2014 NJ Tax Expenditure Report

2014 NJ Tax Expenditure Report
A Report on
Tax Expenditures in
New Jersey
New Jersey Department of the Treasury
Division of Taxation
Michael J. Bryan
Director
February 21, 2014
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New Jersey Tax Expenditure Report
Table of Contents
Introduction .................................................................................................................
3
What is New in this Edition ..........................................................................................
7
Summary of Identifiable Tax Expenditures ....................................................................
10
Gross Income Tax ..............................................................................................................................................
10
Sales and Use Tax ..............................................................................................................................................
11
Corporation Business Tax ..................................................................................................................................
13
9-1-1 System and Emergency Response Assessment .........................................................................................
14
Alcoholic Beverage Tax ......................................................................................................................................
14
Cigarette Tax .....................................................................................................................................................
14
Domestic Security Fee .......................................................................................................................................
14
Hotel/Motel Occupancy Fee ..............................................................................................................................
15
Local Property Tax support by State Government ..............................................................................................
15
Motor Fuels Tax ................................................................................................................................................
15
Motor Vehicle Tire Fee ......................................................................................................................................
15
Nursing Home Assessment ................................................................................................................................
16
Petroleum Products Gross Receipts Tax ............................................................................................................
16
Realty Transfer Fee ...........................................................................................................................................
16
Transfer Inheritance and Estate Taxes ...............................................................................................................
16
Gross Income Tax .........................................................................................................
17
Sales and Use Tax .........................................................................................................
56
Corporation Business Tax .............................................................................................
122
9-1-1 System and Emergency Response Assessment .....................................................
157
Alcoholic Beverage Tax .................................................................................................
159
Cigarette Tax ................................................................................................................
162
Domestic Security Fee ..................................................................................................
165
Hotel/Motel Occupancy Fee .........................................................................................
166
Local Property Tax support by State Government .........................................................
169
Motor Fuels Tax ...........................................................................................................
171
Motor Vehicle Tire Fee .................................................................................................
177
Nursing Home Assessment ...........................................................................................
178
Petroleum Products Gross Receipts Tax ........................................................................
179
Realty Transfer Fee .......................................................................................................
181
Transfer Inheritance and Estate Taxes ..........................................................................
187
Appendix I - Tax Expenditures that do not have an Estimate .........................................
191
Gross Income Tax ..............................................................................................................................................
191
Sales and Use Tax ..............................................................................................................................................
192
Corporation Business Tax ..................................................................................................................................
196
Cigarette Tax .....................................................................................................................................................
196
Taxes of the State of New Jersey ..................................................................................
198
Text0:
Introduction
Pursuant to P.L.2009, c.189, a State tax expenditure report must be included in the Governor's annual
budget message. This is the fifth annual tax expenditure report.
There are features within the tax system whose functions are tantamount to direct expenditures.
Rather than sending a payment to a recipient for performing a specific public service, his/her tax
revenue is simply reduced by that amount and the same effect is realized, while eliminating an
unnecessary exchange. When the State disburses resources from revenue already collected, it is
referred to as direct expenditure; when revenue collected is reduced, instead, the practice is termed,
tax expenditure. It is often extremely difficult to distinguish between aspects of the tax code that are
strict analogues of direct expenditure and which exist as refinements to a revenue generation system,
so no strict delineation of which tax provisions constitute tax expenditures is possible.
In this Report, we list and examine features of the New Jersey tax system in whose absence final tax
liability would be greater. By including all of these, without prejudice, we allow the reader to
determine which conform to his or her notions of what constitutes “true” tax expenditure. Examples
of such tax features include, but are not limited to, tax law definitions, deductions, exclusions,
exemptions, deferrals, credits, preferential tax rates or other special tax provisions.
P.L. 2009, c.189, requires the publication of all state tax expenditures made in the last completed fiscal
year, the current fiscal year and the fiscal year to which the budget message applies. For the purposes
of this report, those years are FY 2013, FY 2014 and FY 2015.
In addition to the estimates of the value of the tax expenditures, the law requires this report include
the following information:
• Citation of the enabling legislation
• Effective date of the tax expenditure
• Objective of the tax expenditure
• Description of the tax expenditure
• Effectiveness in achieving its stated purpose
• Effect of each State tax expenditure on the fairness and equity of the
distribution of the tax burden
• Public and private costs of administering the State tax expenditures
• Data source used for the estimate, and
• A measure of the reliability of the estimate
The State tax expenditures included in this report are organized by categories in a comprehensive
table, and explained in greater detail throughout the sections which follow.
For the purposes of this report, the Division of Taxation considers “tax expenditures” only those
explicitly provided under state law, whether through enabling statutes or subsequent amendments
modifying the original statute. Those statutory provisions mainly allow for four categories of
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preferential tax treatment: exemptions, exclusions, deductions and credits. This year's report
continues the practice of including certain business assistance programs that award funds to qualifying
recipient taxpayers based on taxes paid. These four categories are defined below:
Exemptions are categories of goods, or certain uses thereof, or services that the law bars from
subjectivity to taxation. These expenditures are often not required to be reported. For example,
prescription drugs are exempt under the New Jersey sales tax law. Also, Social Security income is
exempt for New Jersey income tax purposes and need not be reported on the state income tax return.
Exclusions are similar in nature to exemptions, but may apply to only a portion of that otherwise-taxed
category. For example, unlike Social Security income, only a portion of pension income is nontaxable
and that portion of pension income not subject to tax is the pension exclusion.
Deductions reduce income or receipts subject to tax by a specified dollar, percentage amount or
specific category of recipient. Deductions are provided for any number of reasons, including the
avoidance of double taxation on items which may have been taxed already. Common New Jersey
income tax deductions include certain medical expenses and alimony.
Credits are direct reductions from the amount of taxes that must be paid. The provision of tax credits in
tax law directly reduces taxes collected and, therefore, has a greater effect on revenues than
exemptions, exclusions or deductions.
Credits may result in refunds to taxpayers having no tax liability, as in the case of the New Jersey
Earned Income Tax Credit.
The estimates used in this report are from the Office of Revenue and Economic Analysis within the
Office of the Chief Economist, the New Jersey Economic Development Authority, the New Jersey
Division of Revenue and various offices within the New Jersey Division of Taxation. Current tax returns
do not provide certain detailed data that would enhance tax expenditure reporting but which is not
necessary to be disclosed for tax purposes. Additionally, the Division of Taxation, in an effort to relieve
taxpayer burden, limits the information to only those disclosures absolutely required to be included in
taxpayer filings.
Some estimates in this document are the result of standard economic forecasting and modeling
techniques using publicly available information combined with data collected by the Division of
Taxation. We use a 1-6 scale to indicate and rank the reliability of estimates based on their data
source, as follows:
1 – The tax liability of the entire population of verified tax returns is recalculated with the tax
expenditure removed and from this is subtracted the actual tax liability.
2 – A similar process to 1 is performed, but on a statistical sample of returns rather than the entire
population of returns.
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3 – A similar process to 2, but the sample returns contain incomplete or unverified data.
4 – Aggregate data from an external source is applied to average or marginal tax rates.
5 – The Federal estimate of comparable tax expenditure is scaled to a New Jersey level.
6 – Another state’s estimate of its comparable tax expenditure is scaled to a New Jersey level.
NOTE: The reporting of zeroes (00) in the summary of identified state tax expenditures indicates that
no deduction was claimed in that category for FY13, FY14 and FY15.
ACKNOWLEDGEMENTS
This report is a collaborative venture between the Office of Legislative Analysis and Disclosure within
the New Jersey Division of Taxation and the Office of Revenue and Economic Analysis within the Office
of the Chief Economist), the Economic Development Authority and the Division of Revenue.
Special thanks to Kylie A. Cohen, a third year Seton Hall law student, for all her hard work and
contributions to this report.
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Text0:
What is New in this Edition
This fifth edition of the New Jersey Tax Expenditure Report reflects a number of enhancements and
improvements over previous editions. This section highlights changes you will see in this report.
The purpose of the Tax Expenditure Report is to present the estimated costs associated with the various tax
expenditures required under State law. Each report must contain estimates for the last, current and next fiscal
year. Thus, each report will include estimates for two years that were reported in the preceding edition. In
some cases the estimates shown in the current report will differ from the corresponding estimates in the prior
report. This may be due to our having identified more reliable data sources, finding superior methods for
calculating the cost of those tax expenditures, or the revision of data provided by third-parties.
The reader should note that the effective date of a provision does not necessarily indicate the date on which it is
first applied. For example, under the Gross Income Tax, there may be a tax expenditure whose law became
effective in July 1999, but which applies to tax years beginning on January 1 of either 1999, 2000, or some later
year. In this report, we begin to report on the applied dates as well as the effective dates.
This report is greatly expanded to include information on the objective or purpose of tax expenditures reported.
The objectives of tax expenditures may fall into one of several categories. For example, there are tax
expenditures which are required by Federal law or by the Federal or State Constitution. For others, a clear
purpose was expressed in either the legislative intent of the law or in the sponsors’ introduction memorandum.
This edition of the tax expenditure report includes several of the tax expenditures noted in the Appendix that
were not included last year. New laws, such as the Angel Investor Tax Credit (P.L. 2013, Chapter 14) and The
New Jersey Economic Opportunity Act of 2013 (P.L. 2013, Chapter 161) will make a major impact on the state’s
economy and are specifically summarized hereunder. The following tax expenditures that had not been listed,
or were listed without estimates, are now available in this report:
Sales and Use Tax:
• Laundry and Dry-cleaning Services
• Garbage Disposal and Sewer Services
• Motor Vehicle, Airplane and Railroad Fuels Exemption(s)
• Urban Enterprise Zone 50% Reduced Sales Tax Rate
Gross Income Tax:
• Angel Investor Tax Credit
• Taxpayer and Spouse/CU Partner Personal Exemption(s)
• Blind/Disabled Exemption(s)
• Age 65 and Over Exemption(s)
• Dependent Child Exemption(s)
• Other Dependent Exemption(s)
Corporation Business Tax
• Angel Investor Tax Credit
• New Jersey Economic Opportunity Act of 2013
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The New Jersey Angel Tax Credit
The New Jersey Angel Investor Tax Credit Act establishes credits against corporation business and gross income
taxes for angel investor cash investments (equity placements by investor into high-risk start-up ventures) in
New Jersey emerging technology businesses. The Act was signed into law on January 31, 2013 and is effective
for privilege periods and taxable years beginning on or after January 1, 2012.
Upon approval by the New Jersey Economic Development Authority P.L. 2013 Chapter 161, (NJEDA), a corporate
taxpayer is allowed a credit against the “franchise tax” (section 5 of P.L.1945, c.162 (C.54:10A-5)), of 10% of the
qualified investment made in a New Jersey emerging technology business, up to a maximum allowed credit of
$500,000 for the taxable year for each qualified investment made by the taxpayer.
Like the corporate taxpayer’s allowed credit, upon approval by the NJEDA, a taxpayer is allowed a credit against
the gross income tax (N.J.S.54A:1-1 et seq.) amount due for the taxable year, of 10% of the qualified investment
made in a New Jersey emerging technology business, up to a maximum allowed credit of $500,000 for the
taxable year for each qualified investment made by the taxpayer. A partnership itself does not receive the
credit under this section; the partners may claim the credit, based on pre-determined proportional distribution.
The State will issue a refund to the taxpayer if the tax credit exceeds the taxpayer’s tax liability. If the tax credit
exceeds a corporate taxpayer’s liability, it may choose either to receive a refund or have the excess carried
forward to be applied against tax liabilities in the next 15 years.
For more information regarding the Angel Tax Credit www.state.nj.us
The New Jersey Economic Opportunity Act
The New Jersey Economic Opportunity Act of 2013, P.L. 2013 Chapter 161, takes five incentive programs and
reduces it to two, expanding the Grow New Jersey Assistance Program (Grow NJ) and the Economic
Development and Growth Grant (ERGG), which are administered by the New Jersey Economic Development
Authority (NJEDA), and eliminating the Business Employment Incentive Program (BEIP), the Business Retention
and Relocation Assistance Grant (BRRAG) and the Urban Transit Hub Tax Credit (UTHTC). These three programs
are eliminated effective December 31, 2013. The Act serves to make Grow NJ the State’s primary business
attraction and retention incentive and the ERGG the State’s sole redevelopment incentive. It allows for a
greater geographic area of New Jersey to be eligible for its benefits.
Highlights of Grow NJ
• Approved “Mega Projects” as defined in the law
• Garden State Growth Zones (GSGZ) ,the four cities with the lowest median
family income
• Distressed Municipalities
• Priority Areas and Eligible Areas as defined in the law
Grow NJ requires certain minimum capital investments for various types of eligible projects, as well as minimum
full time employment for businesses and industries claiming the credits. All successful projects under Grow NJ
are subject to comprehensive net benefit analysis to verify the revenues the State receives will be greater than
the incentive provided. There are bonuses available under Grow NJ for specific types of developments and
projects, as well as for certain areas of the State.
The ERGG provides incentive grants if the project meet specific requirements. The Act allows a range of
bonuses from 10% - 40% for GSGZ projects dependent on the location of the project. For Local Incentive Grants
provided by the ERGG, there is a cap on the bonus of 100% if the developer is a municipal government or
redevelopment agency. As is the case with Grow NJ, all of these projects are subject to the standards of
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comprehensive net benefit analysis.
The ERGG also provides Bonus Awards of up to 10% if the projects are located in areas including distressed
municipalities and in GSGZ. Further, the ERGG provides county allocations for the $600 million authorized for
qualified residential projects.
