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Original WP 5.1 Version This case can also be found at 167 N.J. 62.
SYLLABUS (This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). GNOC, Corp. t/a The Grand v. Director, Division of Taxation (A-35-00) (NOTE: This Court wrote no full opinion in this case. Rather, the Court's affirmance of the judgment of the Appellate Division is based substantially on the reasons expressed in Judge Braithwaite's opinion below.) Argued February 14, 2001 -- Decided April 3, 2001 PER CURIAM The issue in this appeal is whether the Director of the Division of Taxation (Director) properly assessed a sales and/or use tax on GNOC, which operates a casino under the name of The Grand, for the purchase of alcoholic beverages, which GNOC then provided to its casino patrons on a complimentary basis. This appeal was based on the Director's determination that GNOC owed the State of New Jersey $135,732.40 for sales and use taxes for providing complimentary alcoholic beverages to its patrons. GNOC had not paid any sales tax on the beverages at the time of its purchase from the wholesaler/supplier, having given the supplier resale certificates. On March 30, 1995, GNOC submitted a formal protest of the Director's determination and a request for an administrative hearing. Thereafter, the Director issued a final determination denying GNOC's protest. Prior to the Director's determination, in 1981, GNOC (as well as other casinos) had entered into a "closing agreement" with the Director regarding the payment of taxes on beverages and meals. Under that agreement, no sales or use tax was to be imposed on the provision of complimentary liquor. A 1986 amendment to that closing agreement provided, in relevant part, that no sales or use tax was to be imposed on the provision of complimentary meals or liquor. A 1988 amendment dealt with the tax treatment of complimentary meals and non-alcoholic beverages. The agreement itself contained (statutorily required) language acknowledging that if legislation were enacted, which provided for specific taxability or exemption, the legislation would be held to supercede the agreement and neither the Director nor the casino- hotel would be bound by the agreement for the taxable periods subject to the legislation. In July 1990, the Legislature repealed the exemption of alcoholic beverages from the six percent retail tax. At the same time, the Legislature also repealed the Alcoholic Beverage Wholesale Sales Tax Act, which required a retailer to pay a 7.3 percent tax at the time of its purchase from the wholesaler. Thus, since July 1, 1990, the receipts from any retail sale of alcoholic beverages have been subject to New Jersey's six percent sales tax under the New Jersey Sales and Use Tax Act. Because of the change in the tax law, specifically the repeal of the exemption for retail sales of alcohol, the Director took the position that the agreement regarding complimentary alcoholic beverages was "moot," referring to the provision in the agreement acknowledging that subsequent legislation would supercede the agreement. Thus, he assessed GNOC for the complimentary alcoholic beverages, prompting GNOC's filing of a complaint in the Tax Court seeking to set aside the Director's determination. The Tax Court subsequently dismissed GNOC's complaint on the Director's motion for summary judgment. In doing so, the Tax Court concluded that the parties' agreements had no bearing on the matter in respect of alcoholic beverages. Rather, the Tax Court determined that the agreements merely set forth the state of the law at the time regarding the taxation of alcoholic beverages. The judge further found that the Director was not taxing the provision of complimentary alcoholic beverages by the casinos to their patrons, but instead was only assessing tax owed on the

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purchase of the alcoholic beverages by the casinos from their suppliers. GNOC appealed on several grounds, maintaining among other things, that its 1981 statutorily authorized closing agreement with the Director remained in effect and barred the Director from taxing the alcoholic beverages given to patrons and further that its purchase from the supplier of the beverages provided to the casino patrons on a complimentary basis constituted a non-taxable sale for resale. The Appellate Division agreed with the Tax Court's decision to grant summary judgment to the Director, but disagreed with its decision that the closing agreement had no bearing on the matter. Rather, the Appellate Division concluded that the resolution of the appeal was contingent on the interpretation of the parties' agreement. GNOC had taken the position that although the agreement contained language acknowledging that subsequent changes in legislation would supercede the parties' agreement, the repeal of the sales and use tax exemption on alcoholic beverages did not satisfy the requirement to supercede the agreement. That was so because GNOC believed that the language of the clause in the agreement acknowledging the effect of subsequent legislation required that the legislation impose a tax on complimentary food and beverages. Because the legislation repealed only the exemption from the tax on alcoholic beverages, and not specifically on complimentary items, GNOC maintained that the legislation did not nullify the agreement. The Appellate Division disagreed with GNOC's position, noting that although the Director had broad discretion to enter into final agreements with taxpayers, he or she could not enter into an agreement that would nullify and render meaningless future legislative enactments. The panel