Christopher Gill v. Director, Division of Taxation

• Court: New Jersey Superior Court Appellate Division
• Decided: February 5, 2025
• Docket: A-3116-22
• Status: Published

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-3116-22

CHRISTOPHER GILL,

Plaintiff-Appellant, APPROVED FOR PUBLICATION v. February 5, 2025

DIRECTOR, DIVISION OF APPELLATE DIVISION TAXATION,

Defendant-Respondent. ________________________

Submitted November 6, 2024 – Decided February 5, 2025

Before Judges Firko, Bishop-Thompson, and Augostini.

On appeal from the Tax Court of New Jersey, Docket No. 4035-2021, whose opinion is reported at 33 N.J. Tax 182 (Tax 2023).

Agostino & Associates, PC, attorneys for appellant (Frank Agostino, on the briefs).

Matthew J. Platkin, Attorney General, attorney for respondent (Janet Greenberg Cohen, Assistant Attorney General, of counsel; Judith M. O'Malley, Deputy Attorney General, on the brief).

McCarter & English, LLP and Law Office of Jamie M. Zug, attorneys for amicus curiae The Center for Taxpayer Rights (Lawrence A. Sannicandro, Michael A. Guariglia and Jamie M. Zug, on the brief).

The opinion of the court was delivered by

AUGOSTINI, J.S.C. (temporarily assigned)

This tax appeal presents an issue of first impression: whether the four-

year limitation period governing the additional assessment of the Sales and Use

Tax (SUT) applies to the issuance of a Notice of Finding of Responsible Person

(Responsible Person Notice) for SUTs that a corporation has acknowledged it

owed. A merchant collects SUTs and holds them in trust "as trustee for and on

account of the State." N.J.S.A. 54:32B-12(a). Thus, an officer or responsible

person of a business is held personally liable for these taxes when the business

fails to remit them to the State.

In a reported opinion, Tax Court Judge Kathi F. Fiamingo concluded that

the issuance of a Responsible Person Notice for liability of SUT is not subject

to a limitations period. 33 N.J. Tax 182 (Tax 2023). Plaintiff Christopher Gill

appeals from the May 1, 2023, order denying, in part, his motion for summary

judgment and granting, in part, defendant Division of Taxation's (Taxation)

cross-motion for summary judgment. We granted leave to The Center for

Taxpayer Rights to file an amicus brief, which supports plaintiff's contentions.

We conclude that the Responsible Person Notice is a collection tool for a

previously determined, fixed, and final tax liability assessed against the business 2 A-3116-22 and not an additional assessment. Therefore, we agree with the tax judge's

determination that the issuance of a Responsible Person Notice for liability of

SUT is not subject to a limitations period. Accordingly, we affirm the Tax

Court's order denying, in part, plaintiff Christopher Gill's motion for summary

judgment and granting, in part, defendant Division of Taxation's motion for

summary judgment.

I.

We recite the undisputed material facts from the motion record. Plaintiff

was the vice president and sole shareholder of Floor Resources, Inc. (Floor

Resources), a New Jersey commercial floor company engaged in installation and

demolition services. Plaintiff acknowledged that, during the relevant tax years,

he was the person "most familiar with the business operations of the corporation,

had ultimate decision-making authority, and oversaw all financial aspects of the

company." Plaintiff was responsible for filing the "gross income tax-employer

withholding returns (GIT-ERs) and [SUT] returns and to withhold and pay the

taxes associated with these returns."

Plaintiff acknowledges that under his direction, Floor Resources filed,

albeit late, the SUT returns (Form ST-50) for the second quarter of 2012 (April

to June); the second quarter of 2013 (April to June); and the third quarter of

3 A-3116-22 2013 (July to September). Floor Resources failed to remit a portion of the self-

assessed taxes reported on these forms.

On August 8, 2013, Floor Resources filed for voluntary reorganization

under Chapter 11 of the United States Bankruptcy Code. Plaintiff signed the

requisite documents supporting the bankruptcy filing and listed the business's

creditors. Taxation was listed as a creditor with priority claims in the

bankruptcy proceeding, which included deficiencies for the GIT-ERs, and SUT

returns. Specifically, Taxation submitted a priority proof of claim in the amount

of $70,088.57 and a secured proof of claim in the amount of $109,494.07 in the

Chapter 11 proceeding.

