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corporation

Related Cases

Stryker Corp. v. Director, Div. of Taxation, 168 N.J. 138, 773 A.2d 674

Facts

Stryker Corp., a Michigan corporation with manufacturing facilities in New Jersey, sold orthopedic products to its subsidiary, Osteonics Corporation, which also operated in New Jersey. Stryker shipped products directly to Osteonics's customers, both in and out of state. After an audit, the New Jersey Division of Taxation assessed Stryker for unpaid corporate business taxes based on all receipts from sales to Osteonics, not just those shipped to New Jersey customers. Stryker contested this assessment, leading to a series of court rulings.

Stryker is a Michigan corporation. It has manufacturing facilities in several states, including one in Allendale, New Jersey. The Allendale facility is the only place where Stryker manufactures orthopedic hips and knees. It sells those products domestically through a wholly-owned subsidiary, Osteonics Corporation, a New Jersey corporation.

Issue

Whether Stryker Corp. must include receipts from sales to its subsidiary, Osteonics, in its allocation factor under the New Jersey Corporation Business Tax Act, despite the products being shipped directly to out-of-state customers.

Rule

Under N.J.S.A. 54:10A–6(B)(6) of the New Jersey Corporation Business Tax Act, all business receipts earned within the state are includable in the receipts fraction for tax purposes.

N.J.S.A. 54:10A–6(B)(6) defines the kinds of income in the numerator of the receipts fraction to include: [R]eceipts of the taxpayer … arising … from … (6) all other business receipts … earned within the State….

Analysis

The court determined that the receipts from Stryker's sales to Osteonics were earned within New Jersey, as Stryker operated its manufacturing facility in New Jersey and sold products to a New Jersey dealer. The court rejected Stryker's argument that the receipts should not be included because they were shipped to out-of-state customers, affirming that the nature of the transaction and the location of the business activities justified the tax assessment.

The Tax Court held that Stryker's disputed receipts did not fall within N.J.S.A. 54:10A–6(B)(1) because they did not involve physical 'shipments … made to points within this State.' However, the Tax Court concluded that in a drop-shipment context, those receipts are includible in the numerator of Stryker's receipts fraction under N.J.S.A. 54:10A–6(B)(6) of the CBTA because the receipts were earned within New Jersey.

Conclusion

The Supreme Court affirmed the Appellate Division's judgment, concluding that Stryker's receipts from sales to Osteonics were taxable under the New Jersey Corporation Business Tax Act.

Who won?

Director of Division of Taxation; the court ruled in favor of the Director, affirming that Stryker's receipts were taxable as they were earned within New Jersey.

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