concluded that GNOC's interpretation would render meaningless the Legislature's repeal of the sales and use tax exemption for alcoholic beverages. Thus, the Appellate Division held that the legislation repealing the exemption for sales and use taxes on alcoholic beverages superceded the parties' agreement. The Appellate Division also rejected GNOC's argument that even if the agreement were no longer in effect, its complimentary provision of alcoholic beverages to its patrons constituted a non-taxable sale for resale. The panel found that providing free drinks to casino patrons is a transfer for no consideration and did not constitute a "resale" of the beverages. Because there was no resale, the sale-for-resale exemption did not apply and GNOC became, for tax purposes, the consumer or "end-user" of the beverages, and a use tax became due on the beverages purchased under the sale-for- resale certificates. The panel further noted that it had disposed of the issue in respect of the provision of complimentary non-alcoholic beverages and that it found no reason to treat alcoholic beverages differently. Thus, the Appellate Division determined that GNOC was responsible for use tax on the alcoholic beverages purchased under the sale-for-resale certificates and provided to the patrons on a complimentary basis. The Supreme Court granted GNOC's petition for certification. HELD: As modified, the judgment of the Appellate Division is affirmed substantially for the reasons expressed in Judge Braithwaite's opinion below. Legislation repealing the exemption for sales and use taxes on alcoholic beverages superceded The Grand's closing agreement with the Director of the Division of Taxation, and the casino thus was responsible for the payment of tax on the alcoholic beverages it purchased under the sale-for-resale certificates and provided to its patrons on a complimentary basis. 1. To the extent that GNOC purchased alcoholic beverages from wholesalers to be provided on a complimentary basis to its casino patrons, that transaction constituted a retail sale and not a sale-for-resale under the Sales and Use Tax Act, and was thereby subject to sales tax under the Act. (pp. 2-3) 2. Notwithstanding the Legislature's inadvertence in omitting to reenact the alcoholic beverages exclusion from the Sales and Use Tax Act exemption for food and beverages in section 8.2, it clearly intended in 1990 to again subject alcoholic beverages to the Sales and Use Tax Act. (pp. 3-7) As modified, the judgment of the Appellate Division is AFFIRMED. CHIEF JUSTICE PORITZ and JUSTICES STEIN, COLEMAN, LONG, VERNIERO, LaVECCHIA, and ZAZZALI join in this PER CURIAM opinion.
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SUPREME COURT OF NEW JERSEY A- 35 September Term 2000 GNOC, CORP. t/a THE GRAND, Plaintiff-Appellant, v. DIRECTOR, DIVISION OF TAXATION, Defendant-Respondent. Argued February 14, 2001 -- Decided April 3, 2001 On certification to the Superior Court, Appellate Division, whose opinion is reported at 328 N.J. Super. 467 (2000). Janyce M. Wilson argued the cause for appellant (Graham, Curtin & Sheridan, attorneys; Ms. Wilson and Kent L. Schwarz, on the briefs). Marlene G. Brown, Deputy Attorney General, argued the cause for respondent (John J. Farmer, Jr., Attorney General of New Jersey, attorney; Mary C. Jacobson, Former Assistant Attorney General, of counsel). John K. Antholis submitted a brief on behalf of amici curiae, Resorts International Hotel, Inc. and Great Bay Hotel and Casino t/a Sands Hotel and Casino (Antholis & Courtney, attorneys; Mr. Antholis and Mark G. Yates, on the brief). PER CURIAM We affirm the judgment of the Appellate Division substantially for the reasons set forth in Judge Braithwaite's comprehensive and well-reasoned opinion. GNOC Corp. t/a The Grand v. Director, Div. of Taxation, 328 N.J. Super. 467 (App. Div. 2000). We write separately only to elaborate on the analytical basis for our conclusion that GNOC was liable for sales taxes on the alcoholic beverages it purchased from wholesalers under sale-for-resale certificates and then provided to patrons on a complimentary basis. In support of that conclusion, we rely, as does the Director of the Division of Taxation, on N.J.S.A. 54:32B-8.2, which provides in part as follows: Receipts from the following are exempt from the tax imposed under the Sales and Use Tax Act: sales of food, food products, beverages, dietary foods and health supplements, sold for human consumption off the premises where sold. GNOC contends that sales to it by wholesalers, if not for resale, constitute "sales of . . . beverages . . . for human consumption off the premises where sold" and accordingly are exempt from the sales tax. We reject GNOC's contention, but our explanation of that rejection is necessarily complex. Prior to the enactment in July 1980 of a statute that exempted from the sales tax "all sales at retail of alcoholic beverages," see N.J.S.A. 54:32B-8.34, and during the period when retail sales of alcoholic beverages were subject to sales tax pursuant to N.J.S.A. 54:32B-3, section 8.2, on which GNOC relies, excluded alcoholic beverages from the food products that were exempted from the sales and use tax. That exclusion, which originally was enacted in 1960, read in part as follows: "Receipts from the following are exempt from the tax imposed under the Sales and Use Tax Act: sales of food, food products, beverages except alcoholic beverages . . . dietary foods and health supplements, sold for human consumption off the premises when sold. . . ." L. 1960, c. 30 (emphasis added). Effective July 1, 1980, the Legislature enacted N.J.S.A. 54:32B-8.2. L. 1980, c. 107. At the same time, L. 1980, c.