On July 29, 2014, the Chapter 11 bankruptcy matter was converted to a

Chapter 7 liquidation. On November 29, 2016, a final decree was entered by

the bankruptcy court. The State of New Jersey (State) did not receive any

payment toward its claims.

On March 15, 2019, Taxation issued a Responsible Person Notice against

plaintiff for the unpaid, self-assessed trust fund liabilities of Floor Resources.

On June 11, 2019, plaintiff filed an administrative protest, contending that the

assessments were barred by the statute of limitations. On December 16, 2020,

Taxation issued a final determination, upholding the Responsible Person Notice

"based upon the liabilities in this case being self-reported tax liabilities [reported

4 A-3116-22 to Taxation] and related penalty and interest." Taxation found plaintiff, as the

responsible person, jointly and severally liable for Floor Resources' unpaid

taxes.

On March 12, 2021, plaintiff filed a complaint with the Tax Court,

contesting Taxation's final determination and the timeliness of Taxation's

issuance of the Responsible Person Notice. As the Tax Court judge noted,

plaintiff did not contest the underlying determination of responsible party status

or the amount of the SUT liabilities. Plaintiff filed a motion for summary

judgment, and Taxation filed opposition and a cross-motion for summary

judgment.

In a May 1, 2023, order, the judge granted in part and denied in part

plaintiff's motion and Taxation's cross-motion for summary judgment, voiding

the assessment of the penalty issued against plaintiff for the GIT-ERs1 and

affirming the SUT against plaintiff. In a comprehensive accompanying opinion,

the judge reasoned that based upon the clear language of the Sales and Use Tax

Act, (SUTA), N.J.S.A. 54:32B-1 to -55, there is no time limitation on the filing

of a Responsible Person Notice because "the filing of the return, thus self-

1 Plaintiff does not appeal the portion of the judge's May 1, 2023, order voiding the assessment of the penalty for the employer's gross income tax withholding. 5 A-3116-22 assessing the tax at issue," is known to the responsible person, as is the duty to

act. This appeal follows.

II.

On appeal, plaintiff argues the judge erred in granting summary judgment

to Taxation because: (1) she conflated the issue of a separate notice requirement

with the issue of the applicability of a statute of limitations; (2) her interpretation

of the statute obviates the legislative intent behind N.J.S.A. 54:32B-27(b); (3)

she failed to consider that the application of N.J.S.A. 54:32B-2(w) and -14(a) as

a procedural tool to "pierce the corporate veil"; (4) she failed to abide by the

holdings in Lauckner v. United States, 68 F.3d 69 (3d Cir. 1995); and (5) she

failed to consider the inequity of no statute of limitations.

Amicus The Center for Taxpayer Rights joins in plaintiff's arguments that

Taxation's Responsible Person Notice is time-barred, arguing Taxation is

required to provide notice to an alleged responsible person of deficient SUT

liabilities within four years of the filing of SUT returns. Amicus adds the judge

erred by applying inapplicable, non-SUT authorities to the SUTA analysis, and

her decision implies perpetual exposure to SUT liability, which runs contrary to

policy considerations and Legislative intent. 2

2 We disagree with amicus's assertion that the issue of whether the statute of limitations for SUT liabilities applies to a Responsible Person Notice is not an

6 A-3116-22 We affirm substantially for the reasons set forth by Judge Fiamingo in her

comprehensive written opinion. We add the following comments because there

is no reported New Jersey case on point addressing this issue.

A. Our Standard of Review of a Tax Court Opinion

The scope of appellate review from a Tax Court determination on a motion

for summary judgment is the same as that applicable to a determination made

by any other trial court, which is de novo. 125 Monitor St. v. City of Jersey

City, 23 N.J. Tax 9, 13 (Tax 2005). However, our Supreme Court has recognized

the Tax Court's expertise in tax litigation. Waksal v. Dir., Div. of Tax'n, 215

N.J. 224, 231 (2013). "While 'factual findings of a Tax Court judge are entitled

to deference because of that court's expertise in the field, the judge's

interpretation of a statute is not entitled to such deference and is subject to our

de novo review.'" Ibid. (quoting Advance Hous., Inc. v. Twp. of Teaneck, 422

N.J. Super. 317, 327 (App. Div. 2011)).

