STATE AND LOCAL TAXES – SALES TAX, IMPOSITION OF TAX – ADMINISTRATION & PROCEDURE, ASSESSMENTS – PRESUMPTIONS, REBUTTAL OF PRESUMPTIONS – EVIDENCE – LAY WITNESS TESTIMONY - HEARSAY EXCEPTIONS – BUSINESS RECORDS – PUBLIC RECORDS
Tax Court: La Troncal Food Corp. and Vincente Intriago v. Dir., Div. of Taxation; Docket No. 013472-2017, opinion by Nugent, J.T.C., decided October 2, 2024. For plaintiff – Chinemerem Njoku (C.N. Njoku, LLC, attorney); for defendant – Heather Lynn Anderson, Deputy Attorney General (Matthew J. Platkin, Attorney General of New Jersey, attorney).
Held: Where defendant’s auditor did not testify at trial, the court rejected defendant’s proffered lay opinion testimony from the auditor’s supervisor regarding the reasonableness of the auditor’s actions in setting the estimated tax assessment. The court found the witness’s testimony was inadmissible under Evid. R. 701 due to the supervisor’s lack of personal knowledge of the auditor’s examination. The court also rejected defendant’s proffer of the non-testifying auditor’s report and work papers as an exception to hearsay under Evid. R. 803(c)(6) and Evid. R. 803(c)(8) since the data underlying the estimated assessment included information obtained from the wrong business and the auditor’s methodology was unexplained. The court found the documents untrustworthy and thus, could not conclude that the auditor performed his duty in a “proper, careful and prudent manner” for purposes of Evid. R. 803(c)(8).
The court found plaintiff overcame the presumption of correctness that attaches to the tax assessment by production of credible evidence attacking the reasonableness of the methodology and data the auditor utilized. The court further found the methodology was aberrant given the auditor’s collection and use of unreliable data wholly irrelevant to Taxpayer’s business and unexplained methodology. Accordingly, the court set the assessment aside. The court determined plaintiff’s expert’s reconciliation of plaintiff’s sales records to be credible, thus, plaintiff met its burden of persuasion that the sales tax and corporate business tax owed should be less than that owed under defendant’s estimated assessment.
(38 pages)