                        NOT FOR PUBLICATION WITHOUT THE
                      APPROVAL OF THE APPELLATE DIVISION
     This opinion shall not "constitute precedent or be binding upon any court."
      Although it is posted on the internet, this opinion is binding only on the
        parties in the case and its use in other cases is limited. R. 1:36-3.




                                       SUPERIOR COURT OF NEW JERSEY
                                       APPELLATE DIVISION
                                       DOCKET NO. A-1978-16T1

N. IOAKIMIDIS, LLC, and
STELLA'S PIZZA, INC.,

        Plaintiffs-Appellants,

v.

DIRECTOR, DIVISION
OF TAXATION,

     Defendant-Respondent.
______________________________

              Submitted March 13, 2018 – Decided July 17, 2018

              Before Judges Sumners and Moynihan.

              On appeal from Tax Court of New Jersey,
              Docket Nos. 14362-2014 and 14364-2014.

              Fernando    Iamurri,   PC,    attorney    for
              appellants (Fernando Iamurri, on the brief).

              Gurbir S. Grewal, Attorney General, attorney
              for   respondent  (Heather   Lynn   Anderson,
              Deputy Attorney General, on the brief).

PER CURIAM

        The Division of Taxation (the Division) issued sales tax

assessments for a restaurant owned and operated by plaintiffs N.

Ioakimidis, LLC and Stella's Pizza, Inc., which was based upon a
methodology that did not rely upon business records because the

records   were   deemed     inadequate.      Plaintiffs     appeal    the   Tax

Court's denial of their summary judgment motion contesting the

assessments and the granting of the Division's cross-motion that

the assessments were proper.        We affirm.

       In 2009, Nick Ioakimidis, owner and principal shareholder

of Stella's Pizza, Inc., transitioned operations of "Stella's

Pizza" from Stella's Pizza, Inc. to N. Ioakimidis, LLC, bearing

a   different    taxpayer     identification      number.      A     Pre-Audit

Questionnaire by the Division revealed that Stella's Pizza was

not retaining necessary business records, such as guest checks,

cash    disbursement    journals,    sales    journals,     deposit     slips,

vendor bills, payroll records, and cash register tapes.                 During

a   pre-audit    meeting    in   April    2011,   the   Division's    auditor

requested plaintiffs produce their business records.

       After two years expired without the records being produced,

another pre-audit meeting in May 2013 resulted in a renewed

records request.       This time, plaintiffs responded by producing:

two Point of Service (POS) statements for the tax period of

January 1, 2006 to May 31, 2012; copies of W-2 and NJ W-31 forms

for tax years 2007 through 2009; a price list for tax year 2011;


1
    Gross Income Tax Reconciliation of Tax Withheld.


                                     2                                A-1978-16T1
bank statements from Valley National Bank and PNC Bank; partial

vendor purchase invoices from Bart Foods from 2005 to 2010; a

vendor list for the period of April 1, 2005 through March 31,

2009 and of May 1, 2010 through May 31, 2012; and partial vendor

purchase invoice from Kalimera Food from 2006 to 2012.

      After a careful review of the limited business records, the

auditor found several deficiencies: (i) inconsistencies between

gross receipts reported on plaintiffs' Corporation Business Tax

(CBT) returns and gross receipts reported on plaintiff's Sales

and Use Tax (SUT) returns; (ii) disparities between the menu

prices     identified    on   plaintiffs'     website       and   the     paper      menu

supplied by plaintiffs following the pre-audit meetings; (iii)

the SUT collected by plaintiffs exceeded the SUT remitted to

defendant; (iv) plaintiffs' bank statements did not correspond

to   the   reported     gross    receipts;    (v)    the    sum     of    plaintiffs'

cancelled checks fell short of the purchase totals reported by

plaintiffs;     (vi)    none     of   the    POS    records       corresponded          to

plaintiffs' SUT returns; (vii) plaintiffs' paid wages in cash

and did not record all payroll transactions; and (viii) all cash

received     from     business    operations        was    not    deposited          into

plaintiffs'      bank     accounts.           The         auditor        also      found

inconsistencies with individual line items for the identical tax



                                       3                                        A-1978-16T1
periods and a discrepancy in the gross sales figures between the

POS records.