We "review a grant of summary judgment de novo, applying the same

standard as the trial court." Norman Int'l, Inc. v. Admiral Ins. Co., 251 N.J. 538,

issue of first impression based upon unpublished cases. An unpublished opinion does not constitute precedent, nor is it binding upon us, "[e]xcept for appellate opinions not approved for publication that have been reported in New Jersey Tax Court Reports . . . and except to the extent required by res judicata, collateral estoppel, the single controversy doctrine, or similar principle of law." R. 1:36- 3. 7 A-3116-22 549 (2022) (quoting Woytas v. Greenwood Tree Experts, Inc., 237 N.J. 501, 511

(2019)). Thus, "[w]e '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.'" Invs. Bank v. Torres, 457 N.J. Super. 53, 57 (App. Div. 2018)

(quoting Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995)).

Summary judgment should be granted "if the pleadings, depositions,

answers to interrogatories and admissions on file, together with the affidavits, if

any, show that there is no genuine issue as to any material fact challenged and

that the moving party is entitled to a judgment or order as a matter of law." R.

4:46-2(c). "If there is no genuine issue of material fact, we must then 'decide

whether the trial court correctly interpreted the law.'" DepoLink Ct. Reporting

& Litig. Support Servs. v. Rochman, 430 N.J. Super. 325, 333 (App. Div. 2013).

B. Sales and Use Tax Act

SUTA was "enacted as a revenue raising measure" and governs the

collection of New Jersey sales taxes from the customer or purchaser. Atl. City

Showboat, Inc. v. Dir., Div. of Tax'n, 26 N.J. Tax 234, 251 (Tax 2012), aff'd, 28

N.J. Tax 335 (App. Div. 2013); N.J.S.A. 54:32B-12(a). The vendor or business

owner is responsible for collecting the tax from the customer who is responsible

8 A-3116-22 for paying the tax. See N.J.S.A. 54:32B-12(a). "The Act 'squarely places on

the vendor the obligation of establishing that it correctly reports its collections

of tax.'" La Troncal Food Corp. v. Dir., Div. of Tax'n, 33 N.J. Tax 435, 455

(Tax 2024) (quoting Yilmaz, Inc. v. Dir., Div. of Tax'n, 22 N.J. Tax 204, 230

(Tax 2005), aff'd 390 N.J. Super. 435 (App. Div. 2007)).

The person who collects the taxes holds them in trust for the State until

they are remitted pursuant to N.J.S.A. 54:32B-18. See N.J.S.A. 54:32B-12(a).

Thus, these taxes, collected on behalf of the State, are sometimes referred to as

trust funds. Cf. Ball v. Ind. Dep't of Revenue, 563 N.E.2d 522, 524 (Ind. 1990).

The SUTs are self-assessed, and a person required to collect or pay the tax under

SUTA is required to file a monthly return, unless otherwise permitted by the

director. N.J.S.A. 54:32B-17(a), (b). Moreover, "[p]ersons who are required to

collect the [SUT] are personally liable for the tax imposed, collected or required

to be collected." Connolly, Dromsky-Reed, Gordon, Donio, Stella, McLoughlin

& Quinn, New Jersey Tax Handbook § 3-17 (2025 ed.) (citing N.J.S.A. 54:32B-

14). In a corporation, a person responsible for collecting the sales taxes includes

"any officer or employee of a corporation or of a dissolved corporation who as

such officer or employee is under a duty to act for such corporation in complying

with any requirement of this act and any member of a partnership." N.J.S.A.

54:32B-2(w).

9 A-3116-22 If a corporation fails to file its SUT return or the amount of tax due is

insufficient or incorrect, the director shall determine the amount of tax due.

N.J.S.A. 54:32B-19. A "[n]otice of such determination shall be given to the

person liable for the collection or payment of the tax." Ibid. In other words, if

the corporation fails to remit the SUT collected on behalf of the State, the

Responsible Person Notice shall be given to the individual "under a duty to act"

for the corporation and remit the SUTs collected. N.J.S.A. 54:32B-2(w). Thus,

the Responsible Person Notice provides Taxation with an alternative collection

method for the self-assessed SUTs and any deficiencies owed by the

corporation.

