Kinko’s Receives Refund for Double Taxed Royalties by New Jersey

September 17, 2015

On August 5, the Superior Court of New Jersey, Appellate Division, granted Kinko’s Network (“Network”), an affiliate of Kinko’s Ventures (“Ventures”), post-audit refunds of corporate business taxes paid after a 2006 deficiency assessment related to allocation factor. The issue here is that the refund claim, filed in 2008, was for 2002 corporate business taxes paid twice on royalties which would have not been considered timely filed under New Jersey Law.

During an audit in 2006, Network was required to add back royalties paid to Ventures on their 2002 CBT while simultaneously Ventures was required to file and include it in income. Network had originally deducted the payment on their 2002 CBT, but the Division of Taxation required Network to add it back to taxable income because Ventures had yet to pay the deficiency. At the same time of this addback, the Division of Taxation issued Network a proposed 2002 CBT deficiency assessment of which it revised the sales factor which was followed by a deficiency assessment.

In short, despite the NJ law limiting refund claims “of the assessment of additional tax” to “issues raised by the deficiency assessment itself,” the court ruled that due to the “specific and unique facts presented” they “cannot abide defendant’s limited application on the statute” and therefore granted that the refund was timely. For a copy of the majority opinion, click here.

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