and looks to the legislative history. It says the clear purpose of 54:32B-8.12 was to promote expansion of the shipping industry in New Jersey and to allow New Jersey to compete with ports in nearby states, particularly those that already had a sales tax exemption in place.

The Legislature has defined "marine terminal" in other statutes that predate the most recent amendment of 54:32B-8.12. In 1931, it defined "marine terminal" in the context of municipal waterfront improvements in 40:68-18, as a development of buildings, structures, facilities or improvements, necessary or convenient to the accommodation of steamships or other vessels and their cargoes and passengers.

The director points to the two definitions of "marine terminal" in 32:1-1 et seq., the statutory authority for the compact that created and governs the Port Authority of New York and New Jersey, and argues that the definitions must be read together. N.J.S.A. 32:1-35.30 contains similar language to 40:68-18, but it is expanded to include highways, railroad freight projects, etc. N.J.S.A. 32:1-154.18(1) provides a definition of marine terminal specifically for the rules and regulations of the Port Authority's governing of traffic on highways in air terminals and marine terminals. The director argues that when read together, these definitions require a facility to be capable of stevedoring and/or must be operated by the Port Authority to qualify as a marine terminal facility.

The court disagrees. It cites case law that says that "marine terminal" was intended by the Legislature to have a broad and expansive definition and says it is not limited to Port Authority jurisdiction or location. It then finds that Ironbound's locations meet the definition of a marine terminal provided by 40:68-18, as each facility is a development consisting of structures, facilities and improvements necessary or convenient to the accommodation of steamships or other vessels and their cargoes. Because Ironbound's facilities constitute marine terminal facilities, its container storage services and chassis repair labor charges are exempt from taxation under 54:32B-8.12.

For plaintiff — Susan A. Feeney (McCarter & English). For defendant — Heather Lynn Anderson (John J. Hoffman, Acting Attorney General).