    Consequently, the auditor conducted a markon analysis to

test plaintiffs reported taxable sales and determined that a 3.0

markon ratio should be applied to the purchases for the audit

period.     Plaintiffs' SUT deductions were rejected for failure to

present    any     documentation.      The    auditor   further   applied     the

applicable SUT rate to each audit year, and thereafter, reduced

the sum of the SUT paid by plaintiffs with their SUT returns.

    The Division next issued Notices of Assessment Related to

Final Audit Determination to plaintiffs.                   Plaintiffs filed a

notice of protest.           The Division's conferee2 accepted the 3.0

markon     ratio    and   determined       plaintiffs   failed    to    maintain

adequate     books     and   records    and    adequate     internal     control

procedures.        The Division determined that because "the integrity

of the POS records [were] in question," Stella's Pizza, Inc. was

assessed $161,354.04 in unpaid CBT, SUT,                Gross Income Tax –

Employer Withholding (GIT), and Litter Control Fee, including

penalties    and     interest,   and   N.    Ioakimidis,    LLC   was   assessed



2
   The Division's Conference and Appeals Branch employ a conferee
who conducts administrative conferences with taxpayers.    Clorox
Prods. Mfg. Co. v. Director, Div. of Taxation, 24 N.J. Tax 223,
227 n.6 (Tax 2008).


                                       4                                A-1978-16T1
$76,506.06    in    unpaid    SUT    and     GIT,    including      penalties      and

interest.

      After plaintiffs challenged the determination in Tax Court,

the   parties'      filed    their      respective        motions    for    summary

judgment.    In a comprehensive written opinion, Judge Joshua D.

Novin decided in the Division's favor.                He rejected plaintiffs'

arguments    that    the     Division       erred    in   disallowing      the     POS

statements    to    determine     their      gross   sales    during     the     audit

periods;    that    the   documents     the    Division      requested     were   not

statutorily required to be maintained; that the Division had the

burden to analyze the POS system; and that the markon ratio and

methodology employed in making the assessments were flawed and

produced an arbitrary and capricious assessment.

      The judge found that because plaintiffs failed to satisfy

N.J.A.C.     18:24-2.4       by   preserving         sales    slips,       invoices,

receipts,    cash     register      tapes,     and    guest     checks     receipts

corroborating the accuracy of the two POS statements provided,

the   Division      appropriately         determined       plaintiffs’      summary

records were inaccurate.            The judge cited N.J.S.A. 54:32B-19,

which provides that "if a [tax] return when filed is incorrect

or insufficient, the amount of tax due shall be determined by

the director from such information as may be available.                             If

necessary, the tax may be estimated on the basis of external

                                        5                                   A-1978-16T1
indices."      He further relied upon Yilmaz, Inc. v. Dir., Div. of

Taxation, 390 N.J. Super. 435, 441 (App. Div. 2007), which held

that   the     Division's        Director        was   "given    broad     authority    to

determine      the   tax        from   any       available      information    and,     if

necessary, to estimate the tax from external indices."                            Hence,

the    judge    found      it     suitable        that   the     auditor    "turned     to

consideration of other evidence to estimate plaintiffs' gross

sales and tax obligations," such as the 3.0 markon ratio; noting

plaintiffs      failed     to     show   it       "produced      an   inconsistent      or

aberrant result."        The judge explained, plaintiffs

             have not argued, offered, maintained or
             demonstrated that at trial that they will or
             are prepared to offer the testimony of an
             accountant,   auditor,  examiner   or   other
             expert in the field who has conducted a
             review or analysis of plaintiffs' business
             records, POS statements, SUT returns and the
             auditor's file, and would offer substantive
             alternate calculations to those of the
             auditor. Thus, a trial in this matter would
             seemingly amount to the court's review of
             [Division's] audit and conference practices
             on the basis of plaintiffs' unsubstantiated
             challenges to the auditor's and conferee's
             final   conclusions.       [The]    standards
             governing the review of motions for summary
             judgment do not permit such proceeding.

       Plaintiffs appeal arguing:

             POINT I

             THE LOWER COURT ERRED IN DENYING PLAINTIFFS'
             SUMMARY   JUDGMENT   MOTION   AND   GRANTING
             DEFENDANT'S CROSS[-]MOTION BY FAILING TO

                                             6                                  A-1978-16T1
           RECOGNIZE THE INHERENT LAWS AND ARBITRARY
           ASSUMPTIONS IN THE DIRECTOR'S METHODOLOGY
           AND BY DISREGARDING THE FACT THE DIRECTOR
           VIOLATED STATUTORY LAW BY DISCOUNTING THE
           DOCUMENTATION PROVIDED BY PLAINTIFFS[] IN
           ORDER TO PROPERLY DETERMINE GROSS SALES.