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62, the Alcoholic Beverage Wholesale Sales Tax Act was enacted, which imposed a tax on "the receipts from every sale of alcoholic beverages . . . by any wholesaler to any retail licensee." N.J.S.A. 54:32C-3. Those enactments had the effect of exempting alcoholic beverages from the sales and use tax but subjecting them to tax when the alcoholic beverages were purchased from a wholesaler. Effective July 1, 1990, the Legislature repealed the exemption for "sales at retail of alcoholic beverages" codified at N.J.S.A. 54:32B-8.34, L. 1990, c. 40, and simultaneously repealed the Alcoholic Beverage Wholesale Tax Act. L. 1990, c. 41. However, the Legislature omitted to re-enact the exclusion of alcoholic beverages, repealed in 1980, from the provision exempting from the sales and use tax "beverages . . . sold for human consumption off the premises where sold . . . ." N.J.S.A. 54:32B-8.2. Accordingly, GNOC argues that notwithstanding the Legislature's repeal in 1990 of the specific alcoholic beverage exemption from the sales and use tax previously codified at N.J.S.A. 54:32B-8.34, the Legislature's failure to re-enact the alcoholic beverages exclusion from the general exemption for food products and beverages sold for consumption off premises demonstrated a legislative purpose to continue the exemption of alcoholic beverages from the sales and use tax. In our view, the statutory construction argument advanced by GNOC is unpersuasive. The Assembly Appropriations Committee Statement to Assembly Bill No. 3610, L. 1990, c. 40, provided in pertinent part as follows: The following products and services are made subject to taxation under the sales and use tax: . . . (4) Alcoholic beverages (on and off premises). [Assembly Appropriations Committee Statement, Assembly Bill No. 3610, L. 1990, c. 40.] Section 11 of that statute expressly repealed N.J.S.A. 54:32B- 8.34, the section of the Sales and Use Tax Act that, between 1980 and 1990, had exempted alcoholic beverages from the Sales and Use Tax Act. Further evidence of the Legislature's intent to tax alcoholic beverages is revealed by section 10 of Assembly Bill No. 3610, which exempted all receipts of retail sales, except those from sales of alcoholic beverages, cigarettes, and motor vehicles, made by vendors located in a designated enterprise zone, established pursuant to the New Jersey Urban Enterprise Zones Act, L. 1983, c. 303, from fifty percent of the tax imposed under the Sales and Use Tax Act. We are thoroughly convinced that, notwithstanding its inadvertence in omitting to reenact the alcoholic beverages exclusion from the Sales and Use Tax Act exemption for food and beverages in section 8.2, the Legislature clearly intended in 1990 to again subject alcoholic beverages to the Sales and Use Tax Act. It demonstrated that intention by the Assembly Appropriations Committee's clear and unequivocal statement to that effect, by expressly repealing the section 8.34 exemption for alcoholic beverages that it enacted in 1980, and by excluding alcoholic beverages from the benefit of the fifty percent sales and use tax exemption afforded to retailers in urban enterprise zones. In our view, the evidence of the Legislature's intention in 1990 to subject alcoholic beverages to the Sales and Use Tax Act is clear and incontrovertible. II As modified, we affirm the judgment of the Appellate Division. CHIEF JUSTICE PORITZ and JUSTICES STEIN, COLEMAN, LONG, VERNIERO, LaVECCHIA and ZAZZALI join in this opinion. SUPREME COURT OF NEW JERSEY NO. A-35 SEPTEMBER TERM 2000 ON APPEAL FROM ON CERTIFICATION TO Appellate Division, Superior Court

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GNOC, CORP. t/a THE GRAND, Plaintiff-Appellant, v. DIRECTOR, DIVISION OF TAXATION, Defendant-Respondent. DECIDED April 3, 2001 Chief Justice Poritz PRESIDING OPINION BY Per Curiam CONCURRING OPINION BY DISSENTING OPINION BY CHECKLIST CHIEF JUSTICE PORITZ JUSTICE STEIN JUSTICE COLEMAN JUSTICE LONG JUSTICE VERNIERO JUSTICE LaVECCHIA JUSTICE ZAZZALI TOTALS AFFIRM X X X X X X X 7

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