PRELIMINary STATEMENT

It is undisputed that between August of 1999 and March of 2000 Plaintiff purchased fifty-two cartons of cigarettes from Smoke's Advantage of Louisville, Kentucky, an unlicensed distributor of cigarettes itt New Jersey conducting sales of unstarnped cigarette sales through the Internet. The Director, Division of Taxation ("Director") received the information regarding Plaintiff's purchases from Smoke's Advantage pursuant to the Jenkins Act, 15 U.S.C. § 375, ~ ~jg., a federal act held to be constitutional in a number of contexts.

As Smoke's Advantage failed to remit them, the Director properly determined that Plaintiff was liable for the unpaid taxes under the Cigarette Tax Act, N.J.S.A. 54:40A-l, ~ ~ and Sales and Use Tax Act, U~$~M 54:323-1, ~ ~., resulting from the purchases. As the material facts of this matter are undisputed and do not raise any genuine issues which would preclude it, and the Director is entitled to judgment as a matter of law, this court should enter summary judgment in favor of the Director.

THE TAX COURT SHOULD ENTER SUMMARY JUDGMENT IN FAVOR OF THE DIRECTOR AS THERE IS NO GENUINE ISSUE OF MATERIAL FACT Mm THE DIRECTOR IS ENTITLED TO JUDGMENT AS A MATTER OF LAW.

It is undisputed that between August of 1999 and March of 2000 Plaintiff purchased fifty-two cartons of cigarettes from Smoke's Advantage of Louisville, Kentucky, an unlicensed distributor of cigarettes in New Jersey conducting cigarette sales through the Internet. Consequently, as Smoke's Advantage failed to remit them, the Director properly determined that Plaintiff was liable for the unpaid Cigarette Tax under N.J.S.A. 54:40A-l, ~Z ~jg., and Sales and Use Tax under ~LJS.J.A.L. 54:32B-l, ~t sea., resulting from these purchases. Thus, as the material facts of this matter are undisputed and do not raise any genuine issues which would preclude it, and the Director is entitled to judgment as a matter of law, this court should enter summary judgment in favor of the Director.

Summary judgment shall be granted where "there is no genuine issue as to any material fact . .. and ... the moving party is entitled to judgment as a matter of law." H. 4:46-2(c); .S&~. Judson v. Peoples Bank and Trust, 17 ~jJ~ 67, 74 (1954) . The Supreme Court has cautioned that "a court should deny a summary judgment motion only where the party opposing the motion has come forward with evidence that creates a 'genuine issue as to any

S material fact challenged. '" Brill v. Guardian Life Ins. Cc., 142 ħL& 520, 529 (1995) (quoting % 4:46-2 Cc)). "That means a non-moving party cannot defeat a motion for summary judgment merely by pointing to any tact in dispute." £4~ at 529. "[Wlhere the evidence is so one-sided that one party must prevail as a matter of law, the trial court should not hesitate to grant summary judgment." La.~ at 540 (citations omitted).

Under the Cigarette Tax Act, N.J.S.A. 54:40A-1 ~j a tax is

imposed on the sale, use or possession for sale or use within this State of all cigarettes at the rate of $0.04 for each cigarette. [ILl 2J 54:40A-8.]

See Supermarkets General Corp. v. Taxation Div. Director, 4 N.J. Tax 431, ~ffJ~, 6 N.J. Tax 252 (App. Div. 1982) (holding "use or possession for sale or use" included cigarettes stored in the State by the distributor but never sold)

The Cigarette Tax Act, read in p~fl materia with the Unfair Cigarette Sales Act, ~ 56:7-18, ~ ~ "is designed to impose and prescribe a method of collection of a tax on the sale of cigarettes; to provide for the licensing of distributors, deqlers and consumers; to provide for the control of the transportation at cigarettes in and through the State; and to provide penalties for violations of the Act." C.I.C. Corp. V. Township of East Brunswick, 266 N.J. Super. 1, 9 (App. Div. 1993),

9

~tLLd, 135 L.~L 121 (1994) (citing Coast Cigarette Sales. Inc. v. Mayor of Council, 121 N.J. Super. 439, 447 (Law Div. 1972)).