For more information regarding the New Jersey Economic Opportunity Act of 2013 please visits the website
www.njeda.com
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Summary of Identifiable State Tax Expenditures
($millions)
2013
Fiscal Year
2014
2015
0.0
1.0
25.0
178.0
7.0
0.0
2,610.2
2,687.5
2,829.7
69.4
70.0
70.2
246.9
252.3
261.7
46 Property Tax Credit
29.5
29.7
29.4
53 Sheltered Workshop Tax Credit
35.4
37.1
39.3
38.7
40.2
41.9
2.9
3.0
3.3
16 Deductions from Business Income
542.2
560.0
592.3
17 Deductions from Rents, Royalties, Patents and
Copyrights
102.1
105.7
111.2
10.0
10.5
10.9
0.5
0.6
0.6
37 Medical Expenses
248.9
272.6
308.0
45 Personal Exemptions and Deductions
610.2
645.5
697.8
47 Property Tax Deduction
410.7
428.4
451.3
0.3
0.2
0.2
34.9
36.1
38.5
40.5
54.1
58.8
11 Child Support
32.7
34.4
36.7
25 Exempt Interest (Federal) Exclusion
26.6
25.5
25.5
Gross Income Tax
Credit
3 Angel Investor Tax Credit Act
5 Business Employment Incentive Program (BEIP)
13 Credit for Taxes Paid to Other Jurisdiction(s)
30 Gross Income under $20,000
40 New Jersey Earned Income Tax Credit Payments
Deduction/Exemption
2 Alimony and Separate Maintenance Payments
15 Deductions for Medical Savings Account
Contributions
19 Dependents Attending College
31 Health Enterprise Zone Deduction
48 Qualified Conservation Contribution
52 Self-Employed Health Insurance Costs
Exclusion
7 Capital Gain Exclusion on Sale of Principal
Residence
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Summary of Identifiable State Tax Expenditures
($millions)
2013
11.0
Fiscal Year
2014
10.4
2015
10.5
36 Lottery Winnings under $10,000
2.1
2.1
2.1
42 Other Retirement Income Exclusion and Special
Exclusion
6.0
6.2
6.2
107.5
108.4
111.8
54 Social Security Income Exclusion
72.9
78.7
92.0
56 Temporary Disability Exclusion
88.6
92.5
97.0
57 Unemployment Insurance Exclusion
29.1
30.7
33.6
17.0
18.1
19.4
1.3
1.5
1.4
115.9
118.3
121.6
9.2
9.4
9.8
158.7
164.1
171.4
142.0
146.0
150.0
8.7
3.3
14.1
41.4
40.0
38.6
25 Credit for Certain Property When Used as a Tradein
815.2
796.7
796.7
33 Eggs, Fish, Meat and Poultry
208.7
211.7
220.7
6.8
6.0
5.2
58 Garbage Removal and Sewer Services (as defined
in N.J.S.A. 54:32B-3(b)(4))
80.1
80.1
80.1
70 Internet Access Service
80.8
87.1
103.6
26 Exempt Interest (State) Exclusion
43 Pension Exclusion
Exemption
1 Age 65 years or older exemption
4 Blind/disabled exemption
18 Dependent child exemption
41 Other dependent exemptions
55 Taxpayer and Spouse/CU Partner
Sales and Use Tax
132 Urban Enterprise Zone Special Sales Tax Rate
Credit
9 Business Retention and Relocation Assistance
Grants
Exclusion
4 Bakery Items
54 Food Purchased with Food Stamps
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Summary of Identifiable State Tax Expenditures
($millions)
2013
14.2
Fiscal Year
2014
14.1
2015
14.0
3.1
2.0
2.0
84 Municipal Parking Charges
10.2
11.1
12.1
91 Participatory Sporting Activities
14.7
14.9
15.1
3,661.9
3,661.9
3,661.9
203.8
203.8
203.8
3 Advertising To Be Published in a Newspaper
115.4
113.5
113.5
7 Broadcast Equipment (as defined in N.J.S.A.
54:32B-8.13(e))
2.7
2.4
2.1
50.0
50.0
50.0
900.4
920.7
955.1
27 Dietary Supplements
56.3
58.3
60.3
30 Disposable Household Paper Products
78.5
80.7
80.7
34 Electricity sales, exchanges and delivery (as
defined in N.J.S.A. 54:32B-8.46)
14.6
15.3
16.1
40 Exempt Organizations: State of New Jersey and
its Agencies
60.4
61.7
63.0
43 Exempt Organizations: United States of America
216.0
229.2
240.3
46 Feminine Hygiene Products
2.6
2.5
2.8
53 Food and Food Ingredients
1,449.6
1,491.3
1,534.1
471.6
454.4
462.7
50.0
51.0
52.0
662.2
672.0
681.9
1.2
1.2
1.2
15.3
16.1
17.1
3.0
2.7
2.4
117 School Textbooks
13.2
13.8
14.4
121 Sewing Materials
4.0
4.0
4.0
71 Laundry and Dry Cleaning Services for Clothing
78 Massage Therapy Services (as defined in N.J.S.A.
54:32B-3(b)(9))
104 Purchases for Resale
109 Resale of Taxable Services
Exemption
14 Charitable Organizations Exemption
16 Clothing and Footwear
83 Motor, Airplane and Railroad Fuels
88 Over-the-Counter Drugs
94 Prescribed Drugs and Medications
99 Property Purchased for Film or Video Productions
101 Prosthetic Devices
113 Salem County Reduced Sales Tax
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Summary of Identifiable State Tax Expenditures
($millions)
2013
132.6
Fiscal Year
2014
132.6
2015
132.6
17.0
17.0
17.0
5 AMA Tax Credit
40.5
40.5
40.5
7 Business Retention and Relocation Tax Credit
16.0
13.0
2.4
12 Economic Recovery Tax Credit
0.0
0.0
0.0
13 Effluent Equipment Tax Credit
0.1
0.1
0.1
15 Film Production Tax Credit
1.1
1.1
1.1
16 HMO Assistance Fund Tax Credit
1.4
1.4
1.4
18 Manufacturing Equipment and Employment
Investment Tax Credit
15.9
15.9
15.9
19 Neighborhood Revitalization State Tax Credit
4.2
4.2
4.2
21 New Jersey Economic Opportunity Act of 2013
0.0
0.0
0.0
22 New Jobs Investment Tax Credit
1.2
1.2
1.2
26 Redevelopment Authority Project Tax Credit
0.0
0.0
0.0
27 Remediation Tax Credit
0.1
0.1
0.1
65.6
65.6
65.6
29 Sheltered Workshop Tax Credit
0.0
0.0
0.0
30 Urban Enterprise Zone Employee Tax Credit
0.0
0.0
0.0
31 Urban Enterprise Zone Investment Tax Credit
0.0
0.0
0.0
11.8
30.0
117.0
150.0
150.0
150.0
14 Exceptions to Related Intangible Costs Expense
Add Back
119.0
119.0
119.0
17 Lack of Throw Back
125.0
125.0
125.0
20 Net Operating Loss Deduction
558.0
558.0
558.0
131 Urban Enterprise Zone Exempt Business Purchases
137 Zero Emission Vehicles
Corporation Business Tax
Credit
28 Research and Development Tax Credit
32 Urban Transit Hub Tax Credit
Deduction
4 All Income of New Jersey S Corporations
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Summary of Identifiable State Tax Expenditures
($millions)
2013
Fiscal Year
2014
2015
72.0
74.0
74.0
6.8
6.8
6.8
3,804.6
3,804.6
3,804.6
125.0
125.0
125.0
0.0
0.0
0.0
1.0
1.1
1.0
1 Out-of-State Sales - Beer and Malt
16.7
4.8
4.8
2 Out-of-State Sales - Liquor
89.1
11.9
11.9
3 Out-of-State Sales - Still Wine
28.5
4.2
4.2
1.3
1.0
1.0
1 Director’s Redemption of Certain Stamps
1.2
1.2
1.2
2 Distributor Discounts
1.4
1.4
1.4
1.0
1.0
1.0
Exclusion
1 60% of Investment Company Income
2 96% of Real Estate Investment Trust/Regulated
Investment
10 Dividend Exclusion (ALL)
11 Dividend Exclusion (less than 50% owned)
Exemption
3 Agricultural Co-operatives
9-1-1 System and Emergency Response Assessment
Exemption
1 Exempt Telephone Lines
Alcoholic Beverage Tax
Exemption
4 Out-of-State Sales - Vermouth/Sparking
Wine/Apple Cider
Cigarette Tax
Credit
Domestic Security Fee
Credit
1 Total Deductions
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Summary of Identifiable State Tax Expenditures
($millions)
2013
Fiscal Year
2014
2015
62.2
29.5
29.5
82.5
80.1
80.1
12.5
6.0
6.0
1 Senior Citizen Real Estate Tax Deduction
14.0
14.5
14.5
2 Veteran’s Deduction
58.3
60.8
60.8
0.1
0.2
0.2
1 Exported Fuels (as required by N.J.S.A. 54:39-112)
0.8
0.4
0.0
2 Fuel Used by Aircraft
0.1
0.1
0.1
4 Fuel Used by Certain Agricultural Tractors and
Farm Machinery
0.0
0.0
0.0
5 Fuel Used by Certain Autobuses
0.5
0.1
0.1
6 Fuel Used by Non-Highway Equipment
1.3
1.3
0.1
7 Off Road Use of On Road Vehicles
0.0
0.0
0.0
8 Total Exempt Government Sales
1.0
2.0
2.0
2.6
4.0
4.0
Hotel/Motel Occupancy Fee
Credit
1 Government Exemption
Deduction/Exemption
2 Permanent Resident Exemption
Exclusion
3 Rooms for Assembly
Local Property Tax support by State Government
Deduction
Motor Fuels Tax
Exclusion
3 Fuel Used by Ambulances
Exemption
Motor Vehicle Tire Fee
Exemption
1 Exempt Tires Sales Times $1.50 Tire Fee
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Summary of Identifiable State Tax Expenditures
($millions)
2013
Fiscal Year
2014
2015
29.1
17.5
17.5
5.9
2.5
2.5
35.4
27.6
27.6
2 Partial Realty Transfer Fee Exemption (sales
prices known)
17.2
16.7
16.7
3 Total Realty Transfer Fee Exemption for Sales
Price Less than $100 (Sales Price Known)
145.8
214.0
214.0
5.4
11.5
11.5
1 Increasing Class A Beneficiary to Highest Rate –
Filed Returns
600.0
675.0
675.0
2 Increasing Class C Beneficiary Taxes to Highest
Rate
44.0
50.0
50.0
Nursing Home Assessment
Exemption
1 Exempt Days Times Rate
Petroleum Products Gross Receipts Tax
Exemption
1 Withdrawn for Use Outside New Jersey
Realty Transfer Fee
Deduction/Exemption
1 Exempt Sales Exceeding $1 million Where the
Grantee Pays
Exemption
4 Total Realty Transfer Fee Exemption Where Such
Sales Price Would Have Exceeded $100 (Sales
Price Known)
Transfer Inheritance and Estate Taxes
Exemption
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Gross Income Tax
Overview
Description
This graduated tax is levied on gross income earned or received after June 30, 1976, by New Jersey
resident and nonresident individuals, estates, and trusts.
Rate
Rates for tax years beginning on or after January 1, 2004, range from 1.4% – 8.97%. For tax year
2009, the maximum tax rates were 10.25% for those whose incomes ranged from $500,000 to
$1,000,000, and 10.75% for income in excess of $1,000,000. These rates expired after that year due
to Governor Christie's veto of an extension proposed by the Legislature.
Filing Threshold
For tax years beginning before January 1, 1994, filers with incomes of $3,000 or less for the entire
year ($1,500 or less for married persons filing separately) pay no tax. For the 1994 to 1998 tax years,
filers with incomes of $7,500 or less for the entire year ($3,750 or less for married persons filing
separately) pay no tax. The income levels were raised for the 1999 tax year as part of a three-year
phase-in of higher filing thresholds, and filers with incomes of $10,000 or less for the entire year
($5,000 or less for married persons filing separately) pay no tax.
For tax year 2000, the filing threshold was $10,000 or less for the entire year (single filers and estates
and trusts), $15,000 or less for the entire year (married couples filing jointly, heads of household, and
surviving spouses), and $7,500 or less for the entire year (married persons filing separately). For tax
year 2001 and thereafter, the filing threshold is $10,000 or less for the entire year (single filers,
married persons filing separately, and estates and trusts), and $20,000 or less for the entire year
(married couples filing jointly, heads of household, and surviving spouses).
Effective for tax years beginning on or after January 1, 2007, any reference to a spouse also refers to
a partner to a civil union recognized under New Jersey law.
Exemptions
• Taxpayer, $1,000
• Taxpayer’s spouse/civil union partner or domestic partner who does not file separately, $1,000
• Taxpayer 65 years old or more, additional $1,000; same for spouse/civil union partner age 65 or
older who does not file separately
• Blind or totally disabled taxpayer, additional $1,000; same for blind or totally disabled
spouse/civil union partner who does not file separately
• Taxpayer’s dependent, $1,500
• Taxpayer’s dependent under age 22 and attending college full time, additional $1,000
- 17 -
Deductions
• Payments of alimony or for separate maintenance are deductible by the payer if reported as
income by the payee
• Unreimbursed medical expenses in excess of 2% of gross income; qualified medical savings
account contributions; and for the “self-employed,” qualified health insurance costs
• Property tax deduction (or credit)
• Qualified conservation contribution
• Deduction for eligible taxpayers who provide primary care medical and/or dental services at a
qualified practice located in or within five miles of a Health Enterprise Zone
Credits
• Payments of income or wage tax imposed by another state (or political subdivision) or by the
District of Columbia, with respect to income subject to tax under this Act. This shall not exceed
the proportion of tax otherwise due that the amount of the taxpayer’s income subject to tax by
the other jurisdiction bears to the taxpayer’s entire New Jersey income
• Amounts withheld by an employer and payments of estimated tax, including any payments
made in connection with the sale or transfer of real property by a nonresident, estate, or trust
• Amounts paid by an S corporation on behalf of a shareholder
• Amounts paid by a partnership on behalf of a partner
• New Jersey Earned Income Tax Credit
• Excess unemployment and disability insurance contributions withheld
• Property tax credit (or deduction)
• Sheltered Workshop Tax Credit
Withholding Requirement
All employers and others who withhold New Jersey income tax are required to file quarterly returns
of tax withheld and to remit tax on a monthly, quarterly, or weekly basis.
Those with prior year withholdings of $10,000 or more are required to remit the income tax withheld
by means of Electronic Funds Transfer (EFT) on or before the Wednesday of the week following the
week containing the payday(s) on which taxes were withheld.
Effective for wages paid on and after January 1, 2000, certain employers of household workers may
report and remit Gross Income Tax withheld on an annual basis.
Recent History
Beginning with the 2000 tax year, C. 372, P.L. 1999, provides a deduction for a qualified conservation
contribution.
Chapter 80, P.L. 2001, established a New Jersey Earned Income Tax Credit, which is a percentage of a
person’s Federal Earned Income Credit. To be eligible for the New Jersey credit, a person must have
- 18 -
had at least one “qualifying child” for purposes of the Federal Earned Income Credit and must have
had no more than $20,000 in New Jersey gross income.
Chapter 84, P.L. 2001, amended the military pension or survivor’s benefit exclusion by eliminating
the requirement that the taxpayer be at least 62 years old or disabled.
Under P.L. 2001, C. 93, qualified deposits into or withdrawals from an “individual development
account” (established under the New Jersey Individual Development Account Program and 42 U.S.C.
s. 604(h) for an “eligible individual”), including interest earned on such accounts, are exempt from
Gross Income Tax.
Effective beginning with the 2002 tax year, C. 162. P.L. 2001, increased the exclusion for commuter
transportation benefits to $1,200 and authorizes an annual inflation adjustment.
P.L. 2002, C. 40, effective beginning with the 2002 tax year, requires partnerships to pay a $150 filing
fee per owner (up to $250,000) and a tax prepayment made on behalf of nonresident partners.
P.L. 2002, C. 43, effective beginning with the 2003 tax year, created a tax credit for qualifying firsttime homebuyer-occupants who have purchased residential property in a qualifying municipality
during the municipality’s “period of economic recovery.”
P.L. 2003, C. 9, created an exclusion for the income of victims who died as a result of the September
11, 2001, terrorist attacks. The exclusion applies for tax year 2000 and all later years up to and
including the year of death.
P.L. 2003, C. 246, allows a $1,000 personal exemption for a domestic partner who does not file
separately.
Chapter 40, P.L. 2004, imposes a tax rate of 8.97% on income over $500,000, effective beginning
with the 2004 tax year.
Chapter 55, P.L. 2004, requires that nonresident individuals, estates, or trusts pay estimated tax on
gain from the sale or transfer of real property in New Jersey as a condition for recording the deed.
The law is effective for sales or transfers occurring on and after August 1, 2004.
Effective beginning with the 2004 tax year, section 26 of P.L. 2004, C. 65, “decouples” the calculation
of depreciation and section 179 expenses from recent Federal income tax provisions. Under these
amendments, the expenses must be calculated by applying Federal code provisions as they were in
effect on December 31, 2001 (or December 31, 2002, for section 179 expenses).
P.L. 2004, C. 139, effective for tax years beginning on or after January 1, 2005, allows a limited Gross
Income Tax deduction to qualified primary care physicians and dentists practicing in or within 5 miles
of a Health Enterprise
Effective for tax years beginning on or after January 1, 2004, Chapter 63, P.L. 2005, provides a gross
income exclusion for housing and subsistence allowances received by members of the active and
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reserve components of the U.S. Armed Forces and by members of the New Jersey National Guard
while on State active duty.
P.L. 2005, C. 125, authorized a multistate reciprocal refund set-off program under which the New
Jersey Division of Taxation may “withhold” a taxpayer’s Gross Income Tax refund to forward to
another state for an income tax debt if the other state withholds New Jersey gross income tax claims
from its personal income tax refunds.
P.L. 2005, C. 127, uncoupled New Jersey income tax law from many provisions of the IRC Section 199
deduction for certain qualified production activities income.
P.L. 2005, C. 130, limits the pension and other retirement income exclusions to taxpayers with gross
income of $100,000 or less, effective for tax years beginning on or after January 1, 2005.
Chapter 210, P.L. 2005, requires employers to provide certain employees with written notification of
the availability of both the Federal and New Jersey earned income tax credits.
P.L. 2005, C. 288, requires partners and other owners of pass-through entities to credit payments
made on their behalf against estimated taxes to end “double withholding.”
P.L. 2005, C. 318, allows Gross Income Tax credits to businesses providing employment to qualified
handicapped persons at sheltered workshops.
P.L. 2005, C. 345, provides Gross Income Tax credits for film production expenses incurred in New
Jersey and provides for the transfer of those tax credits to other taxpayers.
P.L. 2006, C. 36, authorizes the Director of the Division of Taxation to permit or mandate reasonable
methods for filing and paying, which may include electronic methods of filing and paying. The law
further requires tax practitioners who prepared or filed 100 or more 2005 New Jersey resident
income tax returns to electronically file all 2006 New Jersey resident income tax returns. This
requirement was extended, for tax year 2007, to preparers who filed 50 or more 2006 Gross Income
Tax returns. The law imposes a $50 per return penalty for noncompliance with this mandate, which
may be abated, in full or in part, at the Director’s discretion.
P.L. 2006, C. 85, requires any person (other than a governmental entity, a homeowner, or a tenant)
who maintains an office or transacts business in New Jersey to withhold New Jersey gross income
tax at the rate of 7% from payments made to unregistered, unincorporated contractors for services
performed in this State.
P.L. 2006, C. 103, establishes the legal relationship of “civil union” under the State’s marriage laws. A
civil union is “the legally recognized union of two eligible individuals of the same sex established
pursuant to this act.” Parties to a civil union will have the same legal benefits, protections, and
responsibilities as parties to a marriage, including those based on tax laws, such as those governing
local property tax, homestead rebates, realty transfer fees, gross income tax, and transfer
inheritance taxes.
- 20 -
P.L. 2007, C. 109, extends the eligibility of the State earned income tax credit to any individual who is
eligible for the Federal earned income tax credit and enhances the benefit amount.
P.L. 2007, C. 114, establishes penalties for employers who misclassify construction work employees
as “independent contractors.”
P.L. 2009, C. 69, temporarily adjusted the New Jersey Gross Income Tax rates for taxpayers with
taxable income exceeding $400,000 in taxable years beginning on or after January 1, 2009, but
before January 1, 2010. The law provided for adjusted income taxation of the following brackets at
the following rates: over $400,000 but not over $500,000 was adjusted from 6.37% to 8%; over
$500,000 but not over $1,000,000 was adjusted from 8.97% to 10.25%; and over $1,000,000 was
adjusted from 8.97% to 10.75%.
The law provided that for the 2009 taxable year, taxpayers who had gross income of more than
$250,000 and were not (1) 65 years of age or older or (2) allowed a personal exemption as a blind or
disabled individual, were not eligible for the property tax deduction.
Additionally, the maximum property tax deduction was capped at $5,000 for taxpayers who had
gross income of more than $150,000 but not more than $250,000 and were not (1) 65 years of age or
older or (2) allowed a personal exemption as a blind or disabled individual.
The law also provides that for tax years beginning on or after January 1, 2009, New Jersey Lottery
winnings from prizes exceeding $10,000 are taxable for New Jersey Gross Income Tax purposes and
that the New Jersey State Lottery is required to withhold income tax on such taxable winnings at the
rate of 3%.
P.L. 2010, C. 20, temporarily suspends the tax credits provided for qualified film and qualified digital
media content production expenses and requires the State Treasurer to make and file a report
regarding the ability of the tax credits to meet their statutory goals and objectives.
P.L. 2010, C. 27, reduces the New Jersey earned income tax credit from 25% of the Federal amount
to 20% of the Federal amount, effective beginning with the 2010 tax year.
P.L.2011, c.57, provided for voluntary contributions by taxpayers on gross income tax returns to
support the Boys and Girls Clubs in New Jersey.
P.L.2011, c.60, established an alternative business calculation under gross income tax to permit
consolidation and carryforward of certain business-related losses. This is the first allowance of its
kind for business taxpayers who pay taxes on their business income through their State personal tax
return. This change provides similar treatment for small business as has been traditionally enjoyed
by larger businesses that pay corporate business tax.
P.L.2011, c.117, provided for voluntary contributions by taxpayers on gross income tax returns for
New Jersey National Guard members and their families in need of assistance.
P.L.2011, c.131, required the Division of Taxation to display Senior Gold prescription program
- 21 -
information on tax return instructions.
P.L.2011, c.211, provided for voluntary contributions by taxpayers on gross income tax returns to the
"American Red Cross-NJ Fund."
P.L.2011, c.227, provided for voluntary contributions by taxpayers on gross income tax returns to
support the Girl Scouts councils in New Jersey.
P.L.2013, c.13, allows for voluntary contributions through gross income tax returns to support New
Jersey athletes participating in 2014 Special Olympics USA Games.
Disposition of Revenues
Revenues are deposited in the Property Tax Relief Fund to be used for the purpose of reducing or
offsetting property taxes.
- 22 -
Gross Income Tax
1
Age 65 years or older exemption
Citation: N.J.S.A. 54A:3-1
Effective Date: 7/6/1976
2015 Estimate:
$19,400,000
Applied Date: 7/1/1976
Description:
An ecemption is allowable for the taxpayer 65 years of age or over at the close of the
taxable year in the amount of of $1,000
An exemption is also allowable for a taxpayer's spouse 65 years of age or over at the
close of the taxable year in the amount of $ 1,000.00.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: The New Jersey Gross Income Tax Act (N.J.S.A. 54A:1-1 et seq.) was designed
to be a levy based on administrative simplicity, to avoid inter-period
adjustments with low rates. The Legislatiure provided few exemptions and
deductions but included personal exemptions.
2
Alimony and Separate Maintenance Payments
Citation: N.J.S.A. 54A:3-2 (P.L. 1976, c. 47).
Effective Date: 7/8/1976
2015 Estimate:
$41,900,000
Applied Date: 7/1/1976
Objective:
This was a part of the original Gross Income Tax Act.
Description:
A deduction is available for amounts paid as alimony to a former spouse, or of
a spouse receiving separate maintenance pursuant to a court decree. Such
amounts must be reported as income to the recipient of alimony or separate
maintenance payments.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: 24,000 returns took this deduction.
- 23 -
Gross Income Tax
3
Angel Investor Tax Credit Act
Citation: N.J.S.A. 54A:4-13
Effective Date: 1/31/2013
2015 Estimate:
$25,000,000
Applied Date: 1/1/2012
4
Objective:
Establishes credits against corporation business and gross income taxes for angel
investor cash investments in New Jersey emerging technology businesses effective for
privilege periods and taxable years beginning on or after January 1, 2012.
Description:
Upon approval by the NJEDA, a taxpayer is allowed a credit against the gross income
tax (N.J.S.54A:1-1 et seq.) amount due for the taxable year, of 10% of the qualified
investment made in a New Jersey emerging technology business, up to a maximum
allowed credit of $500,000 for the taxable year for each qualified investment made by
the taxpayer.
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
Blind/disabled exemption
Citation: N.J.S.A. 54A:3-1
Effective Date: 7/6/1976
2015 Estimate:
$1,400,000
Applied Date: 7/1/1976
Description:
A taxpayer is allowed a $1,000 exemption if that taxpayer is 65 years of age by the
close of the taxable year. A taxpayer's spouse is allowed a $1,000 exemption if he or
she is 65 years of age by the close of the taxable year. A taxpayer and/or spouse is
allowed a $1,000 exemption if they are disabled. Taxpayers and/or spouses may not
claim ecemptiolns as both age 65 and disabled.N.J.S.A. N.J.S.A. 54A:3-1
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
- 24 -
Gross Income Tax
5
Business Employment Incentive Program (BEIP)
Citation: N.J.S.A. 34:1B-124 (P.L. 1996, c.26)
Effective Date: 5/9/1996
2015 Estimate:
$0
Applied Date: 6/1/1996
Description:
The Business Employment Incentive Program, codified at 34:1B-124 (P.L. 1996,
c.26) is one of the State’s tools, jointly administered by the New jersey
Economic Development Authority and the New jersey Division of Taxation, to
promote job growth in New Jersey.
Approved businesses receive annual cash grants based on the number of new
jobs they have created in the State of New Jersey.
In order to qualify for a BEIP grant, businesses must create at least 25 new jobs
within a two-year period; emerging high technology and biotech companies'
eligibility threshold is 10 new jobs. A business must also demonstrate that the
BEIP grant is a "material" factor in moving the job expansion or relocation
forward in New Jersey, and that it is economically viable.
The standard BEIP incentive is limited to 50% of the employees' state income
taxes withheld on the newly created jobs; however, companies that meet
certain Smart Growth objectives can have their grant boosted to 80%.
Qualifying businesses may be eligible for up to 10 years’ worth of grants,
though they must maintain the project and the jobs in New Jersey for at least
1.5 times the number of years the grant is in effect. Greater consideration is
given to positions that average 1.5 times the minimum wage during the grant
agreement.
There are protections built into the program that ensure that grant recipients
meet the strict criteria under which the grant was made. (See N.J.S.A.
34:1B-132).
Businesses receiving assistance under the Business Retention and Relocation
Assistance Grant program (P.L.1996, c. 25) codified in N.J.S.A. 34:1B-112, et
seq., may not receive assistance under this program without specific
authorization from the State Treasurer.
Data Source
NJ Economic Development Authority
Reliability:
1 Based on the population of verified tax returns
- 25 -
Gross Income Tax
6
Cafeteria Plan, Qualified Option
Citation: N.J.S.A. 54A:6-24 (P.L. 1995, c.111)
Effective Date: 6/1/1995
Objective:
To allow a gross income taxpayer to exclude the value of employee "cash-out
options" under employer provided cafeteria benefit plans. Cafeteria plans,
authorized under section 125 of the federal Internal Revenue Code of 1986,
permit an employer to offer employees individual choices among federally
nontaxable employer provided benefits and choices between those benefits
and cash. The employee must recognize federally taxable income only if receipt
of cash is actually chosen. The five permitted benefits are group life insurance,
group accident and health insurance, medical cost reimbursement, dependent
care services, and cash or deferred arrangements.
The exclusion is restricted to cash-out options under plans that only allow cashouts for employees who demonstrate their other source of coverage; such an
employee will only recognize income under a cafeteria plan if the cash-out is
exercised and cash is actually received.
Description:
The law does not include in gross income the value of an employee's qualified
option under a cafeteria plan if the employee does not elect to receive cash,
and the value of the option is excludable from federal taxable income.
Effectiveness: Several of the Federal 'cafeteria plan' optional deductions are recognized as
New Jersey tax deductions.
- 26 -
Gross Income Tax
7
Capital Gain Exclusion on Sale of Principal Residence
Citation: N.J.S.A. 54A:6-9.1 (P.L. 1998, c. 3)
Effective Date: 3/20/1998
2015 Estimate:
$58,800,000
Objective:
This bill increases the income exclusion under the New Jersey gross income tax
of gain derived from the sale or exchange of a principal residence. The bill
conforms the gross income tax treatment of such gain to a similar federal
income tax exemption provided under the federal Taxpayer Relief Act of 1997.
Description:
Gross income does not include up to $500,000 in gain from the sale of a
personal residence, subject to certain timing restrictions similar to restrictions
found in the parallel federal income tax exclusion.
Data Source
January 2014 Gross Income Tax Calculator and IRS published data.
Effectiveness: New Jersey aligns with the federal government to simplify the tax calculation
by following Federal rules in excluding a portion of home value for home sales
or exchanges. All who qualify can take advantage of this exclusion.
8
Cash or Assistance from a Charitable Organization
Citation: N.J.S.A. 54A:6-5, N.J.S.A. 54A:6-22
Effective Date: 7/8/1976
Objective:
As part of the original legislation which created the income tax, the legislature
ensured an exclusion for cash or assistance from a Charitable Organization.
This exclusion remains in effect.
Description:
The law excludes from gross income payments and benefits directly received
by a taxpayer under homeless persons' assistance programs, including but not
limited to assistance in obtaining housing, temporary shelter and short-term
financial assistance.
Effectiveness: The State recognizes individuals who are in financial distress and receive
support from charitable organizations and by doing so shields that income
from taxation.
- 27 -
Gross Income Tax
9
Certain Exclusions from Military Pay
Citation: N.J.S.A. 54A:6-7 (P.L. 1976, c. 47)
Effective Date: 7/8/1976
10
Objective:
As part of the original legislation which created the income tax, the Legislature
ensured an exclusion for military pay. This exclusion remains in effect.
Description:
The law exempts compensation paid by the United States for service in the
Armed Forces of the United States performed by an individual not domiciled in
this State, amounts received during the taxable year as mustering-out
payments with respect to service in the Armed Forces of the United States and
amounts received during the taxable year as housing and subsistence
allowances by members of the active and reserve components of the Armed
Forces of the United States, and by New Jersey National Guard members while
on State active duty.
Charitable Trust or Pension/Profit Sharing Plan Trust
Citation: N.J.S.A. 54A:2-1 (P.L. 1976, c.47)
Effective Date: 7/8/1976
Objective:
As part of the original legislation which created the income tax, the Legislature
ensured an exclusion for income earned by a charitable trust or a
pension/profit-sharing plan trust. This exclusion remains in effect.
Description:
The income of a charitable trust or a pension/profit-sharing plan trust is
exempt from gross income tax.
- 28 -
Gross Income Tax
11
Child Support
Citation: N.J.S.A. 54A:5-1(n) (P.L. 1976, c. 47)
Effective Date: 7/8/1976
12
2015 Estimate:
$36,700,000
Objective:
As part of the original legislation which created the income tax, the Legislature
ensured child support is not included in gross income. This exclusion remains
in effect.
Description:
Child support payments received are not included in Gross Income
Data Source
January 2014 GIT Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Commuter Transportation Benefits
Citation: N.J.S.A.54A:6-23 (P.L. 1993, c.108; amended 1996, c.121; 2001, c.162)
Effective Date: 7/17/2001
Objective:
To reduce work-related vehicle trips and miles traveled by employees in an
effort to reduce the amount of pollutants being emitted by daily travel.
Description:
Gross income does not include employer-provided commuter transportation
benefits up to and including the allowable limit per taxable year per employee
paid in addition to regular salary.
- 29 -
Gross Income Tax
13
Credit for Taxes Paid to Other Jurisdiction(s)
Citation: N.J.S.A. 54A:4-1 (P. L.1976, c. 47; amended P.L. 1993, c.173)
Effective Date: 7/7/1993
Objective:
2015 Estimate:
$2,829,700,000
To allow resident taxpayers who receive income from other taxing jurisdictions
(work or derive income in other states or cities that impose tax on those
earning income there) which is subject to tax both in New jersey and in that
other jurisdiction to take a credit for those taxes. The credit is the greater of
the tax actually paid or a calculated amount representing the proportion of
income subject to tax in the other jurisdiction as compared to income from all
sources which is taxable to a New Jersey resident.
This proportional credit was a part of the original Gross Income Tax Act.
