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On September 19, 1984, plaintiff and Merck & Co., Inc., entered into an agreement for which plaintiff licensed to Merck certain patentable and unpatentable inventions and technologies developed by plaintiff. Merck agreed to pay plaintiff royalties in specified amounts for the use of the license. Merck was a New Jersey corporation with its corporate offices in New Jersey, and, for purposes of determining the numerator of plaintiff’s sales fraction, the Director determined that the royalty payments from Merck should be included. The Director also determined that royalties paid to plaintiff by Ethicon, a New Jersey corporation with its offices in New Jersey, for licensing of plaintiff’s technology were to be included in the numerator of plaintiff’s sales fraction.
For each of the years under appeal, 1992, 1993 and 1994, the joint business filed a federal Partnership income tax return, using its own federal identification number. The return identified the Partnership as “ODSI/Chiron HIV and Hepatitis Business” with an address at 1 001 U.S. Highway 202, Raritan, New Jersey (the address of ODS’s offices). The Schedules K-1 issued to plaintiff and ODS pursuant to the Partnership return showed each as a 50% partner. The joint business did not file tax returns in New Jersey, either as a Partnership or otherwise. Plaintiff filed an individual New Jersey Corporation Business Tax return and a federal income tax return for each of the years under appeal. In both returns, plaintiff reported its income from the business with ODS as income from the “Ortho Joint Venture.”

The sales fraction is the receipts of the taxpayer, computed on the cash or accrual basis according to the method of accounting used in the computation of its net income for federal tax purposes, arising during such period from . . .
2) sales of tangible personal property located without the State at the time of the receipt of or appropriation to the orders where shipment is made to points within the State . . .
5) . . . royalties from the use of patents or copyrights, within the State,
6) all other business receipts . . . earned within the State,
divided by the total amount of the taxpayer’s receipts, similarly computed, arising during such period from all sales of its tangible personal property, services, rentals, royalties and all other business receipts, whether within or without the State. . . .

Plaintiff does not dispute that its sales of antigens and antibodies to ODS are included under item (2) of the definition. Plaintiff contends, however, that its relationship with ODS was a joint venture, and that, consequently, one-half of its sales of antibodies and antigens to the joint venture constituted sales to itself. Plaintiff’s position is summarized in its brief as follows:
To the extent that such transfers [of antigens and antibodies] were considered transfers by Chiron to Ortho, Chiron treated the transfers as “sales” to Ortho and as a New Jersey receipt. Chiron included such receipt in both the numerator and the denominator of its receipt factor. To the extent that such transfers were considered as transfers by Chiron to itself, Chiron did not treat the transfers as “sales” and did not include such transfers in either the numerator or the denominator of its receipt fraction.

Plaintiff asserts that the following announcement published in State Tax News supports its position:
Inquiries have been received by the [New Jersey Division of Taxation] regarding factor representation of joint venture interests for Corporation Business Tax purposes. Since joint ventures are not separate legal entities for New Jersey tax purposes, the pro rata share of joint venture real and tangible personal property, receipts and wages both within and without New Jersey must be included in determining the corporate business allocation factor of the venturer. Similarly, the proportionate share of income and expense must be included in the co-venturer’s taxable net income. This reflects the Division’s historical position which is independent of any unitary/non-unitary analysis in a particular case. A copy of Federal Form 1065 [(the Federal Partnership Tax Return)] should be included when filing the Return.

[N.J. Div. of Taxation, 25 State Tax News, Spring 1996, at 4 (citation omitted).]     