Additionally, the Sales and Use Tax Act, N.J.S.A. 54:323- 1, ~t ~aq., has been amended so that cigarettes subject to tax under the Cigarette Tax Act are no longer exempt from the tax imposed under the Sales and Use Tax Act. S~ kLL&Aħ. 54:323-8.24, repealed by li 1990, c. 40, § 11. The Sales and Use Tax Act provides, in pertinent part:

Unless property or services have already been or will be subject to the sales tax under this act, there is hereby imposed on and there shall be paid by every person a use tax for the use within this State of 6%, except as otherwise exempted under this act, (A) of any tangible personal property purchased at retail. .

For purposes of clause (A) of this section, the tax shall be at the applicable rate, as set forth hereinabove, of the consideration given or contracted to be given for such property.... ~ 54:323-6.]

Both the Cigarette Tax Act and the Sales and Use Tax Act provide vital sources of state revenue. Indeed, so important is a state's collection of cigarette taxes as a source of state revenue, Congress enacted the Jenkins Act, 15 ~ § 375, ~ ~ to assist states in the collection of sales and use taxes on cigarettes and to address the widespread problem of evasion. See

10 Neeld V. Giroux, 24 N.J. 224, 228 (1957) (citing Senate Report found at 1949 U.S. Code Cong. Service, p. 2159).

The Jenkins Act, suora, provides in relevant part:

(a)

Any person who sells or transfers for profit cigarettes in inteistate commerce, whereby such cigarettes are shipped into a State taxing the sales or use of cigarettes, to other than a distributor licensed by or located in such State, or who advertises or offers cigarettes for such a sale or transfer and shipment, shall --

(1) first file with the tobacco tax administrator of the State into which such shipment is made or in which such advertisement or offer is disseminated a statement setting forth his name and trade name (if any), and the address of his principal place of business and of any other place of business; and

(2) not later than the 10th day of each calendar month, file with the tobacco tax administrator of the State into which such shipment is made, a memorandum or a copy of the invoice covering each and every shipment of cigarettes made during the previous calendar month into such State; the memorandum or invoice in each case to include the name and address of the person to whom the shipment was made, the brand, and the quantity thereof.

(b)

The fact that any person ships or delivers for shipment any cigarettes shall, if such shipment is into a State in which such person had tiled a statement with the tobacco tax administrator under subsection (a) (1) of this section, be presumptive evidence (1) that such cigarettes were sold, or transferred for profit, by such person, and (2) that such sale or transfer was to other than a distributor

11 licensed by or located in such State. [15 U.S.C. § 376.]

This section of the Jenkins Act requiring persons selling or disposing of cigarettes in interstate commerce to forward customer lists to the tobacco tax administrator of the state into which the shipments are made has been held to be a valid exercise of the federal commerce power in aid of state law, and not violative of due process of law notwithstanding the fact that goods other than cigarettes are free from this regulation. Consumer Mail

Order Ass'n of America v. McGrath, 94 F. Suno. 705 0. D.C. 1950), aff'd, 71 5. Ct. 500, 340 SL~.J 925, 95 L. Ed. 668; .s~ also L2i.~&

~ 516 ~2d 959 (4th Cir. 1975) (holding the Jenkins Act is not violative of due process, even though this section only regulates the interstate sale of cigarettes and does not similarly regulate the sale of little cigars) . As recognized by the New Jersey Supreme Court in Neeld v. Giroux, sunra, 24 ~L~L at 228, 229, the authority of Congress to enact the Jenkins Act has been upheld, as the Act is meant to assist rather than foreclose state efforts to protect important state interests. j~ at 228, 229.

The Tax Court should grant the Directors motion for summary judgment as there is no genuine issue of material fact and the Director is entitled to judgment as a matter of law. It is undisputed that between August of 1999 and March of 2000, Plaintiff purchased fifty-two cartons of cigarettes from Smoke's Advantage of

12 Louisville, Kentucky, an unlicensed distributor of cigarettes in New Jersey conducting sales of unstamped cigarettes through the Internet. Plaintiff's own statements reflect that he acquired the cigarettes for his own use or the use of his friends. Plaintiff's purchase information and the selling prices of the cigarettes were forwarded to the Director by Smoke's Advantage pursuant to the Jenkins Act. Since Smoke's Advantage failed to remit the Cigarette Tax and Sales and Use Tax due as a result of Plaintiff's purchases, the Director properly determined that Plaintiff was liable for the taxes in light of the clear, uncontested facts presented. CONCLUSION

For the foregoing reasons, the Director respectfully requests that summary judgment be entered in favor of Defendant, Director, Division of Taxation. DAVID SAMSON ATTORNEY GENERAL OF NEW JERSEY

By: MarYZxtbldschmidt Deputy Attorney General Dated: July 26, 2002