Description:
A New Jersey resident is allowed a credit for tax paid to certain other
jurisdictions when the income is subject to tax by both New Jersey and the
outside jurisdiction.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: New Jersey, like many other states, recognizes that individuals working
outside our state are burdened with those states' taxes. This credit reduces
that burden via a proportion calculation. 416,000 returns used this credit.
14
Damages for Personal Injury or Illness
Citation: N.J.S.A. 54A:6-6 (P.L. 1976, c. 47)
Effective Date: 7/8/1976
Objective:
As part of the original legislation which created the income tax, the Legislature
ensured an exclusion for income earned due to personal injury or illness. This
exclusion remains in effect.
Description:
Gross income does not include amounts received, through lawsuit or
agreement, due to personal injury or sickness.
- 30 -
Gross Income Tax
15
Deductions for Medical Savings Account Contributions
Citation: N.J.S.A. 54A:3-4 (P.L. 1997, c.414)
Effective Date: 1/19/1998
2015 Estimate:
$3,300,000
Objective:
This bill establishes certain standards for medical savings accounts opened by
employers and permits employees who are account holders of medical savings
accounts to deduct from gross income the amount deposited in such an
account and any interest, dividends or gain earned thereon under certain
circumstances.
Description:
A deduction is allowed for contributions to Archer MSAs.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
- 31 -
Gross Income Tax
16
Deductions from Business Income
Citation: N.J.S.A. 54A:5-1(b) (P. L.1976, c.47; amended 1977, c.40, 1977, c.273, 1981, c.423, 1983,
c.571, 1987, c.76, 1987, c.310, 1990, c.79, 1993, c.173, 1997, c.414, 1998, c.57).
Effective Date: 7/24/1998
2015 Estimate:
$592,300,000
Objective:
The allowance of legitimate business deductions from gross income realized
from an unincorporated business, primarily the same deductions as allowed for
federal income tax purposes, ensures that only net income is subject to the
income tax.
Description:
In calculating net income from the operation of a business, profession or other
activity, taxpayers are permitted to deduct all costs and expenses incurred in
the conduct of such business.
The Governor signed into law P.L. 2011, Chapter 60, a Gross Income Tax reform
which provides an alternative business income calculation that affords business
taxpayers a limited ability to consolidate business income sources, utilize
business losses and carry forward unused losses for up to 20 years. This new
law is applicable to tax years 2012 and beyond.
Data Source
January 2014 Gross Income Tax Calculator and IMF/IRTF file (IRS)
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: New Jersey, since the inception of the income tax, has allowed deductions for
the vast majority of business expenses. This serves to reduce the
complication with the federal income tax and to simplify New Jersey's tax
calculations. 409,000 returns deducted expenses from business income.
- 32 -
Gross Income Tax
17
Deductions from Rents, Royalties, Patents and Copyrights
Citation: N.J.S.A. 54A:5-1(d) (P.L. 1976, c.47; amended P.L. 1977, c.40, P.L. 1977, c.273, P.L. 1981,
c.423, P.L. 1983, c.571, P.L. 1987, c.76, P.L. 987, c.310, P.L. 1990, c.79, P.L. 1993, c.173,
P.L. 1997, c.414, P.L. 1998, c.57).
Effective Date: 7/24/1998
2015 Estimate:
$111,200,000
Objective:
To allow the recipients of rent, royalty, patent and copyright income to reduce
gross income from these sources by the legitimate costs of earning such
income.
Description:
In calculating net income, taxpayers are permitted to deduct all costs and
expenses.
Data Source
January 2014 Gross Income Tax Calculator and IMF/IRTF file (IRS)
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: New Jersey, since the inception of the income tax, has allowed deductions for
the vast majority of Federally allowable business expenses including that for
rents, royalties, patents and copyrights. This serves to simplify New Jersey's
tax calculations. 202,000 returns had deductions from rent, royalty, patents
and copyrights.
18
Dependent child exemption
Citation: N.J.S.A. 54A:3-1
Effective Date: 7/12/1990
2015 Estimate:
$121,600,000
Applied Date: 1/1/1991
Objective:
P.L. 1990, c.61, in addition to other changes made to the Gross Income Tax Act
(N.J.S.A. 54A:1-1 et seq.), increased the then-curren t exemption amount for
qualifying dependent children in an attempt to financially support child-rearing
taxpayers.
Description:
A taxpayer is allowed a $1,500 exemption for each dependent who qualifies as a
dependent of the taxpayer during the taxable year for federal income tax purposes.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
- 33 -
Gross Income Tax
19
Dependents Attending College
Citation: N.J.S.A.54A:3-1.1 (P.L. 1976, c. 84)
Effective Date: 9/2/1976
2015 Estimate:
$10,900,000
Objective:
This provision became law the same year as the Gross Income Tax Act and
represented an attempt by the same legislative leaders who enacted the
income tax to provide additional relief for taxpayers whose dependents were
and are attending college.
Description:
A deduction which reduces taxable income by $1,000 for each dependent
claimed on the NJ tax return who is under age 22 for the entire tax year and is
attending college full-time.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: The State of New Jersey recognizes the financial struggle for parents to afford
the current high costs of college tuition and therefore established this
deduction. All eligible residents take advantage of this deduction. 197,000
returns took the exemption.
20
Education IRA or State Tuition Plan Earnings
Citation: N.J.S.A. 54A:6-25 (P.L. 1997, c. 237; amended P.L. 1999, c.46, c.116, P.L. 2001, c.262)
Effective Date: 12/11/2001
Objective:
To provide a mechanism through which tuition cost, registration fees, and
dormitory residence may be paid in advance of enrollment in a public
institution of higher education at a rate lower than the cost at the time of
actual enrollment. To support the New Jersey Prepaid Higher Education
Expense Program.
Description:
Gross income does not include certain earnings (and certain distributions) on
education IRA’s or a qualified State tuition program account. Qualified
earnings are allowed tax-deferral treatment and qualified distributions are
excludable from gross income.
- 34 -
Gross Income Tax
21
Employee 401(k) Contributions
Citation: N.J.S.A. 54A:6-21 (P.L. 1983, c. 571)
Effective Date: 1/1/1984
Objective:
Allows for employee contributions to their own 401(k) retirement fund to be
excluded from gross income. This exclusion took effect January 1, 1984.
Description:
Gross income does not include amounts contributed by an employee to a 401k
retirement plan.
Effectiveness: It is assessed that this expenditure is effective as individuals enrolled in other
pension or retirement plans seek the advantage of the 401k contribution
exclusion.
22
Employee's Death Benefits
Citation: N.J.S.A. 54A:6-4 (P.L. 1976, c. 47)
Effective Date: 7/8/1976
Objective:
As part of the original legislation which created the income tax, the legislature
ensured that gross income does not include benefit amounts paid by or on
behalf of an employer due to the death of the employee. This exclusion
remains in effect.
Description:
Gross income does not include benefit amounts paid by or on behalf of an
employer due to the death of the employee.
Effectiveness: New Jersey does not tax benefits received by a grieving loved one due to loss
of life. All who qualify take advantage of this exclusion.
- 35 -
Gross Income Tax
23
Employer 401(k) Contributions
Citation: N.J.S.A. 54A:6-21 (P.L. 1983, c. 571)
Effective Date: 1/1/1984
Objective:
Allows for employer contributions, on behalf of the employee, to an employees'
401(k) retirement fund to be excluded from gross income. This exclusion took effect
January 1, 1984.
Description:
Gross income does not include amounts contributed by an employer on behalf
of and at the election of an employee to a 401k retirement plan.
Effectiveness: Effective January 1, 1984, 401(k) pension contributions were made allowable
to reduce taxable annual income to assist taxpayers funding their own
retirement.
24
Employer Contributions to Retirement Plans
Citation: P.L. 1976, c.47
Effective Date: 7/8/1976
Applied Date: 8/30/1976
Description:
Employer contributions to employee retirement plans are not included in gross
income for Gross income tax purposes.
Effectiveness: The Gross Income Tax Act does not require employer contributions to a
retirement account to be taxed or reported as income by a recipient. This
fosters employer support of employee retirement without consequence to
the employee.
- 36 -
Gross Income Tax
25
Exempt Interest (Federal) Exclusion
Citation: N.J.S.A. 54A:6-14 (P.L. 1976, c. 47)
Effective Date: 7/8/1976
2015 Estimate:
$25,500,000
Objective:
Non-discretionary. Required under federal law.
Description:
Gross income does not include interest on (or capital gain from) obligations of a
U.S. agency, including such received through an investment fund.
Data Source
January 2014 Gross Income Tax Calculator and BEA
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: The federal government requires certain interest earned be exempt, the State
of New Jersey follows this requirement. This encourages the investment in
government bonds and other similar instruments. 251,000 returns with
Federal or state/local nontaxable interest.
26
Exempt Interest (State) Exclusion
Citation: N.J.S.A. 54A:6-14), P. L. 1976, c. 47
Effective Date: 7/8/1976
2015 Estimate:
$10,500,000
Objective:
The exemption of interest on New Jersey obligations was a part of the original
Gross Income Tax Act. Apparently the Legislature intended to encourage
investment in New Jersey securities.
Description:
Gross income does not include interest on obligations of a New Jersey State
agency, Authority or a New Jersey political subdivision.
Data Source
January 2014 Gross Income Tax Calculator and BEA
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: The State of New Jersey excludes certain interest earned from taxation. This
encourages the investment in government bonds and other similar
instruments. 251,000 returns with Federal or state/local nontaxable interest.
- 37 -
Gross Income Tax
27
Family Leave Benefits
Citation:
Effective Date: 5/2/2008
28
Objective:
To reaffirm the State’s commitment to sustaining the State-operated,
nonprofit State disability benefits plan, which has been found to be a highly
efficient and cost-effective means of ensuring the availability of coverage for
employers and workers with low overhead costs and impartial claims
Description:
Gross income does not include benefits for family temporary disability leave.
Gambling Losses
Citation: N.J.S.A. 54A:5-1(g) (P.L. 1976, c.47; amended 1977, c.40, 1977, c.273, 1981, c.423, 1983,
c.571, 1987, c.76, 1987, c.310, 1990, c.79, 1993, c.173, 1997, c.414, 1998, c.57)
Effective Date: 7/24/1998
Objective:
To provide for the opportunity to deduct actual losses from gambling. Only
losses from taxable gambling activities are permitted to be deducted. This
provides an equitable match between taxable activities and losses resulting
from such activities.
Description:
Taxpayers may deduct all types of gambling losses, including those from
playing the New Jersey Lottery, from their total gambling winnings during the
tax period not to exceed the total of the winnings because gambling is a “net”
category of income.
- 38 -
Gross Income Tax
29
Gifts and Inheritances
Citation: N.J.S.A. 54A:6-5 (P.L. 1976, c. 47)
Effective Date: 7/8/1976
Objective:
As part of the original legislation which created the income tax, the legislature
ensured that gross income does not include the value of property acquired by
gift, bequest, devise or inheritance. This exclusion remains in effect.
Description:
Gross income does not include the value of property acquired by gift, bequest,
devise or inheritance.
Effectiveness: These income sources have been nontaxable since the inception of the Gross
Income tax as they may be taxed under other tax laws.
30
Gross Income under $20,000
Citation: N.J.S.A. 54A:8-3.1
Effective Date: 9/11/1980
2015 Estimate:
$70,200,000
Objective:
Basic component of the tax structure.
Description:
New Jersey filers with gross includable income totaling less than $20,000, or
$10,000, depending on filing status, are not subject to income taxation.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: 1,015,740 returns fell below the filing threshold.
- 39 -
Gross Income Tax
31
Health Enterprise Zone Deduction
Citation: N.J.S.A. 54A:3-8 (P.L. 2004, c.139)
Effective Date: 3/1/2005
2015 Estimate:
$600,000
Objective:
To provide access to quality medical and dental primary care for the
traditionally medically underserved communities in New Jersey. To that end,
this bill institutes incentives to encourage primary care physicians and dentists
to set up and maintain their medical and dental offices in the State's medically
and dentally underserved areas.
Description:
A taxpayer, engaged in providing primary care in a practice located within a
Health Enterprise Zone or in a qualified practice located within 5 miles of a
Health Enterprise Zone, is allowed a deduction.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: 73 returns took this deduction.
32
Holocaust Reparations and Restitution
Citation: N.J.SA. 54A:6-29 (P.L. 1998, c.113)
Effective Date: 10/20/1998
Objective:
This bill amends the New Jersey gross income tax act to exempt recoveries of
looted property from definitions of income for victims of National Socialist
(Nazi) persecution.
Description:
Gross income does not include amounts received in connection with
restoration or compensation efforts for victims of National Socialist (Nazi)
persecution.
Effectiveness: New Jersey law shields from taxation money received as a result of the
horrible suffering and violation of human rights brought about by the Nazi
regime during the Second World War.
- 40 -
Gross Income Tax
33
Homeless Persons' Assistance Programs
Citation: N.J.S.A. 54A:6-22 (P.L. 1988, c.29; amended P.L. 2008, c.127)
Effective Date: 1/9/2009
34
Objective:
To promote the establishment of more assistance programs for the homeless
through excluding the programs from the gross income tax.
Description:
Gross income does not include direct payments, assistance and benefits under
homeless persons' assistance programs.
Life Insurance Payments
Citation: N.J.S.A. 54A:6-4 (P.L. 1976, c. 47)
Effective Date: 7/8/1976
35
Objective:
As part of the original legislation which created the income tax, the legislature
ensured that gross income does not include the proceeds of life insurance
contracts payable by reason of death. This exclusion remains in effect.
Description:
Gross income does not include the proceeds of life insurance contracts payable
by reason of death.
Loan Redemption
Citation: N.J.S.A. 54A:6-25.1 (P.L. 2005, c.157)
Effective Date: 1/10/2006
Objective:
This bill revises the State’s sales and use tax to conform with various provisions
of the multi-state Streamlined Sales and Use Tax Agreement (SSUTA). The
changes are intended to simplify and modernize the State’s tax collection and
administrative procedures, and to ensure New Jersey remains compliant with
the provisions of the SSUTA.
Description:
Gross income does not include amounts received as a loan redemption under
the Social Services Student Loan Redemption Program.
- 41 -
Gross Income Tax
36
Lottery Winnings under $10,000
Citation: N.J.S.A. 54A:6-11 (P.L. 1976, c. 47; amended P.L. 2009, c.69)
Effective Date: 6/29/2009
37
2015 Estimate:
$2,100,000
Objective:
The Gross Income Tax Act, as amended, preserves the exemption for winnings
of less than $10,000 in an effort to promote the support of the recipient
agencies and populations benefiting from State Lottery proceeds. The original
Gross Income Tax Act (P.L. 1976, c.47) exempted all Lottery winnings.
Description:
Gross income does not include individual winnings or prize amounts under
$10,000 from the New Jersey Lottery.
Data Source
New Jersey Lottery Commission data
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
Medical Expenses
Citation: N.J.S.A. 54A:3-3 (P.L. 1976, c.47; amended P.L. 1997, c.414, P.L. 1999, c.222).
Effective Date: 9/22/1999
2015 Estimate:
$308,000,000
Objective:
The bill allows the self-employed to deduct the cost of their health insurance
premiums under the New Jersey gross income tax.
Description:
A taxpayer is allowed to deduct from gross income unreimbursed medical
expenses for the taxpayer, spouse and dependents to the extent that such
medical expenses exceed 2% of the taxpayer’s gross income.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: The federal government allows for deductions for medical expenses when the
expenses total more than 7.5% of Adjusted Gross Income, while NJ alters that
standard to 2% of New Jersey Gross Income. New Jersey has provided
residents a greater deduction and therefore a greater relief from the growing
burden of medical expenses than the federal government. 1,198,530 took the
deduction.