    Plaintiff characterizes its relationship with ODS as a joint venture on the following bases:
the enterprise had a single purpose, that is, to market the HCV and HIV technologies in the immunodiagnostic field of use;
the relationship between plaintiff and ODS was relatively informal in that each was free to conduct its operations on behalf of the joint business independently and without scrutiny by the other party; and
each party was free to pursue other business opportunities.
The Director contends that the joint business constitutes a partnership and not a joint venture, and argues that, whatever title is attached to the form of the business, it remains a separate entity for CBT purposes.
Under the Uniform Partnership Law as in effect in New Jersey during the years under appeal, “part ownership does not of itself establish a partnership, whether such co-owners do or do not share any profits made by the use of the property.” N.J.S.A. 42:1-7(2), repealed by L. 2000, c. 161, §59. The statute also provided, however, that a party’s receipt of a share of the profits of a business “is prima facie evidence that he is a partner in the business.” N.J.S.A. 42:1-7(4), repealed by L. 2000, c. 161, §59. Under the Revised Uniform Partnership Act, L. 2000, c. 161, which became effective in New Jersey in 2000, “the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership.” N.J.S.A. 42:1A-10(a). The revised statute also provides that a party receiving a share of business profits “is presumed to be a partner in the business,” unless the profits are received in payment of specific obligations of the entity. N.J.S.A. 42:1A-10(c)(3).
The definition of a partnership in Black’s Law Dictionary is “[a] voluntary association of two or more persons who jointly own and carry on a business for profit.” Black’s Law Dictionary 1152 (8th ed. 2004). The definition also includes a “particular partnership” which is defined as a partnership “in which the members unite to share the benefits of a single transaction or enterprise.” Id. at 1153. Black’s defines a joint venture as “[a] business undertaking by two or more persons engaged in a single defined project. The necessary elements are: (1) an express or implied agreement; (2) a common purpose that the group intends to carry out; (3) shared profits and losses; and (4) each member’s equal voice in controlling the project.” Id. at 856.
The Internal Revenue Code draws no distinction between a partnership and a joint venture. In I.R.C. § 7701(a)(2), the term partnership is defined as including a “joint venture, or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on. . . .” Based on this definition, the filing of a partnership return by the joint business does not, in itself, constitute an admission by plaintiff that its relationship with ODS was a partnership, because, under the federal definition, a partnership return was appropriately filed even if plaintiff contended that the entity filing the return was a joint venture. The Director has adopted the definition of a partnership set forth in I.R.C. § 7701(a)(2). N.J.A.C. 18:7-7.6(f) (stating that “the term ‘partnership’ has the same meaning as is set forth under I.R.C. § 7701(a)(2) and the regulations issued thereunder.”).
Generally the courts have drawn little distinction between partnerships and joint ventures under New Jersey law.
Under New Jersey law, joint ventures are virtually identical to partnerships, and the same rules apply to both relationships when determining the respective parties’ obligations. See, e.g., 68^th St. Apts., Inc. v. Lauricella, 142 N.J. Super. 546, 559 n.2, 362 A.2d 78 (Law Div. 1976), aff’d, 150 N.J. Super. 47, 374 A.2d 1222 ([App. Div.] 1977) (holding the rules of law which apply to partners also apply to joint ventures); Kozlowski v. Kozlowski, 164 N.J. Super. 162, 171, 395 A.2d 913 (Ch. Div. 1978), aff’d 80 N.J. 378, 403 A.2d 902 (1979) (noting the elements of a joint venture are virtually identical to those required for a partnership and the rules of law which apply to partners also apply to joint ventures); Silverstein v. Last, 156 N.J. Super. 145, 152, 383 A.2d 718 (App. Div. 1978) (stating the classification of relationship as a joint venture or partnership is immaterial in terms of fiduciary obligations owed by one participant to another); A. Bromberg & L. Ribstein, 1 Bromberg and Ribstein on Partnership § 2.06(a), at 2:42-43 (1988) (“Most courts have chosen to distinguish between isolated transactions and continuing enterprises by classifying the former as joint ventures and applying partnership law with little or no modification.”).

[Walter v. Holiday Inns, Inc., 784 F. Supp. 1159, 1167 n.10 (D.N.J. 1992) aff’d, 985 F.2d 1232 (3d Cir. 1993).]

See also, Rodin Properties-Shore Mall, N.V. v. Cushman & Wakefield of Pennsylvania, Inc., 49 F. Supp.2d 728, 736 (D.N.J. 1999) (defining the elements of a joint venture as virtually identical to those of a partnership). In Wittner v. Metzger, 72 N.J. Super. 438 (App. Div. 1962), the court quoted the following from Cooperstein v. Shapiro, 122 N.J. Eq. 238, 241 (E. & A. 1937):
A joint adventure is not dissimilar to a partnership * * *; the character of the relationship being more informal and usually limited to a single transaction although the conduct of the particular business may continue for a number of years.

