Tax Court Finds Inland Storage and Repair Services Are Tax Exempt Services At A Marine Terminal Facility

By Sean Mack, Esq.
smack@pashmanstein.com

On July 19, 2013, the Tax Court of New Jersey issued a decision, which confirms that fees and charges for intermodal container storage services and related chassis repair services in the Newark/Elizabeth Port District are exempt from New Jersey’s Sales and Use Taxes.

In response to a challenge to its tax assessment by Plaintiff, Ironbound Intermodal, the New Jersey Tax Court had its first opportunity to interpret an exemption to New Jersey’s sales and use tax statute, which exempts receipts for certain services performed at “marine terminal facilities.”

In relevant part, the marine terminal facilities exemption provides:

Receipts from sales or charges for repairs, alterations or conversion of commercial ships or any component thereof including cargo containers of any type whatsoever, … machinery, apparatus and equipment for use at a marine terminal facility in loading, unloading and handling cargo carried by those commercial ships, … and storage and other services rendered with respect to such loading, unloading and handling cargo at a marine terminal facility … are exempt from the tax imposed under the Sales and Use Tax Act.  (N.J.S.A. 54:32B-8.12)

The plaintiff’s business involves the storage of intermodal containers, and chassis maintenance and repair services, which are required to keep the chassis in compliance with state and federal regulations.

The plaintiff’s facilities while located in Newark, are outside of Port Newark, are not located on the waterfront, do not have piers, wharves or the ability to load and unload cargo containers on and off ocean going vessels.  While those same services provided within Port Newark are tax exempt, the Division of Revenue deemed Plaintiff to be ineligible for the exemption because it was outside the Port and could not provide stevedoring services.

The term “marine terminal facility” is not defined in the Sales and Use Tax Act.  In reaching its conclusion, the court explained that the exemption was enacted to encourage cargo container owners to come to New Jersey for their repairs and maintenance, because New Jersey had been losing that business to New York companies, whose services could be provided tax free.

The tax court concluded that the plaintiff’s facilities in Newark were “marine terminal facilities” because they were “structures, facilities and improvements necessary or convenient to the accommodation of steamships or other vessels and their cargoes.”

Because the court found that plaintiff’s facilities constitute marine terminal facilities, its container storage services and chassis repair labor charges are exempt from taxation under N.J.S.A. 54:32B-8.12.

Other operators of cargo container storage and chassis repair and maintenance services in the Newark/Elizabeth area should look to this decision as precedent for challenging sales and use tax assessments.  [Note, the Division of Revenue has appealed the tax court’s ruling]

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