- 42 -
Gross Income Tax
38
Medical Savings Account Contributions
Citation: N.J.S.A. 54A:6-27 (P.L. 1997, c.414)
Effective Date: 7/19/1998
39
Objective:
The Gross Income Tax Act establishes certain standards for medical savings
accounts opened by employers and permits employees who are account
holders of medical savings accounts to deduct from gross income the amount
deposited in such an account and any interest, dividends or gain earned
thereon under certain circumstances.
Description:
Gross income does not include contributions to a taxpayer's section IRC 220
Archer Medical Savings Account in the amount allowed for federal income tax
purposes.
Military Pension and Survivor's Benefit Payments
Citation: N.J.S.A. 54A:6-26 (P.L. 1997, c.409; amended 2001, c.84)
Effective Date: 5/7/2001
Objective:
To exclude military pensions from the New Jersey gross income tax in an
attempt to make it easier for the men and women of the military to live in New
Jersey. Military pension funds also contribute to the vitality of the State's
economy.
Description:
Gross income does not include military pension payments or military survivor's
benefit payments paid to individuals by the United States with respect to
service in the Armed Forces of the United States.
- 43 -
Gross Income Tax
40
New Jersey Earned Income Tax Credit Payments
Citation: N.J.S.A. 54A:4-7
Effective Date: 6/30/2010
2015 Estimate:
$261,700,000
Objective:
To assist New Jersey families struggling to provide for their children, reduce child
poverty, help families afford better care for their children, support welfare-to-work
efforts and foster employment Statewide.
Description:
The law provides a refundable tax credit program for low to moderate
individuals and families with earned income.
Data Source
January 2014 Gross Income Tax Calculator.
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: 512,000 returns took advantage of this credit.
For more information on the effectiveness of state earned income tax credits
see "A State Earned Income Tax Credit," Connecticut Office of Legislative
Research, February 2008. http://www.cga.ct.gov/2008/rpt/pdf/2008R-0102.pdf
41
Other dependent exemptions
Citation: N.J.S.A. 54A:3-1
Effective Date: 7/12/1990
2015 Estimate:
$9,800,000
Applied Date: 1/1/1991
Objective:
To provide additional exemption(s) to all dependents for which the taxpayer is eligible
to take a Federal exemption.
Description:
A taxpayer is allowed a $1,500 exemption for each dependent who qualifies as a
dependent of the taxpayer during the taxable year for federal income tax purposes
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
- 44 -
Gross Income Tax
42
Other Retirement Income Exclusion and Special Exclusion
Citation: N.J.S.A. 54A:6-15 (P.L. 1977, c. 273)
Effective Date: 7/8/1976
Objective:
2015 Estimate:
$6,200,000
This 'additional exclusion' allows those eligible seniors, who receive less than
the maximum exclusion to reduce other, passive income receipts up to the
maximum excludable amounts otherwise available to provide parity amongst
senior taxpayers.
The additional Special Exclusion is provided for those seniors who would
otherwise be eligible to receive Social Security or Railroad Retirement benefits
and were only precluded from such receipt due to inability to participate in the
plans.
Description:
Gross income does not include up to $20,000 to the extent that a Pension
Exclusion is not fully used. An additional exclusion of up to $6,000 is also
available for certain taxpayers not receiving Social Security or Railroad
Retirement benefits
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: Since the inception of the New Jersey Gross Income Tax seniors and certain
disabled residents have had the ability to deduct portions of their pensions.
Over time the excludable amount has increased and is currently $20,000 or
the difference between retirement income and the remaining excludable
amount. This has clearly been a benefit to those on fixed incomes. 194,000
returns declared the exclusion.
- 45 -
Gross Income Tax
43
Pension Exclusion
Citation: N.J.S.A. 54A:6-10 (P.L.1976, c. 47; amended P.L. 1977, c.40, c.273, P.L. 1979, c.79, P.L.
1990,c.61, P.L. 1999, c.177.)
Effective Date: 7/8/1976
2015 Estimate:
$111,800,000
Objective:
The Pension Exclusion was included in the original Gross Income Tax Act and
any and all modifications were intended to provide limited tax relief to New
Jersey senior and disabled taxpayers.
Description:
Gross income does not include up to $20,000 of income in the pension, annuity
or IRA category, if the taxpayer’s total income is $100,000 or less and the
taxpayer is 62 or over or disabled.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: Since the inception of the New Jersey Gross Income Tax seniors and certain
disabled residents have had the ability to deduct portions of their pensions.
Over time the excludable amount has increased and is currently $20,000 or
the difference between retirement income and the remaining excludable
amount. This has clearly been a benefit to those on fixed incomes. 438,000
returns took the pension exclusion.
44
Permanent Disability Exclusion
Citation: N.J.S.A. 54A:6-10 (P.L. 1976, c. 47)
Effective Date: 7/8/1976
Objective:
As part of the original legislation which created the income tax, the legislature
ensured that gross income does not include amounts received as permanent
disability payments through a public or private plan. This exclusion remains in
effect.
Description:
Gross income does not include amounts received as permanent disability
payments through a public or private plan.
Effectiveness: Those receiving pensions resulting from permanent and total disability may
exclude those pensions from the Gross Income tax.
- 46 -
Gross Income Tax
45
Personal Exemptions and Deductions
Citation: N.J.S.A. 54A:3-1 (P.L. 1976, c.47; amended P.L. 1990, c.61, P.L. 1993, c.178, P.L. 1993,
c.320, P.L. 2003, c.246)
Effective Date: 7/8/1976
46
2015 Estimate:
$697,800,000
Objective:
This allowance, similar in nature but differing in amount, is provided in
recognition of certain personal costs that each individual taxpayer, certain
older taxpayers and dependents that must be provided for by the taxpayer.
Description:
Each taxpayer is allowed personal exemption of $1,000 for self, and an extra
$1,000 for a spouse/domestic partner, for any taxpayer 65 years of age or over,
for any taxpayer’s spouse 65 years of age or over, blind or disabled, and for any
taxpayer’s spouse blind or disabled. $1,500 is deductible for each dependent
and $1,000 for each dependent attending college.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness:
All taxpayers receive a personal exemption of $1,000 for themselves, their
spouse and dependents, intended, in the same manner as Federal tax
exemptions, to shield from taxable income an allowance for personal needs.
3,788,054 had positive exemptions or deductions.
Property Tax Credit
Citation: N.J.S.A. 54A:3A-20 (P. L.1996, c.60)
Effective Date: 1/1/1996
2015 Estimate:
$29,400,000
Objective:
To provide a tax credit in the amount of $50 for homeowners or renters who
do not take a property tax deduction.
Description:
A tax credit in the amount of $50 for homeowners or renters who do not take a
property tax deduction. This credit is also available to certain senior or
disabled residents who do not have an income tax obligation.
Data Source
January 2014 Gross Income Tax Calculator.
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: For New Jersey residents who have, for years, suffered from the burden of
high property taxes, this credit, based on a calculation reduces taxable
income. All residents who qualify take advantage of the most financially
beneficial option. 736,000 returns used this credit.
- 47 -
Gross Income Tax
47
Property Tax Deduction
Citation: N.J.S.A. 54A:3A-16 (P.L. 1996, c.60)
Effective Date: 1/1/1996
2015 Estimate:
$451,300,000
Objective:
The act, as amended, provides a gross income tax deduction of up to $10,000
for property taxes paid by homeowners, or the rental equivalent thereof paid
by tenants, on a taxpayer's principal residence in this State. The cited
amendment reinstated the deduction of property taxes under the gross
income tax which was allowed under the former "Homestead Tax Relief Act,"
P.L.1985, c.304 (C.54A:3A-1 et seq.).
Description:
Taxpayers are entitled to a deduction up to $10,000 from gross income for
property taxes due and paid for that calendar year on the taxpayer's
homestead.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: For New Jersey residents who have, for years, suffered from the burden of
high property taxes, this deduction reduces taxable income based upon paid
property taxes. All residents who qualify take advantage of the most
financially beneficial option. 1,445,609 took this deduction.
- 48 -
Gross Income Tax
48
Qualified Conservation Contribution
Citation: N.J.S.A. 54A:3-6 (P.L. 1999, c.372)
Effective Date: 1/14/2000
2015 Estimate:
$200,000
Objective:
To provide New Jersey taxpayers with an incentive to transfer ownership
interests in real property to governmental or nongovernmental agencies
engaged in land conservation or, through such means as development
easements and conservation restrictions, to limit permanently the use of such
property so that its natural character is preserved.
Description:
A taxpayer is allowed a deduction against gross income for a qualified
conservation contribution if so qualified under the federal IRC section 170(h).
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: There is and has been wide support for the preservation of open space, the
fact that 1,273 returns took this deduction would appear to indicate that
there is active, tax-supported land preservation occurring.
49
Railroad Retirement Exclusion
Citation: N.J.S.A. 54A:6-3 (P.L. 1976, c. 47)
Effective Date: 7/8/1976
Objective:
As part of the original legislation which created the income tax, the legislature
ensured that gross income does not include payments received under the
Railroad Retirement Act. This exclusion remains in effect.
Description:
Gross income does not include payments received under the Railroad
Retirement Act.
Effectiveness: Two years after the Social Security Act of 1935, the Railroad Retirement and
Carrier Taxing Acts of 1937 became law, allowing employees of the railroad
industry to have a retirement pension. Like Social Security, the State of New
Jersey excludes this income from taxation to allow our States' seniors to have
greater disposable income. This ensures that both Social Security and Railroad
Retirement Benefits recipients are treated equitably.
- 49 -
Gross Income Tax
50
Roth IRA Distributions
Citation: N.J.S.A. 54A:6-28 (P.L. 1998, c.57)
Effective Date: 12/31/1997
51
Objective:
This bill conforms the New Jersey gross income tax treatment of the popular
federally authorized Roth IRA's to the federal tax treatment of these accounts.
Under the bill, qualified distributions from a Roth IRA are not includible in
taxable New Jersey gross income.
Description:
Gross income does not include distributions from a Roth IRA that are qualified
distributions or that are rolled over to a Roth IRA.
Scholarships and Fellowship Grants
Citation: N.J.S.A. 54A:6-8 (P. L. 1976, c. 47)
Effective Date: 7/8/1976
Objective:
As part of the original legislation which created the income tax, the legislature
ensured that gross income does not include amounts received as a scholarship
or Fellowship grant. This exclusion remains in effect.
Description:
Gross income does not include amounts received as a scholarship (educational)
or fellowship grant or for amount received (and expended) for related travel,
research and equipment.
- 50 -
Gross Income Tax
52
Self-Employed Health Insurance Costs
Citation: N.J.S.A. 54A:3-5 (P.L. 1999, c.222)
Effective Date: 9/22/1999
2015 Estimate:
$38,500,000
Objective:
The law allows self-employed taxpayers to deduct health insurance costs.
Employer-paid health benefits are not included in employees' taxable income;
the law provides equitable treatment of self-employed and employee
taxpayers.
Description:
Self-employed taxpayers are allowed to deduct, from their gross income, an
amount equal to the amount paid, during the taxable year, for insurance for
medical expenses for themselves, their spouses and dependents.
Data Source
January 2014 Gross Income Tax Calculator and IMF/IRTF File (2011, IRS)
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: New Jersey, since the inception of the income tax, has allowed deductions for
the vast majority of Federally-allowable business expenses. This serves to
simplify New Jersey's tax calculations. As 71,000 took the deduction, it is
clear that those self-employed taxpayers are not burdened with taxes on
expenditures for maintaining good health.
53
Sheltered Workshop Tax Credit
Citation: N.J.S.A. 54A:4-11 (P.L. 2005, c.318)
Effective Date: 3/1/2005
2015 Estimate:
$39,300,000
Objective:
To support the sheltered workshop operations of Easter Seals and other
nonprofit sponsors of facilities that provide employment to the
developmentally disabled under contract with private employers.
Description:
A credit available to certain taxpayers that employ qualified handicapped
person(s) in a “sheltered workshop” arrangement.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: 173 returns used this credit, which indicates that a number of employers are
providing meaningful work experiences for New Jersey's disabled citizens.
- 51 -
Gross Income Tax
54
Social Security Income Exclusion
Citation: N.J.S.A. 54A:6-2 (P.L. 1976, c. 47)
Effective Date: 7/8/1976
2015 Estimate:
$92,000,000
Applied Date: 7/1/1976
Objective:
As part of the original legislation which created the income tax, the legislature
ensured that Social Security benefits received are not taxable under the Gross
Income Tax to any extent. This exclusion remains in effect.
Description:
Social Security benefits received are not taxable under the Gross Income Tax to
any extent.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: The State of New Jersey, unlike the Federal Government, does not tax monies
received as Social Security benefits, preserving the value of this important
component of income for New Jersey's seniors.
55
Taxpayer and Spouse/CU Partner
Citation: N.J.S.A. 54A:3-1
Effective Date: 7/6/1976
2015 Estimate:
$171,400,000
Applied Date: 7/1/1976
Objective:
The New Jersey Gross Income Tax Act (N.J.S.A. 54A:1-1 et seq.)
Description:
Each taxpayer shall be allowed a personal exemption of $ 1,000.00 which may be
taken as a deduction from his New Jersey gross income. Additionally, an additional
ecemption is allowable for the taxpayer's spouse, or domestic partner as defined in
section 3 of P.L. 2003, c. 246 (C. 26:8A-3), who does not file separately -- $ 1,000.00.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: The New Jersey Gross Income Tax Act (N.J.S.A. 54A:1-1 et seq.) was designed
to be a levy based on administrative simplicity, to avoid inter-period
adjustments with low rates. The Legislatiure provided few exemptions and
deductions but included personal exemptions.
- 52 -
Gross Income Tax
56
Temporary Disability Exclusion
Citation: N.J.S.A. 54A:6-6 (P.L. 1976, c. 47)
Effective Date: 7/8/1976
2015 Estimate:
$97,000,000
Objective:
As part of the original legislation which created the income tax, the legislature
ensured that gross income does not include amounts received as temporary
disability payments through the New Jersey State temporary disability
insurance law. This exclusion remains in effect.
Description:
Gross income does not include amounts received as temporary disability
payments through the New Jersey State temporary disability insurance law.
Data Source
January 2014 Gross Income Tax Calculator and SSA published data.
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: The state income tax has never applied to the receipt of temporary disability
benefits, thereby preserving the full value of this income for those periods
when individual taxpayers are precluded from working.
57
Unemployment Insurance Exclusion
Citation: N.J.S.A. 54A:6-13 (P.L. 1976, c. 47)
Effective Date: 7/8/1976
2015 Estimate:
$33,600,000
Objective:
As part of the original legislation which created the income tax, the legislature
ensured that gross income does not include benefits received under any
unemployment insurance law. This exclusion remains in effect.
Description:
Gross income does not include benefits received under any unemployment
insurance law.
Data Source
January 2014 Gross Income Tax Calculator
Reliability:
2 Based on a sample of verified tax returns
Effectiveness: Especially in times of financial distress, our State has, since the inception of
the state's personal income tax, deemed that unemployment payments will
not be impacted by taxation.
- 53 -
Gross Income Tax
58
Victims of September 11, 2001 Terrorist Attacks
Citation: (N.J.S.A. 54A:6-30) P.L. 2003, c.9
Effective Date: 1/27/2003
Objective:
To ease some of the financial hardship and worry for the thousands of
aggrieved wives, husbands and children suffering from their loss of loved ones
in the terrorist attacks of September 11, 2001.
Description:
Gross income does not include the income of any individual who dies as a
result of wounds or injury incurred as a result of the terrorist attacks against
the United States on September 11, 2001.