[Wittner v. Metzger, supra, 72 N.J. Super. at 444.]
    I conclude that the joint business between plaintiff and ODS constitutes a partnership for purposes of determining plaintiff’s CBT liability and, in the remainder of this opinion, I will refer to the entity as the Partnership. The following elements of the relationship between plaintiff and ODS provide the basis for my conclusion:
the 1989 Agreement is not limited to a single enterprise. The document specifically recites that it is intended to “restructure and expand the scope” of the 1986 Agreement. Although the definition of the term “Product” under the 1989 Agreement relates to immunoassays, immunoassay kits, and immunoassay test configurations using or containing antigens or antibodies provided by plaintiff, the Agreement also provides (as did the 1986 Agreement) that the supervisory board has the responsibility to suggest “new avenues or areas of research and development for Antigens and Antibodies and/or Products, including possible acquisition of third-party technology, as they are identified.” The 1989 Agreement expressly contemplates that each party will pursue and acquire rights from third parties to use “competitive or complimentary technology and developments pertaining to the development or manufacture of Antigens, Antibodies or Products and related test configurations and related assay systems and technology related to instrument or other diagnostic read out systems;”
under the 1989 Agreement, the joint business has its own annual budget and annual strategic plan;
the supervisory board constitutes a separate management structure for the joint business;
the 1989 Agreement expressly provides for a relationship with a third-party, Abbott, for the sublicensing of technology licensed by plaintiff to ODS, and plaintiff and ODS agree to sublicense to Abbott any competitive technology which may be acquired by either of them for use by the joint business;
the 1989 Agreement provides that plaintiff and ODS jointly will own any patent or know-how invented by them jointly;
the term of the 1989 Agreement is fifty years with automatic five year renewals;
under the agreement with DuPont, plaintiff and ODS together were granted a single license to use certain technology and information; and
both plaintiff and ODS, as part of their “long-term collaborative effort,” entered into the agreement described above with PSD.
Because plaintiff’s joint business with ODS resulted in the formation of a separate partnership entity for purposes of calculating CBT, plaintiff’s sales to ODS of antigens and antibodies for use on behalf of the business constituted sales to the Partnership. Plaintiff did not sell one-half of the antigens and antibodies to itself, as it contends, and, did not pay its share of Partnership revenue to itself. Therefore, the numerator of its sales fraction must be calculated on the basis of the revenues derived from all sales of antigens and antibodies to ODS pursuant to the 1989 Agreement.

    In such a situation, nexus may exist by virtue of the partnership’s activities in New Jersey, and the receipts, property and payroll of the partnership may be included in a corporate taxpayer’s fractions of its allocation factor.

    Facts that either singly or in combination may suggest that a flow-through approach may be appropriate include:
substantial intercompany-partnership transactions;
the partnership interest is the only or the most substantial asset of the corporation, or the partnership interest produces all or most of the income of the corporation;
the corporation and partnership are in the same line of business;
substantial overlapping employees and officers;
sharing of operational facilities, technology and/or know-how.
        
[New Jersey Division of Taxation, Technical Bulletin-3, Issued June 21, 1991 and expiring June 30, 1992.]