Regarding notice and limitations of time, N.J.S.A. 54:32B-27(b) of SUTA

provides:

The provisions of law relative to limitations of time for the enforcement of a civil remedy shall not apply to any proceeding or action taken by the State or the director to levy, appraise, assess, determine or enforce the collection of any tax or penalty provided by this act. However, except in the case of a willfully false or fraudulent return with intent to evade the tax, no assessment of additional tax shall be made after the expiration of more than four years from the date of the filing of a return; provided, however, that where no return has been filed as provided by law the tax may be assessed at any time.

10 A-3116-22 The four-year statute of limitations clearly applies to the assessment of

additional taxes and penalties. The statute provides no time limitation, however,

to action taken by the State to enforce collection of any tax.

Further, pursuant to N.J.S.A. 54:49-6(b) of the State Uniform Tax

Procedure Law, assessments of additional taxes or penalties are subject to the

four-year time limitation:

a. After a return or report is filed under the provisions of any State tax law, the director shall cause the same to be examined and may make such further audit or investigation as the director may deem necessary, and if therefrom the director shall determine that there is a deficiency with respect to the payment of any tax due under such law, the director shall assess the additional taxes, penalties, if any, pursuant to any State tax law or pursuant to this subtitle, and interest at the rate of three percentage points above the prime rate due the State from such taxpayer assessed for each month or fraction thereof, compounded annually at the end of each year, from the date the tax was originally due until the date of actual payment, give notice of such assessment to the taxpayer, and make demand upon the taxpayer for payment.

b. No assessment of additional tax shall be made after the expiration of more than four years from the date of the filing of a return; provided, that in the case of a false or fraudulent return with intent to evade tax, or failure to file a return, the tax may be assessed at any time. If a shorter time for the assessment of additional tax is fixed by the law imposing the tax, the shorter time shall govern. If, before the expiration of the period prescribed herein for the assessment of additional tax, a taxpayer consents in writing that such period may be extended, the amount of such additional tax due may be 11 A-3116-22 determined at any time within such extended period. The period so extended may be further extended by subsequent consents in writing made before the expiration of the extended period. For purposes of this subsection, a return filed before the last day prescribed by law or by regulations promulgated pursuant to law for the filing thereof, shall be considered as filed on such last day.

The primary question is whether the filing of the Responsible Person

Notice is subject to the ordinary four-year statutory limit, applicable to

additional tax assessments. As the judge found, the imposition of liability is not

a penalty assessment, nor an additional tax assessment. The judge further

reasoned that this finding comports with the intent of the Legislature; namely,

to impose liability on the responsible person at the same time as, and in the same

manner as, the corporation. The filing of the SUT return constitutes the

assessment of the tax both against the responsible person and corporation

simultaneously.

Moreover, N.J.S.A. 54:32B-19 provides a ninety-day period in which to

challenge the underlying SUT assessment by requesting a hearing. Unless a

hearing is requested, the determination of the assessment "shall finally and

irrevocably fix the tax." N.J.S.A. 54:32B-19. The statute does not provide an

additional ninety-day period within which to challenge the underlying

assessment once the Responsible Person Notice is issued, thereby adding further

support to the judge's finding that the Responsible Person Notice is not an 12 A-3116-22 additional assessment. Millwork Installation, Inc. v. State Dep't of the Treasury,

Div. of Tax'n, 25 N.J. Tax 452 (Tax 2010); see Kowasaki, Inc. v. State, Div., of

Tax'n, 13 N.J. Tax 160, 167-68 (Tax 1993).

Plaintiff contends that a Responsible Person Notice is an assessment of

the SUT owed by the corporation because it is the first time Taxation determines

that the individual is personally liable for the tax. He further argues the notice

must be served no later than four years following the filing date of the returns.

Amicus Taxpayer for Center Rights concurs and argues that Taxation is required

to give notice to an alleged responsible person of liability within four years of

the filing of the SUT return pursuant to the Taxpayers' Bill of Rights, codified

in pertinent part at N.J.S.A. 54:49-6 and N.J.S.A. 54:32B-27(b). L. 1992, c.