Effectiveness: All individuals who suffered the loss or injury of a loved one or other
hardships due to the terrorist attacks on September 11, 2001, were provided
tax relief for that year in an attempt to alleviate a portion of their financial
and emotional burden. All who were eligible took advantage of this exclusion.
59
Welfare Assistance Payments
Citation: N.J.S.A. 54A:6-13
Effective Date: 7/8/1976
Objective:
As part of the original legislation which created the income tax, the legislature
ensured that monies received as welfare assistance is not included in gross
income. This exclusion remains in effect.
Description:
Monies received as welfare assistance is not included in gross income.
Effectiveness: New Jersey has taken the position that individuals who fall below the poverty
line and receive money from Welfare Assistance programs are not taxed. All
who are qualified take advantage of this exclusion.
- 54 -
Gross Income Tax
60
Worker's Compensation Exclusion
Citation: N.J.S.A. 54A:6-6 (P.L. 1976, c. 47)
Effective Date: 7/8/1976
Objective:
As part of the original legislation which created the income tax, the legislature
ensured that gross income does not include amounts received through
workmen’s compensation acts. This exclusion remains in effect.
Description:
Gross income does not include amounts received through workmen’s
compensation acts.
Effectiveness: Like temporary disability payments, the State does not reduce the value of
these payments which are received by taxpayers who cannot work during the
period for which workers compensation payment are received.
- 55 -
Sales and Use Tax (N.J.S.A.54:32B-1 et seq.)
Overview
Description
Sales and Use Tax applies to receipts from retail sale, rental, or use of tangible personal property or
digital property; retail sale of producing, fabricating, processing, installing, maintaining, repairing,
and servicing tangible personal property or digital property; maintaining, servicing, or repairing real
property; certain direct-mail services; tattooing, tanning, and massage services; investigation and
security services; information services; limousine services; sales of restaurant meals and prepared
food; rental of hotel and motel rooms; certain admission charges; certain membership fees; parking
charges; storage services; sales of magazines and periodicals; delivery charges; and
telecommunications services, except as otherwise provided in the Sales and Use Tax Act.
A compensating use tax is also imposed when taxable goods and services are purchased and New
Jersey sales tax is either not collected or is collected at a rate less than New Jersey’s sales tax rate.
The use tax is due when such goods, or the goods on which taxable services are performed, come
into New Jersey. If sales tax was paid to another state, the Use Tax is only due if the tax was paid at a
rate that is less than New Jersey’s rate.
All persons required to collect the tax must file a Business Registration Application (Form NJ-REG).
Each registrant’s authority to collect the sales tax is certified by a Certificate of Authority issued by
the Division, which must be prominently displayed at each place of business to which it applies.
Major exemptions include: sales of newspapers; magazines and periodicals sold by subscription and
membership periodicals; casual sales except motor vehicles and registered boats; clothing; farm
supplies and equipment; flags of New Jersey and the United States; unprepared food and food
ingredients purchased for human consumption; food sold in school cafeterias; prescription and
certain nonprescription drugs and other medical aids; motor fuels; textbooks; professional and
personal services unless otherwise taxable under the Act; real estate sales; tangible personal
property used in research and development; production machinery and equipment.
The Sales and Use Tax Act was amended, effective October 1, 2005, to conform New Jersey’s law to
the requirements of the Streamlined Sales and Use Tax Agreement.
SSUTA, which is a multi-state effort to simplify and modernize the collection and administration of
sales and use taxes. The adoption of the SSUTA resulted in significant changes in New Jersey’s tax
policy and administration, including uniform product definitions and changes in the taxability of
specific items. In addition, the SSUTA provided for the creation of a new central registration system,
certain amnesty provisions, and minor changes in the treatment of exemption certificates.
Rate
The rate of tax is 7% on taxable sales occurring on or after July 15, 2006. Formerly, the tax rate was
6%.
- 56 -
Disposition of Revenues
Revenues are deposited in the State Treasury for general State use.
- 57 -
Sales and Use Tax
1
Admission to Athletic Games: Elementary or Secondary Schools
Citation: N.J.S.A. 54:32B-9(f)(2)(A) (P.L.1997, c.162, s.27)
Effective Date: 7/14/1997
Applied Date: 1/1/1998
2
Objective:
To comply with the then-current Streamlined Sales and Use Tax Agreement,
the act provides a full sales and use tax exemption for charges for admission to
athletic games or exhibition when sold by a public elementary or qualifying
non-profit secondary school. To comply with the then-current Streamlined
Sales and Use Tax Agreement, the act provides a full sales and use tax
exemption for charges for admission to athletic games or exhibition when sold
by a public elementary or qualifying non-profit secondary school.
Description:
The law exempts charges for admission to athletic games or exhibition when
sold by a public elementary or qualifying non-profit secondary school.
Admissions Charges from an Exempt Organization
Citation: N.J.S.A. 54:32B-9(f) (P.L. 1997, c.162)
Effective Date: 7/14/1997
Applied Date: 1/1/1998
Objective:
To include parent-teacher groups to be considered amongst those
organizations who have been granted Exempt Organization status, which
provides for sales-tax free purchases of goods or services for the organizations’
own use to reduce costs for those organizations.
Description:
Admission charges to certain events are exempt from tax if proceeds from the
sale go exclusively to an exempt organization.
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Sales and Use Tax
3
Advertising To Be Published in a Newspaper
Citation: N.J.S.A. 54:32B-8.30 (P.L. 1980, c.105)
Effective Date: 9/11/1980
2015 Estimate:
$113,500,000
Applied Date: 9/11/1980
4
Objective:
To exempt Receipts from the sales of advertising to be published in a
newspaper from the tax imposed by the Sales and Use Tax Act.
Description:
Receipts from the sales of advertising to be published in a newspaper are
exempt from the tax imposed under the Sales and Use Tax Act.
Data Source
Economic Census 2002-2007 Extrapolated by Annual Newspaper Receipts
Growth
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Bakery Items
Citation: N.J.S.A. 54:32B-3(c)(3)(ii)(c) (P.L. 2005, c.126)
Effective Date: 7/2/2005
2015 Estimate:
$38,600,000
Applied Date: 10/1/2005
Objective:
The State’s sales and use tax has been revised to conform with various
provisions of the multi-state Streamlined Sales and Use Tax Agreement
(SSUTA). The changes are intended to simplify and modernize the State’s tax
collection and administrative procedures, and to ensure New Jersey continues
to remain compliant with the provisions of the SSUTA.
Description:
Bakery items sold as such, including but not limited to, bread, rolls, buns,
biscuits, bagels, croissants, pastries, donuts, danish, cakes, tortes, pie, tarts,
muffins, bars, cookies, and tortillas are exempt from tax if sold without eating
utensils provided by the seller.
Data Source
Economic Census 2002-2007 Extrapolated by Division of Taxation Bakery
Growth to 2010 then by Harmonic Mean.
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
- 59 -
Sales and Use Tax
5
Barges
Citation: N.J.S.A. 54:32B-8.12 (P.L. 1988, c.53)
Effective Date: 7/8/1988
Applied Date: 7/8/1988
6
Objective:
Receipts from sales or charges for repairs, alterations or conversion of barges
and other vessels of 50-ton burden or over are exempt from the tax imposed
by the Sales and Use Tax Act. These vessels are integral to intrastate and
interstate commerce.
Description:
The law exempts receipts from the sale or repairs, alterations or conversion of
certain commercial ships, including barges.
BPU-Regulated Service Provider purchases of equipment (as defined in N.J.S.A.
54:32B-8.13©
Citation: N.J.S.A. 54:32B-8.13(c) (L. 1980, c. 105, § 25; amended 1985, c. 266; 1989, c. 2, § 1; 1995,
c. 317; 1996, c. 26, § 18; 1997, c. 162, § 23).
Effective Date: 1/5/1996
Applied Date: 4/1/1996
Objective:
The act provides a full sales and use tax exemption for machinery, apparatus
and equipment sold to a service provider regulated by the New Jersey Board of
Public Utilities or the Federal Communications Commission for use directly and
primarily in providing telecommunications service.
Description:
Machinery, apparatus and equipment sold to a service provider regulated by
the new Jersey Board of Public Utilities or the Federal Communications
Commission for use directly and primarily in providing telecommunications
service are not subject to sales tax.
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Sales and Use Tax
7
Broadcast Equipment (as defined in N.J.S.A. 54:32B-8.13(e))
Citation: N.J.S.A. 54:32B-8.13(e) (L. 1980, c. 105, § 25; amended 1985, c. 266; 1989, c. 2, § 1; 1995,
c. 317; 1996, c. 26, § 18; 1997, c. 162, § 23).
Effective Date: 7/14/1997
2015 Estimate:
$2,100,000
Applied Date: 1/1/1998
8
Objective:
This exemption allows commercial broadcasters or cable operators to purchase
certain otherwise-taxable items for their own use without payment of the tax.
Description:
Machinery, apparatus, or equipment used directly and primarily in the
production or transmission of radio or television broadcasts by commercial
broadcasters operating under a broadcasting license issued by the Federal
Communications Commission or by providers of cable/satellite television
program services. The exemption also applies to parts with a useful life of more
than one year.
Data Source
Economic Census 2002-2007
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Building Materials and Supplies Purchased for an Exempt Organization
Citation: N.J.S.A.54:32B-8.22 (P.L. 1980, c. 105, amended 1983, c. 303, § 31; P.L. 1988, c. 83, § 1;
P.L. 1988, c. 93, § 5; P.L. 2006, c. 34, § 2)
Effective Date: 7/8/2006
Applied Date: 7/15/2006
Objective:
To ensure that those organizations granted Exempt Organization status are
provided the opportunity to erect or modify structures for their own use
without payment of sales tax on the materials used for those purposes.
Description:
Receipts from sales made to contractors or repairmen of materials, supplies or
services for exclusive use in erecting structures or building on, or otherwise
improving, altering or repairing real property of exempt entities or government
agencies are exempt from tax.
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Sales and Use Tax
9
Business Retention and Relocation Assistance Grants
Citation: L. 1996, c. 25, § 4, eff. May 9, 1996; amended 2004, c. 65, § 4, eff. June 30, 2004; 2007, c.
310, § 1, eff. Jan. 13, 2008; 2010, c. 123, § 3, eff. Jan. 6, 2011.
Effective Date: 5/9/1996
2015 Estimate:
$14,050,000
Applied Date: 5/9/1996
Objective:
The purpose of the program is to encourage economic development, preserve
existing jobs, and stimulate new job activity in New Jersey.
Description:
The Business Retention and Relocation Assistance Act (C.34:1B-112 et seq.,
was signed into law on May 9, 1996 and has been subsequently amended and
expanded in scope.. P.L 2004, c.65 gave the State new tools in the effort to
retain jobs under threat of leaving New Jersey. On January 13, 2008, the
Business Retention and Relocation Assistance Act was amended by P.L. 2007,
c.310 (C.34:1B-115), which reduced the program’s eligibility threshold from 250
retained full-time jobs to 50 retained full-time jobs. Most recently, P.L. 2010,
c.123, signed into law January 6, 2011, expanded the definition of the
"designated industries" eligible for the grant; expanded the job retention grant
from a one-time $1,100 to $1,500 grant for the number of jobs retained to a
six-year award, in the same amounts, based on the number of jobs retained,
e.g., a six-year award of $1,500 per job retained, per year and
allowed for an additional 50 percent bonus grant to be applied to any business
that retains 2,000-plus jobs and invests double the amount they would receive
in the tax credit. This would be on top of the existing $750 per job bonus grant
currently available to businesses keeping 2,000-plus jobs in the state and
created a "net benefit test," in which potential grant recipients must prove that
the state would see a net benefit from providing the tax credit, i.e., the
anticipated tax revenue must be greater than the credits awarded under
BRRAG; required that businesses maintain the relocated jobs in New Jersey for
five years from the last year tax credits were awarded, essentially requiring
businesses to keep the jobs in the state for 11 years if they wish to receive the
full amount of the tax credits. For businesses that do not comply, a clawback
provision exists to allow the state to recapture the awarded tax credits; and
allowed for a business to receive BRRAG awards even if it's not relocating, so
long as the business makes a capital investment equal to or greater than the
total value of the grants to be received.
The BRRAG Program is a one-time grant of corporation business tax credits (or
insurance premiums tax credits as applicable) to businesses to assist them in
retaining jobs and developing projects that relocate within the state.
Additionally, an eligible business may be authorized to acquire certain
materials without payment of sales tax. There are specific statutory criteria
that must be met.
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Sales and Use Tax
The amount of the grant for a business relocating between 50 and 499 full-time
employees can be up to $1,500 per job and is scored based on a number of
factors, such as the type of industry, quality of the jobs, and consistency with
New Jersey’s Smart Growth policies. Businesses relocating 500 or more fulltime workers are eligible for a tax credit of $1,500 per job retained. Businesses
relocating 2,000 jobs or more into a designated urban center can qualify for a
“bonus grant” of 50 percent in addition to their base grant amount.
The BRRAG program caps the tax credits that can be issued during any single
fiscal year in New Jersey at $20 million. Moreover, the credits issued to a
business can be applied in the tax year issued or the tax year following
issuance. The program rules also have a recapture or “claw back” provision for
businesses that do not retain the necessary number of jobs for the agreed
upon five-year period or that are otherwise in default according to the Project
Agreement contract.
There are 5 components to the BRRAG program:
1. The Business Retention and Relocation Assistance Grant (BRRAG) Program;
2. The Sales and Use Tax Exemption (STX) Program;
3. The BRRAG Tax Credit Certificate Transfer Program (Transfer Program);
4. The Urban Enterprise Zone Energy Sales & Use Tax Exemption for
Manufacturers Program; and
The Business Retention and Relocation Assistance Act (C.34:1B-112 et seq.,
was signed into law on May 9, 1996 and has been subsequently amended and
expanded in scope.. P.L 2004, c.65 gave the State new tools in the effort to
retain jobs under threat of leaving New Jersey. On January 13, 2008, the
Business Retention and Relocation Assistance Act was amended by P.L. 2007,
c.310 (C.34:1B-115), which reduced the program’s eligibility threshold from 250
retained full-time jobs to 50 retained full-time jobs. Most recently, P.L. 2010,
c.123, signed into law January 6, 2011, expanded the definition of the
"designated industries" eligible for the grant; expanded the job retention grant
from a one-time $1,100 to $1,500 grant for the number of jobs retained to a
six-year award, in the same amounts, based on the number of jobs retained,
e.g., a six-year award of $1,500 per job retained, per year and
allowed for an additional 50 percent bonus grant to be applied to any business
that retains 2,000-plus jobs and invests double the amount they would receive
in the tax credit. This would be on top of the existing $750 per job bonus grant
currently available to businesses keeping 2,000-plus jobs in the state and
created a "net benefit test," in which potential grant recipients must prove that
the state would see a net benefit from providing the tax credit, i.e., the
anticipated tax revenue must be greater than the credits awarded under
BRRAG; required that businesses maintain the relocated jobs in New Jersey for
- 63 -
Sales and Use Tax
five years from the last year tax credits were awarded, essentially requiring
businesses to keep the jobs in the state for 11 years if they wish to receive the
full amount of the tax credits. For businesses that do not comply, a clawback
provision exists to allow the state to recapture the awarded tax credits; and
allowed for a business to receive BRRAG awards even if it's not relocating, so
long as the business makes a capital investment equal to or greater than the
total value of the grants to be received.
The BRRAG Program is a one-time grant of corporation business tax credits (or
insurance premiums tax credits as applicable) to businesses to assist them in
retaining jobs and developing projects that relocate within the state.
Additionally, an eligible business may be authorized to acquire certain
materials without payment of sales tax. There are specific statutory criteria
that must be met.
