United States: NJ Tax Court Issues Ruling On Sales Tax Sourcing

Last Updated: November 20 2017
Article by David J. Gutowski, Robert E. Weyman and Matthew L. Setzer

At a Glance...

On November 16, 2017, the Tax Court of New Jersey issued a ruling in Spirit Halloween Superstores, Inc. v. Director, Division of Taxation,1 concerning the sourcing of sales of tangible personal property for sales tax purposes. The ruling also provides guidance on the evidentiary standards for obtaining a sales tax refund.

The Tax Court of New Jersey's decision in Spirit Halloween Superstores serves as an important reminder to taxpayers that evidence, such as affidavits, submitted to the court in support of a claim must meet the court's evidentiary standards or it will be disregarded.

On a brighter note, the decision confirms that a sale is not necessarily a sale sourced to New Jersey for sales tax purposes just because the invoice has a New Jersey "ship-to" address and title transfers to the purchaser in New Jersey at the location of a common carrier.


The case involved a New Jersey-based retailer that operated more than 1,100 retail stores across the United States, including 119 stores in New Jersey (the "Taxpayer"). The Taxpayer purchased signage and printed materials from a New Jersey-based vendor. According to the Taxpayer, the purchased items were for retail stores across the United States, but all of the invoices listed the Taxpayer's New Jersey headquarters as the shipping address. The vendor charged New Jersey tax on all of the purchases and the Taxpayer filed a refund claim with the New Jersey Division of Taxation, seeking relief for tax paid on items shipped outside the state. The Division denied the claims and the Taxpayer appealed to the Tax Court.

In addition to the sourcing claim, the Taxpayer sought a refund of tax paid on certain purchases of software and updates. The parties are still evaluating those issues, however, so the court was not asked to rule on the software purchases. (Most purchases of business software and related services are not subject to New Jersey sales tax. For more information about New Jersey software-related issues, please click here to view our recent webinar.)

Taxpayer Failed to Meet Evidentiary Standard

The Taxpayer filed a motion for summary judgement in which it asked the Tax Court to order the requested refund. In support of its motion, Taxpayer submitted:

  • A letter from the vendor stating that the "ship to" address on the invoices did not represent the actual destination of the items sold; rather, FedEx typically picked up the items for delivery to Taxpayer's in-state and out-of-state retail locations. Although the letter was signed by the vendor's Vice-President of Finance and printed on the vendor's letterhead, it was unauthenticated and uncertified.
  • An affidavit from the Taxpayer's senior manager attesting that the purchased items were shipped directly to Taxpayer's retail locations. The affidavit further provided that the proportion of items shipped to New Jersey corresponded with the percentage of taxpayer's retail stores located in New Jersey.

The court found this evidence to be neither credible nor reliable. With respect to the letter from the vendor, the court rejected it as unauthenticated hearsay. The court similarly rejected the Taxpayer's affidavit, noting that it referenced documents that were not attached to the affidavit or otherwise submitted to the court. As a result, the court denied the Taxpayer's motion and the requested refund.

The Tax Court's decision serves as a warning to taxpayers not to rely on unauthenticated documents. Although letters from employees or vendors may be persuasive on audit, that type of evidence may be insufficient when submitted as part of an appeal. Even if a taxpayer submits an affidavit, it is likely to be disregarded unless the attested facts are put into context (for example, by attaching the underlying documents or business records).

Sourcing Sales of Tangible Personal Property

The Division filed its own motion for summary judgment seeking to have Taxpayer's claim dismissed. The Division argued that the ultimate destination of the purchased items to out-of-state locations was irrelevant. According to the Division, title to the items passed to Taxpayer when the vendor delivered the items to FedEx in New Jersey. As a result, the Division argued that it was proper to impose New Jersey sales tax on all of Taxpayer's purchases.

The court concluded that delivery to FedEx in New Jersey did not necessarily mean that New Jersey sales tax was due on the transactions. Although the Division's position may have been supported by prior law,2 the Division never addressed the statutory sourcing provisions that New Jersey adopted in 2005 to conform to the Streamlined Sales and Use Tax Agreement.3 Accordingly, the court denied the Division's motion.

In our view, delivery to a shipping company such as FedEx does not determine sourcing for New Jersey sales tax purposes. Rather, in a situation like the one in Spirit Halloween, a taxpayer is subject to New Jersey sales tax only to the extent that the tangible personal property is delivered to the taxpayer itself in New Jersey.


1. Docket No. 012526-2015.

2. See Media Graphics, Inc. v. Director, Division of Taxation, 8 N.J. Tax 321 (N.J. Super. Ct. App. Div. 1986).

3. Codified as N.J.S.A. 54:32B-3.1.

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions