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Propark American New York LLC et al v. City of Hoboken: No Remedy for a “Volunteer” Taxpayer

By David B. Wolfe, Esq posted 03-04-2015 04:16 PM

  

Originally published in the Taxation Law Section Newsletter Vol. 34, No. 2/March 2015

Propark American New York LLC et al v. City of Hoboken: No Remedy for a “Volunteer” Taxpayer

by David B. Wolfe and Maria H. Yoo

         A recent New Jersey Tax Court opinion reaffirmed the unavailability of a judicial remedy for a taxpayer who erroneously overpays a municipal tax when no appeal is expressly provided for in the statutory scheme authorizing the underlying tax. In Propark American New York LLC et al v. City of Hoboken,1 the court held that a taxpayer has no remedy to pursue a refund of overpaid parking taxes because there is no appeal provision in the statute authorizing the municipal parking tax, and that any refund is barred by the ‘volunteer rule’ doctrine.

         In Propark, the court examined Hoboken’s parking tax ordinance, which imposes a 15 percent parking tax on all parking receipts, but excludes taxes on receipts from residential tenants. The plaintiff erroneously remitted parking taxes on all receipts, including those from residential tenants. The plaintiff subsequently sought a refund from the city for $147,643.83, which represented the amount of taxes it had erroneously paid on the residential receipts.

         As “municipalities have no power except that delegated to them by the Legislature,” the tax court examined the statutory framework authorizing municipalities to levy a parking tax. Specifically, the court examined the Local Tax Authorization Act (LTAA),which authorizes municipalities to adopt: 1) a parking tax, 2) an alcoholic beverage tax and 3) an employer payroll tax. In determining whether the taxpayer has the right to seek a refund of parking taxes under the LTAA, the tax court placed significant weight on the fact that the “Legislature specifically provided a refund in the Employee Payroll Tax and specifically did not provide a refund in the Alcoholic Beverages Tax or the Parking Tax.” The court also noted there was not the same “comprehensive” language used in other tax statutes, such as “the tax imposed by this section shall be governed in all respects by the provisions of the State Tax Uniform Procedure Law.”

         After finding the LTAA does not contain a refund mechanism for parking taxes, the tax court ruled the taxpayer could not pursue a refund due to the volunteer rule doctrine. The New Jersey Supreme Court has endorsed the doctrine, which provides that “where a party, without mistake of fact, fraud, duress, or extortion, voluntarily pays money on a demand that is not enforceable against him, he cannot recover it back.”3 The tax court concluded that the taxpayer’s overpayments of the municipal parking taxes were a mistake of law and not due to a mistake of fact. As such, the court held that the city was justified in relying upon the accuracy of the self-paid tax, and the taxpayer was barred from seeking a refund under the volunteer rule.

         Given the court’s rationale, the tax court may similarly rule that refunds are unavailable for alcoholic beverage taxes, and for any other tax that does not expressly provide for a refund mechanism and does not make a ‘comprehensive’ reference to the State Tax Uniform Procedure Law.

         Given the potential inability to seek refunds, practitioners and clients must examine these issues prior to the payment of taxes—particularly in the case of self-reported taxes. As the taxpayer in Propark learned, a subsequent challenge seeking a refund of taxes paid may simply not be sufficient.

David B. Wolfe and Maria H. Yoo practice in the property tax department at Skoloff & Wolfe, P.C. in Livingston, where they focus their practice on representing taxpayers in significant property tax matters. 

Endnotes

1.         27 N.J. Tax 565 (Tax 2014).
2.         N.J.S.A. 40:48C–6 et seq.
3.         See Continental Trailways v. Dir., Division of Motor Vehicle, 102 N.J. 526 (1986), cert. denied, 481 U.S. 1001 (1987).

 

 

 

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