Check Your Math: NJ Tax Court Rules Plaintiffs Not Entitled to Refund of Overpaid Municipal Parking Taxes

Check Your Math: NJ Tax Court Rules Plaintiffs Not Entitled to Refund of Overpaid Municipal Parking TaxesIn Propark America New York, L.L.C. et al v. City of Hoboken, the Tax Court of New Jersey ruled that the operator of public parking garage was not entitled to a refund of overpaid municipal parking taxes paid to the City of Hoboken. The court reasoned that in the absence of a New Jersey tax law authorizing such a refund, the City has the right to rely upon the written certification of the taxpayer and the right to assume that the payment remitted is accurate and in conformance with the parking ordinance.

The Facts of the Case

Pursuant to the Local Tax Authorization Act, N.J.S.A. 40:48C-6, the City of Hoboken enacted Ordinance No. 140-10, which imposed a parking tax on the operators of public parking garages. It specifically authorized the City to collect a 15 percent tax on fees derived from the parking or garaging of motor vehicles. The parking tax is self-reported by the taxpayer and submitted on a monthly basis using a form provided by the City.

Plaintiff, Block 255, LLC, (“Block 255”) owns the property known as Block 255, Lot 4.03 on the Hoboken tax map, which includes a 1,250-space parking garage commonly known as the Hudson Tea Parking Garage. Block 255 entered into a contractual arrangement with plaintiff, Propark America New York, LLC (“Propark”) under which Propark became responsible for the management of the parking garage and the collection of all fees derived from the use of the parking spaces.

In 2009, Propark discovered that, from April 2007 through May 2009, it had erroneously calculated the amount of tax due. Rather than paying the tax only on the fees received from nonresidential and transient parkers, Propark paid tax on all parking fees, including those from spaces leased to Hudson Tea residents, who are exempt under the ordinance. Propark subsequently sought a refund from the City of Hoboken for $147,643.83 in overpaid taxes. After the City denied the claim, the plaintiffs filed suit.

The Court’s Decision

The New Jersey Tax Court ultimately sided with the City of Hoboken, ruling that the plaintiffs were not entitled to a refund. As explained in the opinion, the City’s parking tax ordinance clearly states that the fifteen percent tax does not apply to parking fees from residential tenants. More importantly, it does not contain a provision or procedure for refunds.

The court further rejected the plaintiffs’ arguments that Local Tax Authorization Act (LTAA) or the State Tax Uniform Procedure Law (STUPL) provide for refunds or the repayment of overpaid parking taxes. The court specifically concluded that the New Jersey Legislature’s decision to not include a refund provision within the Parking Tax statute was intentional and designed to preclude the right to a refund of overpaid taxes, citing that employer payroll tax, enacted and amended at the same time as the parking tax statute, does include such a right.

The court further held that the provisions of STUPL, which provide that a taxpayer may, within four years after the payment of any tax assessed, file a claim for a refund with the appropriate assessing authority, did not authorize a refund in this case. As explained by the court, “Plaintiffs have not cited any legislative history or other evidence of legislative intent that would persuade this court that the reference in Article 8 to the STUPL is for the purpose of providing refunds from overpaid local parking taxes.”

Finally, in the absence of the specific statutory right to a refund, the court concluded that the Volunteer Rule applies.  It states that “where a party without mistake of fact, or fraud, duress or extortion, voluntarily pays money on a demand which is not enforcible [sic] against him, he cannot recover it back.” Since the plaintiffs’ overpayments of the City’s municipal parking tax were a mistake of law, they are not refundable as a matter of law, the court reasoned.

For more information about this legislation or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group. 

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