           A. The Lower Court failed to recognize the
           unmistakable   inherent  flaws   and  wholly
           arbitrary assumptions in the State Auditor's
           markup methodology and calculations.

           B. The Lower Court failed to recognize that
           the Arbitrator Deviated from Statutory Law
           by Arbitrarily Disregarding the Point of
           Sale   Statements    and    the Plaintiffs'
           Accountant's Certification.

           POINT II

           THE   LOWER    COURT   ERRED    IN    GRANTING
           DEFENDANTS'   SUMMARY  JUDGMENT    MOTION   BY
           SUBSTANTIALLY DEVIATING FROM THE BRILL[3]
           STANDARD SET FORTH BY OUR COURTS WHEN
           CONSIDERING SUMMARY JUDGMENT APPLICATIONS.

      To   inform   our   review   of   plaintiffs'    contentions,    we

consider some well-known general standards.           When reviewing an

order granting summary judgment, we apply "the same standard

governing the trial court."        Oyola v. Xing Lan Liu, 431 N.J.

Super. 493, 497 (App. Div. 2013).       A court should grant summary

judgment when the record reveals "no genuine issue as to any

material fact" and "the moving party is entitled to a judgment

or order as a matter of law."           R. 4:46-2(c).     We accord no


3
    Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520 (1995).


                                   7                           A-1978-16T1
deference to the trial judge's legal conclusions.                   Nicholas v.

Mynster, 213 N.J. 463, 478 (2013) (citations omitted).                  Summary

judgment should be denied when the determination of material

disputed    facts   depends    primarily        on   credibility    evaluations.

Petersen v. Twp. of Raritan, 418 N.J. Super. 125, 132 (App. Div.

2011).      Although    both   parties      moved     for   summary    judgment,

because the court granted judgment in favor of the Division, we

consider the facts in a light most favorable to plaintiffs.

Brill, 142 N.J. at 523.

    "A      taxpayer    challenging       the    [Division]'s      determination

bears the burden of proof."           UPSCO v. Dir., Div. of Taxation,

430 N.J. Super. 1, 8 (App. Div. 2013) (citing Atl. City Transp.

Co. v. Dir., Div. of Taxation, 12 N.J. 130, 146 (1953)).                   Those

transactions enumerated by the SUT Act, N.J.S.A. 54:32B-1 to -

55, are "presumed" to be "subject to tax until the contrary is

established, and the burden of proving that any such receipt,

charge or rent is not taxable . . . shall be upon the person

required to collect tax or the customer."                    N.J.S.A. 54:32B-

12(b).     N.J.S.A. 54:32B-3(b) imposes a tax on the "receipts from

every sale . . . of" certain services.                 These include services

connected    with   "[i]nstalling     tangible        personal   property,"     or

"[m]aintaining,        servicing,     or        repairing    real     property."

N.J.S.A. 54:32B-3(b)(2) and (4).

                                      8                                 A-1978-16T1
       Generally, we review "[a] tax court's interpretation of a

statute . . . de novo."            Presbyterian Home at Pennington, Inc.

v. Borough of Pennington, 409 N.J. Super. 166, 180 (App. Div.

2009) (citing Twp. of Holmdel v. N.J. Highway Auth., 190 N.J.

74, 86 (2007)).            On the other hand, we are mindful that we

extend some deference to the Division's interpretation of the

operative law based on "the Director's expertise, particularly

in specialized and complex areas of the Act," and the Director's

responsibility        to    interpret     the        law   he   is    charged        with

enforcing.       Koch      v.   Dir.,   Div.    of     Taxation,     157   N.J.     1,   8

(1999).     "However, this deference is not total, as the courts

remain     the     final        authorities       on       issues     of       statutory

construction."      Ibid. (citation omitted).

       Applying these standards, we conclude plaintiffs' arguments

lack     sufficient     merit     to    warrant       discussion     in    a    written

opinion, R. 2:11-3(e)(2), and we affirm substantially for the

reasons set forth by Judge Novin in his cogent decision.

       Affirmed.




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