The amount of the grant for a business relocating between 50 and 499 full-time
employees can be up to $1,500 per job and is scored based on a number of
factors, such as the type of industry, quality of the jobs, and consistency with
New Jersey’s Smart Growth policies. Businesses relocating 500 or more fulltime workers are eligible for a tax credit of $1,500 per job retained. Businesses
relocating 2,000 jobs or more into a designated urban center can qualify for a
“bonus grant” of 50 percent in addition to their base grant amount.
The BRRAG program caps the tax credits that can be issued during any single
fiscal year in New Jersey at $20 million. Moreover, the credits issued to a
business can be applied in the tax year issued or the tax year following
issuance. The program rules also have a recapture or “claw back” provision for
businesses that do not retain the necessary number of jobs for the agreed
upon five-year period or that are otherwise in default according to the Project
Agreement contract.
There are 5 components to the BRRAG program:
1. The Business Retention and Relocation Assistance Grant (BRRAG) Program;
2. The Sales and Use Tax Exemption (STX) Program;
3. The BRRAG Tax Credit Certificate Transfer Program (Transfer Program);
4. The Urban Enterprise Zone Energy Sales & Use Tax Exemption for
Manufacturers Program; and
5. The Energy Sales Tax Exemption Program, Salem County.
Data Source
NJ Division of Taxation Unpublished Data
Reliability:
2 Based on a sample of verified tax returns
- 64 -
Sales and Use Tax
10
Capital Improvements to Real Property
Citation: N.J.S.A. 54:32B-3(b)(4) (P.L. 1966, c.30)
Effective Date: 4/27/1966
Applied Date: 7/1/1966
Objective:
The law aims to encourage capital improvements to limit the amount of
deterioration of real property in any given area. This treatment has been
afforded to capital improvements since the inception of the sales tax in this
State (P.L. 1966, c.30.
Description:
Services in constructing or altering real property where the work performed
results in a capital improvement are exempt from tax.
Effectiveness: There is no sales tax assessed on the labor portion of most completed capital
improvements, which by their very nature increase property value which is
subject to local property taxes. Double taxation is therefore avoided as the
sales and use tax is levied on sales and servicing of tangible personal property.
11
Cargo Containers
Citation: N.J.S.A. 54:32B-8.12 (P.L. 1980, c. 105, § 24; amended P.L. 1981, c. 218, § 1; P.L. 1988, c.
53; P.L. 1999, c. 273)
Effective Date: 11/24/1999
Applied Date: 11/1/1996
Objective:
To ensure that the repair, alteration or conversion of cargo containers, which
are integral to intrastate and interstate commerce are not subject to sales and
use tax.
Description:
Receipts from sales or charges for repairs, alterations or conversion of any type
of cargo containers used for commercial loading, storing, hauling or transport
are exempt from the tax imposed under the Sales and Use Tax Act.
- 65 -
Sales and Use Tax
12
Casino Parking Charges pursuant to an agreement between the CRDA and a
Casino Operator
Citation: N.J.S.A. 54:32B-3(i)
Effective Date: 12/19/2008
Applied Date: 1/1/2009
Objective:
To exclude certain casino parking charges from subjectivity to the NJ Sales and
Use Tax. This exclusion is effective as of December 19, 2008.
Description:
Parking charges imposed pursuant to an agreement between the Casino
Reinvestment Development Authority (CRDA) and a casino operator are
exempt.
Effectiveness: To spur economic growth in Atlantic City it has been decided that sales tax
would not be charged on certain items or services that would generally be
subject to taxation.
13
Casual Sales
Citation: N.J.S.A. 54:32B-8.6 (P.L. 1980, c. 105, § 18; amended P.L. 1983, c. 400, § 7; P.L. 1989, c.
123, § 4; P.L. 2005, c. 126, § 10.)
Effective Date: 7/2/2005
Applied Date: 10/1/2005
Objective:
This exemption has been a part of the sales and use tax laws since the
inception of the tax to prevent the occasional sale of personal property by
individuals not engaged as merchants in such sales from subjectivity to the
sales and use tax.
Description:
The law exempts property sold as a casual sale, where an individual or business
sells goods, originally purchased for their own use, so long as that are not in
the business of selling such products. Yard and rummage sales are common
examples. Sales of motor vehicles do not qualify as casual sales.
- 66 -
Sales and Use Tax
14
Charitable Organizations Exemption
Citation: N.J.S.A. 54:32B-9(b)
Effective Date: 7/8/2006
15
2015 Estimate:
$50,000,000
Objective:
The Sales and Use Tax Act (N.J.S.A. 54:32B-1 et seq.) exempts the purchases
made by certain charitable entities for the purposes of those entities from tax
in an effort to reduce costs for those organizations.
Description:
New Jersey Exempt Organizations may purchase otherwise-taxable items for
their own use without payment of the sales tax on those items
Data Source
http://www.irs.gov/uac/Tax-Stats-2
Reliability:
5 Based on Federal tax expenditure estimates
Chemicals and Catalysts used in manufacturing processes
Citation: N.J.S.A. 54:32B-8.20 (L. 1980, c. 105, 32, eff. Sept. 11, 1980)
Effective Date: 9/11/1980
Applied Date: 9/11/1980
Objective:
To allow receipts from sales of materials that do not become a component part
of the finished product exemption from the tax imposed under the Sales and
Use Tax Act.
Description:
Materials used to induce chemical or refining processes in which the materials
are an essential part of the process but do not become part of the finished
product.
- 67 -
Sales and Use Tax
16
Clothing and Footwear
Citation: N.J.S.A. 54:32B-8.4 (P.L. 1980, c. 105, § 16)
Effective Date: 12/19/2008
2015 Estimate:
$955,105,800
Objective:
To exclude receipts from sales of articles of clothing and footwear from the
New Jersey Sales and Use. This exemption does not apply to fur clothing,
clothing accessories or equipment, sport or recreational equipment, or
protective equipment.
Description:
Receipts from sales of articles of clothing and footwear, excluding fur clothing,
for human use are exempt from the tax imposed under the "Sales and Use Tax
Act."
Data Source
Economic Census 2002-2007 NJ Unpublished Data
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Effectiveness: New Jersey, unlike New York and many other states, exempts most clothing
and footwear in recognition of the critical nature of these purchases.
17
Cogeneration Facility purchases of machinery and apparatus (as defined in
N.J.S.A. 54:32B-8.13(d))
Citation: N.J.S.A. 54:32B-8.13(d)
Effective Date: 7/14/1997
Objective:
The act provides a full sales and use tax exemption for machinery, apparatus
and equipment, building materials and structures used directly and primarily
for cogeneration in a cogeneration facility.
Description:
Machinery, apparatus and equipment, building materials and structures are
exempt if used directly and primarily for cogeneration in a cogeneration
- 68 -
Sales and Use Tax
18
Coin-Operated Telephone Service
Citation: N.J.S.A. 54:32B-8.58 (P.L. 2008, c. 123, § 16)
Effective Date: 12/19/2008
19
Objective:
To comply with the then-current Streamlined Sales and Use Tax Agreement,
the act provides a full sales and use tax exemption for receipts from coin-paid
sales of telecommunications service using pay phones and expands the prior
exemption which only applied to coin-operated calls at the local calling rate.
Description:
Receipts from sales of coin-operated telephone service are exempt from the
tax imposed under the Sales and Use Tax Act.
Coin-Operated Vending Machine Sales under $.25
Citation: N.J.S.A. 54:32B-8.9
Effective Date: 10/15/1999
Objective:
The act provides a full sales and use tax exemption for receipts from sales of
tangible personal property sold through coin-operated vending machines at
$0.25 or less, provided the retailer is primarily engaged in making such sales
and maintains records satisfactory to the director.
Description:
Sales of any items for 25 cents or less, are not taxable and are deducted from
gross sales receipts before calculating tax.
- 69 -
Sales and Use Tax
20
Commercial Fishing Boats and Boat Repairs
Citation: N.J.S.A. 54:32B-8.12
Effective Date: 11/24/1999
21
Objective:
To clarify and extend an existing exemption from the tax for the sale and
servicing of certain commercial ships to include commuter ferryboats, including
specific provision for the exemption of receipts from sales or charges for
repairs, alterations or conversion of ferryboats that are primarily engaged in
the transportation of passengers during peak hours of commutation. Further,
the statute now extends the exemption to commuter ferryboats primarily
engaged in intrastate commerce.
Description:
Certain boats, including commercial party boats (headboats) engaged in sport
fishing and subject to annual inspection by the U.S. Coast Guard, and vessels
primarily engaged in commercial fishing or shellfishing. Also exempt are
charges for repairs, alterations, reoutfitting of boats, fuel, maintenance, and
charges for supplies.
Commercial Fishing Vessels
Citation: N.J.S.A. 54:32B-8.12
Effective Date: 11/24/1999
Objective:
The act provides a full sales and use tax exemption for receipts from sales or
charges for repairs, alterations or conversion of commercial fishing vessels.
Description:
Certain boats, including commercial party boats (headboats) engaged in sport
fishing and subject to annual inspection by the U.S. Coast Guard, and vessels
primarily engaged in commercial fishing or shellfishing.
- 70 -
Sales and Use Tax
22
Commercial Trucks and Truck Repairs (as defined in N.J.S.A. 54:32B-8.43)
Citation: N.J.S.A. 54:32B-8.43 (L. 1990, c. 115, § 3)
Effective Date: 11/19/1990
Applied Date: 7/1/1990
23
Objective:
Ensures receipts from sales, renting or leasing of certain commercial trucks,
and their repairs, are excluded from the tax imposed by the NJ Sales and Use
Tax Act.
Description:
Receipts from sales, renting or leasing of commercial trucks, truck tractors,
tractors, semitrailers which are registered in New Jersey and have a gross
vehicle weight rating in excess of 26,000 pounds or are operated actively and
exclusively for the carriage of interstate freight pursuant to a certificate or
permit issued by the Interstate Commerce Commission are exempt from sales
tax. Repair and replacement parts for such vehicles, also qualify for the tax
exemption.
Commercial Trucks Used for Interstate Travel
Citation: N.J.S.A.54:32B-8.43
Effective Date: 7/1/1990
Objective:
To exclude receipts from sales, renting or leasing of ,certain truck tractors,
tractors, semitrailers, and certain other vehicles , which are operated actively
and exclusively for the carriage of interstate freight, from tax under the "Sales
and Use Act." Also, to excludes the repair and replacement parts for such
vehicles.
Description:
The purchase, rental, or lease of commercial trucks, tractors, trailers, and
vehicles used in combination with such when operated exclusively for the
carriage of interstate freight pursuant to Federal law. Repair and replacement
parts are also covered under this exemption.
- 71 -
Sales and Use Tax
24
Concession Stand Sales: State-Owned Veterans Facilities
Citation: N.J.S.A. 54:32B-8.54
Effective Date: 8/31/2003
25
Objective:
This bill revises the State’s sales and use tax to conform with various provisions
of the multi-state Streamlined Sales and Use Tax Agreement (SSUTA). The
changes are intended to simplify and modernize the State’s tax collection and
administrative procedures, and to ensure New Jersey remains compliant with
the provisions of the SSUTA.
Description:
Concession stand sales located at State-owned veterans facilities are not
subject to tax by law.
Credit for Certain Property When Used as a Trade-in
Citation: N.J.S.A. 54:32B-2(oo)(2)(E)
Effective Date: 12/19/2008
2015 Estimate:
$796,700,000
Objective:
To stipulate that the "sale price" does not include credit for any trade-in of
property of the same kind accepted in part payment and intended for resale if
the amount is separately stated on the invoice, bill of sale, or similar document
given to the purchaser.
Description:
Within the Sales and Use Tax Act, the term "Sales price" does not include credit
for any trade-in of property of the same kind accepted in part payment and
intended for resale if the amount is separately stated on the invoice, bill of
sale, or similar document given to the purchaser.
Data Source
Sales & Use Tax by Business Code 1988-2012
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
- 72 -
Sales and Use Tax
26
Diabetic Supplies
Citation: N.J.S.A. 54:32B-8.1
Effective Date: 12/19/2008
Objective:
To allow tax exemptions for those in need of certain medical supplies and
equipment. Also for reasons of compliance with the Streamlined Sales and Use
Tax Agreement.
Description:
An exemption exists for certain medical supplies and equipment including
diabetic supplies.
Effectiveness: New Jersey allows for the exemption of certain medical supplies, including
diabetic supplies, to support the health and welfare of New Jersey citizens.
27
Dietary Supplements
Citation: N.J.S.A. 54:32B-8.2
Effective Date: 12/19/2008
2015 Estimate:
$60,300,000
Objective:
To exclude sales of food and food ingredients and dietary supplements sold for
human consumption from the NJ Sales and Use Tax. This is effective as of
December 19, 2009.
Description:
Products required by the Federal government to be labeled as a dietary
supplement, and that are identifiable by the Supplement Facts box on the label
are exempt from New Jersey Sales and Use Tax.
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Effectiveness: New Jersey allows for the exemption of certain medical supplies, including
dietary supplements, to support the health and welfare of New Jersey
citizens.
- 73 -
Sales and Use Tax
28
Diplomats, Consulates and Foreign Embassies
Citation: N.J.S.A. 54:32B-9(a)(3)
Effective Date: 7/8/2006
29
Objective:
To recognize the status of foreign embassy personnel and to afford them an
exemption from the sales and use tax on certain approved purchases.
Description:
Purchases made by diplomats, consulates and foreign embassies are exempt
from tax when made for purposes approved by the Department of State, Office
of Foreign Missions.
Direct Mail Advertising and Processing Services (as defined in N.J.S.A. 54:32B3(b)(5))
Citation: N.J.S.A. 54:32B-3(b)(5) (L. 2008, c.123)
Effective Date: 12/19/2008
Applied Date: 1/1/2009
Objective:
The State’s sales and use tax has been revised to conform with various
provisions of the multi-state Streamlined Sales and Use Tax Agreement
(SSUTA). The changes are intended to simplify and modernize the State’s tax
collection and administrative procedures, and to ensure New Jersey continues
to remain compliant with the provisions of the SSUTA.
Description:
This exemption applies to charges for printing or production of direct mail and
direct mail processing services performed for distribution to out-of-State
recipients.
- 74 -
Sales and Use Tax
30
Disposable Household Paper Products
Citation: N.J.S.A. 54:32B-8.44
Effective Date: 7/15/1991
31
2015 Estimate:
$80,700,000
Objective:
To exclude sales of disposable household paper products, including towels,
napkins, toilet tissues, cleaning tissues, diapers, paper plates and cups
purchased for household use, from the tax imposed under the "Sales and Use
Tax Act". This exclusion is effective as of July 15, 1991.
Description:
Sales of disposable household paper products such as towels, napkins, toilet
tissue, paper plates, and paper cups are exempt from sales tax.
Data Source
Economic Census 2007 and New York State Tax Expenditure Report 2011-12
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Distribution of Certain Corporate Property
Citation: N.J.S.A. 54:32B-(2)(e)(4)(c)
Effective Date: 12/19/2008
Objective:
To define a distribution of property by a corporation to its stockholders as a
liquidating dividend in the Streamlined Sales and Use Tax Agreement.
Description:
The distribution of property by a corporation to its stockholders as a liquidating
dividend is not considered a sale under the Sales and Use Tax Act.
Effectiveness: The distribution of corporate property may be subject to the corporate
business tax, and, as such, it is not subject to the sales and use tax.
- 75 -
Sales and Use Tax
32
Durable Medical Equipment
Citation: N.J.S.A. 54:32B-8.1 (P.L. 1980, c. 105, § 13; amended 1982, c. 227, § 5; 1987, c. 383, § 1;
2005, c. 126, § 7; 2008, c. 123, § 6).