175, §§ 3, 33.

We conclude, however, that the Responsible Person Notice is a collection

tool for a previously determined, fixed, and final tax liability assessed against

the corporation and not an additional assessment. Unlike an individual's

personal income tax, the SUTs are taxes a vendor is required to collect from

customers and hold in trust for the State until the return is filed, and the taxes

are remitted.

Regarding plaintiff's assertion that the judge failed to abide by the holding

in Lauckner v. United States, Civ. No. 93-1594, 1994 WL 837464 (D.N.J. May

13 A-3116-22 4, 1994), aff'd o.b., 68 F.3d 69 (3d Cir. 1995) 3, this argument is unavailing. In

Lauckner, a case addressing a penalty assessment against a responsible officer

of a corporation for unpaid employment withholding taxes, the court held the

Internal Revenue Service (IRS) was time-barred from assessing a penalty

against the responsible officer. The judge analyzed the District Court's decision

in the context of examining whether plaintiff's liability for employer gross

income tax withholding was subject to the statute of limitations, an issue that is

not before us on this appeal. Moreover, Lauckner involved an "additional

assessment" of a penalty after the statute of limitations had expired, and not the

payment of the self-assessed SUT, which is at issue here.

Contrary to plaintiff's and amicus's assertions, the out-of-state cases

identified by the judge support her analysis of this issue. These cases offer

guidance as to how other states interpreting their state statutes and federal law

have resolved this issue. United States v. Galletti, 541 U.S. 114, 123 (2004)

("Once a tax has been properly assessed, nothing in the [Tax] Code requires the

IRS to duplicate its efforts by separately assessing the same tax against

3 "[M]indful of its obligation not to cite to unpublished decisions[,] R. 1:36- 3[,]" the tax court judge "cite[d] Judge Sarokin's opinion to give context to the decision of the [a]ppellate [c]ourt which affirmed the lower court's decision 'for the reasons given in the district court's opinion reported at Lauckner v. United States, Civ. No. 93-1594, 1994 WL 837464 (D.N.J. May 4, 1994).'" Lauckner, 68 F.3d 69. 14 A-3116-22 individuals or entities who are not the actual taxpayers but are, by reason of state

law, liable for payment of the taxpayer's debt. The consequences of the

assessment—in this case the extension of the statute of limitations for collection

of the debt—attach to the tax debt without reference to the special circumstances

of the secondarily liable parties."); Ball, 563 N.E.2d at 525 (holding that

collection of trust tax delinquencies against the responsible officer is not barred

by the statute of limitations based on notices of assessment to corporations and

awareness of corporate duties); Livingstone v. Dep't of Treasury, 456 N.W.2d

684, 686 (Mich. 1990) (holding Michigan use tax statute of limitations does not

bar assessment of use taxes applicable to a corporate officer held personally

liable for the use taxes corporation failed to pay); Van Orman v. State, 416

N.E.2d 1301, 1306 (Ind. Ct. App. 1981) (finding responsible person of

corporation aware that corporation failed to pay the SUT due, and thus, no

personal notice necessary within a three year statute of limitations).

Finally, plaintiff argues the judge failed to consider the inequity of having

no statute of limitations applicable to the Responsible Person Notice. We reject

this assertion. The clear Legislative intent of the SUTA is to ensure collection

of the SUT and to prevent evasion. N.J.S.A. 54:32B-12(b). A merchant who,

on behalf of the State, collects SUT holds it in trust "as trustee for and on account

of the State." N.J.S.A. 54:32B-12(a). These are monies belonging to the State

15 A-3116-22 and not to the merchant, and the merchant is responsible for ensuring the timely

remittance of such funds. Thus, an officer or responsible person of a corporation

is held personally liable for these taxes when the corporation fails to remit them

to the State.

Plaintiff, as the responsible person for Floor Resources, knew of the

business's tax deficiencies, failed to make provisions for the satisfaction of the

SUT debt when due, and now "simply cannot be allowed to take advantage of

[his] own omissions." Livingstone, 456 N.W.2d at 696.

Affirmed.

16 A-3116-22