In 1997, after the last year under appeal in this matter, the Director incorporated the contents of the Technical Bulletin into his regulations under the CBT Act. N.J.A.C. 18:7-7.6(g). 29 N.J. Reg. 1686(a) and 4327(a) (1997). ^{See footnote 4}
Plaintiff contends that it and the Partnership are integrated, and, therefore, the requirements of the Technical Bulletin use of the flow through method are satisfied. Specifically, plaintiff contends that it satisfies the five factors set forth in the Bulletin as follows: 1) the sales by plaintiff to the Partnership of antigens and antibodies constitute substantial intercompany-partnership transactions; 2) the Partnership interest produces most of plaintiff’s income, representing between 38% (for 1993 and 1994) and 50% (for 1992) of its gross income and between 180% and 608% of its net income (plaintiff having suffered losses on other aspects of its business); 3) plaintiff and the Partnership are in the same line of business, that is, developing tests to be used for detecting HCV and HIV; 4) there is substantial overlapping of employees and offices because three of plaintiff’s senior executives serve as members of the six-member supervisory board, and employees of plaintiff performing their work for it are simultaneously performing work which benefits the Partnership; and 5) the Partnership and plaintiff share technology and/or know-how as evidenced by the licenses granted by plaintiff and ODS to each other under the 1989 Agreement and their continuing every day business relationship in developing and marketing Products.
    The Director contends that plaintiff fails to satisfy any of the five factors for the following reasons: 1) the sales of antibodies and antigens by plaintiff to the Partnership do not constitute the type of intercompany-partnership transactions contemplated by the Technical Bulletin; 2) although, at least on a net income basis, plaintiff’s interest in the Partnership produces most of its revenue, if plaintiff’s other business ventures become profitable, then plaintiff will no longer have most of its revenues derived from the Partnership; 3) plaintiff and the Partnership are not in the same line of business, with plaintiff’s business being research and development of antigens and antibodies and the Partnership’s business being the use of those antigens and antibodies to develop, produce and market blood testing kits; 4) the service of three of plaintiff’s senior executives on the Partnership’s supervisory board does not constitute a substantial overlapping of employees or officers and plaintiff’s employees do not work for the Partnership; 5) there is no use by plaintiff’s employees or officers of any offices which are also used by the Partnership; and 6) the sharing of technology and know-how is limited to the specific purposes of the 1989 Agreement and there is no general agreement to share technology and know-how by plaintiff or by ODS.
    The Technical Bulletin states that the factors articulated by the Director “either singly or in combination may suggest” that the flow-through approach “may be appropriate.” Although I conclude that the relationship between plaintiff and the Partnership is such as to satisfy more than one of the factors in the Bulletin, I also conclude that, given the non-definitive language of the Bulletin (”may suggest” and “may be appropriate”), the factors are merely indicators that the Division will consider. The critical issue is whether the corporate partner and the partnership are “integrated” and parts of a “unitary business.” See N.J.A.C. 18:7-7.6, Example III (applying the flow-through method when a corporation is “unitary with a partnership” and “there is a sufficient integration of assets and business activities”). Here, for the reasons discussed below, the relationship between plaintiff and the Partnership is not unitary or integrated. Therefore, plaintiff does not qualify for use of the flow through method.
The Technical Bulletin factor most obviously satisfied is the second, relating to the derivation of most of plaintiff’s revenue from the Partnership. The Director is correct that plaintiff’s receipts from other ventures may change and may diminish the significance of the revenues from the Partnership, but, during the years under appeal, those revenues were the most significant element of plaintiff’s total revenue picture, both on a gross and net basis. The relationship between plaintiff and the Partnership also satisfies the fifth factor relating to sharing of technology. The sales of antigens and antibodies by plaintiff to the Partnership could satisfy the first factor relating to substantial intercompany-partnership transactions but I need not decide that issue.
Other factors set forth in the Bulletin are not satisfied and suggest a lack of integration between plaintiff and the Partnership. Plaintiff and the Partnership are not in the same line of business (the third factor). Viewed from the perspective of the Partnership, plaintiff’s business simply is one aspect of the Partnership’s business, namely, providing research and supplying antigens and antibodies. Plaintiff is not in the business of producing blood testing kits and marketing them throughout the world. Its inability to do so is precisely the reason for its entering into a relationship with ODS. The relationship between plaintiff and the Partnership does not satisfy the fourth factor relating to substantial overlapping of employees and offices (or officers). As indicated above, plaintiff’s employees do not use offices of the Partnership. The Partnership’s offices are the offices of ODS and are used by ODS personnel. The service by three executives of plaintiff on the supervisory board does not constitute a substantial overlapping of employees or officers. That work performed by plaintiff’s employees and officers also benefits the Partnership does not mean that the employees or officers are working on behalf of the Partnership. Their employment is by plaintiff, and their work is directed by plaintiff.
The lack of integration between plaintiff and the Partnership is confirmed by the 1989 Agreement. As described above, the Agreement imposes on plaintiff significant obligations while imposing very few, if any, obligations on ODS. Plaintiff is obligated to provide to ODS the Partnership’s requirements for antigens and antibodies, as determined solely by ODS. ODS has no obligation to have any such requirements, but does have a general obligation of good faith under the Agreement. Under the October 12, 1993 amendment, ODS no longer has any obligation to purchase any antigens or antibodies from plaintiff. ODS has no obligations under the Agreement to use its best efforts to produce and market blood testing kits using antigens and antibodies provided by plaintiff.
As to management of the Partnership, the Agreement provides, as described above, that, if the members of the supervisory board cannot agree on a budget or strategic plan for the following year, in most circumstances ODS alone has the right to make the budgetary decisions and develop the plan, including the right to change the allocation of responsibilities between the parties subject to plaintiff’s retaining research responsibilities. See Chiron Corp. v. Ortho Diagnostic Systems Inc., 207 F.3d 1126 (9th Cir. 2000) (discussing an arbitrator’s award enforcing a decision by ODS under the 1989 Agreement with which plaintiff disagreed). Under certain limited circumstances, a neutral third party may be required to make decisions in the event of a deadlock, but, generally, if the business venture is successful, ODS retains total control of the budget and strategic plan, the two most critical elements of the business operation.
    Not only does plaintiff have limited management rights under the 1989 Agreement and far greater responsibilities and obligations than ODS, but also plaintiff has the express right under the Agreement (as does ODS) to continue with other business ventures not involving the sale of antibodies and antigens as contemplated by the Agreement. As financial figures submitted by plaintiff indicate, the Partnership’s operations represent no more than one-half of plaintiff’s gross revenues.
    The Partnership represents a successful business venture by plaintiff, but plaintiff has not relinquished its independence and does not have a position of parity with ODS in terms of obligations and rights under the 1989 Agreement. In no sense, therefore, can plaintiff be deemed or viewed as unitary or integrated with the Partnership. Consequently, even though several of the factors permitting use of the flow through method appear to be satisfied, I conclude that use of the method would be inappropriate and would result in a distortion of the sales fraction and thus plaintiff’s allocation factor. See N.J.S.A. 54:10A-10 (authorizing the Director to adjust entire net income allocable to New Jersey, and other items, in order to make “a fair and reasonable determination of the amount of tax payable under [the CBT] act.”). The separate entity approach, as generally applicable under the Director’s Technical Bulletin and later regulation, does not result in a distortion of the sales fraction, and thus does not result in a distortion of the allocation factor to be used by plaintiff for purposes of calculating its CBT obligations to this State.