Effective Date: 12/19/2008
Objective:
To exclude purchases of durable medical equipment including bath and shower
chairs, bed pans, and raised toilet seats from subjectivity to tax under the NJ
Sales and Use Tax Act.
Description:
Purchases of durable medical equipment including bath and shower chairs, bed
pans, and raised toilet seats are not subject to tax.
Effectiveness: Durable medical equipment that improves the health and welfare of New
Jersey citizens is not subject to tax when sold directly to the end customer.
33
Eggs, Fish, Meat and Poultry
Citation: N.J.S.A. 54:32B-3(c)(3)(i)(B) (N.J.A.C. 18:24-12.2)
Effective Date: 12/1/2008
2015 Estimate:
$220,700,000
Applied Date: 12/1/2008
Objective:
To define prepared food as two or more food ingredients mixed or combined
by the seller for sale as a single item, but not including food that is only cut,
repackaged, or pasteurized by the seller, and eggs, fish, meat, poultry, and
foods containing these raw animal foods requiring cooking by the consumer.
Also aligns with federal Food and Drug Administration regulations to prevent
food borne illnesses.
Description:
The sale of eggs, fish, meat, poultry and foods that contain these raw animal
foods that require cooking by the consumer are not subject to sales tax.
Data Source
From Consumer Expenditure Survey. Forecast using harmonic mean growth
rate 2006-2011
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
- 76 -
Sales and Use Tax
34
Electricity sales, exchanges and delivery (as defined in N.J.S.A. 54:32B-8.46)
Citation: N.J.S.A. 54:32B-8.46 (L. 1997, c. 162, § 26, eff. Jan. 1, 1998; amended 1998, c. 114, § 4, eff.
Oct. 28, 1998, retroactive to Jan. 1, 1998; 1999, c. 23, § 62, eff. Feb. 9, 1999; 2009, c. 240,
§ 3, eff. Jan. 16, 2010).
Effective Date: 1/16/2010
2015 Estimate:
$16,073,600
Applied Date: 1/16/2010
35
Objective:
The law requires that the Board of Public Utilities, when determining electric
and natural gas rates, pass along to consumers all tax savings realized by
utilities as a result of this bill. To encourage more competition and free market
among electrical sales within municipal boundaries, and thus prevent the
establishment of regulated monopolies.
Description:
Receipts from the sale, exchange, delivery or use of electricity are exempt from
the tax imposed under the "Sales and Use Tax Act," if the electricity is sold by a
municipal electric corporation to customers within its municipal or regulatory
boundaries.
Data Source
Government Finances-2002-2009 Extrapolated by Mean of Growths
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Electronically Delivered Software for Business Use
Citation: N.J.S.A. 54:32B-8.56 (P.L. 2005, c. 126, §15; amended 2006, c. 44, §12; 2008, c. 123, §11).
Effective Date: 12/19/2008
Objective:
To ensure that business software purchases, critical to commerce, are not
subject to the sales tax.
Description:
The law exempts sales prewritten computer software used exclusively for
business when delivered electronically.
- 77 -
Sales and Use Tax
36
Employer Provided Parking
Citation: N.J.S.A. 54:32B-3(i) (L. 2007, c.105)
Effective Date: 6/28/2007
Applied Date: 7/1/2008
37
Objective:
To ensure that certain employer-provided parking benefits are not subject to
sales tax.
Description:
Charges for employee parking, when provided by an employer or at a facility
owned or operated by the employer, are exempt from tax.
Energy and Utility Service
Citation: N.J.S.A. 54:32B-8.47 (P.L. 1997, c. 162, § 33; amended 2007, c. 94, § 1)
Effective Date: 5/10/2007
38
Objective:
To reduce the costs of certain energy production by utilities.
Description:
Receipts from the sale or use of energy and utility service to or by a utility
corporation or person that was subject to the provisions of P.L.1940, c.4, as of
April 1, 1997, or currently or formerly subject to taxation pursuant to P.L.1940,
c.5, for their own use and consumption, are exempt from the tax imposed
under the Sales and Use Tax Act.
Equipment for Printing and Publishing
Citation: N.J.S.A. 54:32B-8.29 (P.L. 1980, c. 105, 41. Amended by L. 1985, c. 440, 1)
Effective Date: 3/1/1986
Objective:
To allow for receipts from sales of machinery and equipment used by
businesses engaged in commercial printing, and certain other publishing
activities to be excluded from taxation under the NJ Sales and Use Tax Act.
Description:
An exemption exists for machinery and equipment used by businesses engaged
in commercial printing, publishing of periodicals, books, business forms,
greeting cards, or miscellaneous publishing, typesetting, photoengraving,
electrotyping, stereotyping, and lithographic platemaking, including supplies.
- 78 -
Sales and Use Tax
39
Equipment Used on Boats or Ships
Citation: N.J.S.A. 54:32B-8.12 (PL. 1980, c. 105, § 24; amended 1981, c. 218, § 1; 1988, c. 53; 1999,
c. 273).
Effective Date: 11/24/1999
40
Objective:
One of a number of shipping-related exemptions in the sales tax statute, the
intent of which is to reduce costs in the maritime industries.
Description:
Sales of machinery, apparatus and equipment for fuel, provisions, supplies,
maintenance and repairs (other than articles purchased for the original
equipping of a new ship) on a boat or other vessel are exempt.
Exempt Organizations: State of New Jersey and its Agencies
Citation: N.J.S.A. 54:32B-9(a)(1)
Effective Date: 7/8/2006
41
2015 Estimate:
$63,000,000
Objective:
In order to ensure that the business of governmental entities is conducted in
the most cost-efficient manner possible for the benefit of taxpayers, purchases
by government are not subject to sales and use tax.
Description:
Certain purchasers are exempt from sales and use tax including the State of
New Jersey, or any of its agencies, instrumentalities and public authorities.
Data Source
State and Local Government Finances 2004-2009 Extrapolated by Harmonic
Mean
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Exempt Organizations: Parent-Teachers Associations
Citation: N.J.S.A. 54:32B-9(b) (P.L. 1997, c.162)
Effective Date: 11/9/1998
Objective:
To ensure that parent-teacher organizations purchasing items for the use of
such organizations are not subject to sales and use tax.
Description:
Purchases made by and for the use of an association of parents and teachers of
an elementary or secondary school are exempt for either a public and private
school association.
- 79 -
Sales and Use Tax
42
Exempt Organizations: United Nations
Citation: N.J.S.A. 54:32B-9(a)(3)
Effective Date: 7/8/2006
43
Objective:
To ensure that the United Nations, an international organization which counts
the United States among its members, is not burdened by sales tax subjectivity
to purchases it makes, nor the requirement for the collection of sales tax on
certain sales it makes.
Description:
The law exempts the United Nations or any international organization of which
the United States of America is a member where it is the purchaser, user or
consumer, or where it sells services or property of a kind not ordinarily sold by
private persons.
Exempt Organizations: United States of America
Citation: N.J.S.A. 54:32B-9(a)(2)
Effective Date: 7/8/2006
2015 Estimate:
$240,300,000
Objective:
The State exempts the federal government on purchases it makes from the
burden of sales and use tax subjectivity and also from the requirement of sales
tax collection on certain sales it makes.
Description:
The law exempts the United States of America, and any of its agencies and
instrumentalities, where it is the purchaser, user or consumer, or where it sells
services or property of a kind not ordinarily sold by private persons.
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
- 80 -
Sales and Use Tax
44
Farm machinery and apparatus (as defined in
Citation: 54:32B-8.16
Effective Date: 1/8/1988
Applied Date: 1/8/1988
45
Objective:
To update the "farm use" sales tax exemption to reflect the changing nature of
the agricultural sector of the New Jersey economy and to remove the
restriction on the sales tax exemption for farmer's purchases of property that is
incorporated into buildings or structures.
Description:
The law exempts tangible personal property and production and conservation
services to a farmer for use and consumption directly and primarily in the
production, handling and preservation for sale of agricultural or horticultural
commodities at the farming enterprise including materials used to construct
non-residential buildings or structures such as a silo, greenhouse, grain bin, or
manure handling equipment.
Farm Vehicles and Vehicle Repairs
Citation: N.J.S.A. 54:32B-8.43
Effective Date: 11/19/1990
Objective:
To exclude receipts from sales, renting or leasing of ,certain truck tractors,
tractors, semitrailers, and vehicles used in combination therewith, which are
registered in New Jersey from tax under the "Sales and Use Act". Also, to
exclude the repair and replacement parts for such vehicles from tax imposed
by the NJ "Sales and Use Tax Act".
Description:
This exemption applies to the purchase of trucks, trailers, and truck-trailer
combinations that are used directly and exclusively in the production for sale of
tangible personal property on farms when the vehicles have a gross vehicle
weight rating in excess of 18,000 pounds and are registered with the New
Jersey Division of Motor Vehicles for farm use.
- 81 -
Sales and Use Tax
46
Feminine Hygiene Products
Citation: N.J.S.A. 54:32B-8.1
Effective Date: 12/19/2008
47
2015 Estimate:
$2,800,000
Objective:
These necessary personal hygiene items have been long determined to be
exempt from the tax.
Description:
An exemption is provided for feminine hygiene products such as tampons,
sanitary napkins and panty liners.
Data Source
Statista US Sales 2011/2012 http://www.statista.com/statistics/192658/ustampon-sales-via-different-sales-channels-in-2011-and-2012/
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Ferryboats carrying passengers (as defined in N.J.S.A. 54:32B-8.12)
Citation: N.J.S.A. 54:32B-8.12 (L. 1980, c. 105, § 24; amended 1981, c. 218, § 1; 1988, c. 53; 1999, c.
273, eff. Nov. 24, 1999)
Effective Date: 7/8/1988
Applied Date: 7/8/1988
Objective:
To exclude receipts from sales or charges for repairs, alterations or conversion
of ferryboats that are primarily engaged in the transportation of passengers
during peak hours of commutation from the tax imposed under the Sales and
Use Tax Act.
Description:
Purchases of ferryboats that are primarily engaged in the transportation of
passengers during peak hours of commutation are exempt from tax.
- 82 -
Sales and Use Tax
48
Films, Records and Tapes Used in Radio and Television
Citation: N.J.S.A. 54:32B-8.18
Effective Date: 9/11/1980
49
Objective:
To allow receipts from sales of films, records, tapes or any type of visual or
sound transcriptions not used for advertising purposes exclusion from the tax
imposed under the Sales and Use Tax Act.
Description:
Films, records, tapes, and other types of visual or sound transcriptions
produced for exhibition in theaters or for broadcast by radio or television
stations or networks and not used for advertising may be purchased exempt
from sales tax.
Firearm Safety Locks
Citation: N.J.S.A. 54:32B-8.50
Effective Date: 12/1/1999
50
Objective:
To encourage responsibility in firearm ownership by relieving owners of liability
for sales tax on their purchases of firearm safety locks and other devices that
enable the firearm to be made inoperable by anyone other than an authorized
person.
Description:
Receipts from sales of firearm trigger locks and other devices that enable the
firearm to be made inoperable by anyone other than an authorized person.
Firearm Storage Vaults
Citation: N.J.S.A. 54:32B-8.51
Effective Date: 12/1/1999
Objective:
To ensure a place of secure storage for firearms and to prevent tragic events
caused by firearms from occurring through affording lawful firearm owners
with an effective means of storing their firearms in a place that, while
convenient to the owner, is inaccessible to a child, intruder or anyone else that
the owner would wish to exclude from access to firearms.
Description:
Receipts from sales of firearm vaults providing secure storage for firearms.
- 83 -
Sales and Use Tax
51
Flag sales (American and New Jersey State )
Citation: N.J.S.A. 54:32B-8.26 (P.L. 1980, c.105)
Effective Date: 9/11/1980
Applied Date: 9/11/1980
52
Objective:
To exempt receipts from sales of the flag of the United States of America and
of the flag of the State of New Jersey from the tax imposed under the Sales
and Use Tax Act.
Description:
Receipts from sales of the flag of the United States of America and of the flag
of the State of New Jersey are exempt from sales tax.
Food and Drink for Airline Passengers
Citation: N.J.S.A. 54:32B-3
Effective Date: 12/19/2008
Objective:
To ensure that food purchased for consumption by airline passengers in flight,
in whatever air space it is consumed is not subject to sales tax.
Description:
Food and drink sold by airlines for consumption while in flight are not subject
to sales tax.
- 84 -
Sales and Use Tax
53
Food and Food Ingredients
Citation: N.J.S.A. 54:32B-8.2
Effective Date: 12/19/2008
54
2015 Estimate:
$1,534,126,000
Objective:
The State’s sales and use tax laws have been revised to conform with various
provisions of the multi-state Streamlined Sales and Use Tax Agreement
(SSUTA). The changes are intended to simplify and modernize the State’s tax
collection and administrative procedures, and to ensure New Jersey remains
compliant with the provisions of the SSUTA.
Description:
Food sold for human consumption in various states but not including hot or
prepared food, candy and soft drinks.
Data Source
2002-2007 Economic Census, New York State Tax Expenditure Report, Internal
Information.
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Food Purchased with Food Stamps
Citation: N.J.S.A. 54:32B-2(oo)(2)(D)
Effective Date: 9/11/1980
2015 Estimate:
$5,200,000
Objective:
To clarify that "sales price" does not include the amount for which food stamps
have been used for full or partial payment. Clearly, the eligibility for and use of
food stamps is indicative of economic hardship and such hardship should not
be worsened by the payment of sales tax on otherwise-taxable food items.
Description:
The term "sales price" does not include the amount for which food stamps
have been properly tendered in full or part payment.
Data Source
Monthly Food Stamp Benefits, September 2011 - 2012, Statehealthfacts.org,
Kaiser Family Foundation
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
- 85 -
Sales and Use Tax
55
Food Sold by a Manufacturer
Citation: N.J.S.A. 54:32B-3(c)(3)(ii)(A)
Effective Date: 12/19/2008
56
Objective:
Unlike many states, New Jersey exempts most sales of unprepared food for use
for human consumption from the sales tax, including food sold by
manufacturers thereof.
Description:
Food sold by a seller who is a manufacturer is exempt from NJ sales tax.
Food Sold in an Unheated State
Citation: N.J.S.A. 54:32B-3(c)(3)(ii)(B)
Effective Date: 12/19/2008
57
Objective:
Unlike many other states, New Jersey exempts most unprepared food sold for
human consumption, including food sold in an unheated state.
Description:
Foods prepared by the seller are exempt if sold in an unheated state by weight
or volume and without utensils provided by the seller.
Food that is Cut, Repacked or Pasteurized by the Seller
Citation: N.J.S.A. 54:32B-3(c)(3)(i)(B)
Effective Date: 12/19/2008
Objective:
The State’s sales and use tax has been revised to conform with various
provisions of the multi-state Streamlined Sales and Use Tax Agreement
(SSUTA). The changes are intended to simplify and modernize the State’s tax
collection and administrative procedures, and to ensure New Jersey remains
compliant with the provisions of the SSUTA.
Description:
Food that is only cut, repackaged, or pasteurized by the seller is not subject to
sales tax if sold without eating utensils.
- 86 -
Sales and Use Tax
58
Garbage Removal and Sewer Services (as defined in N.J.S.A. 54:32B-3(b)(4))
Citation: N.J.S.A. 54:32B-3(b)(4) (L. 1967, c. 25)
Effective Date: 4/16/1967
2015 Estimate:
$80,100,000
Applied Date: 5/1/1967
59
Objective:
To exclude garbage removal and sewer services performed on a regular
contractual basis for a term not less than 30 days from subjectivity to the NJ
Sales and Use Tax.
Description:
Garbage removal and sewer maintenance services performed on a regular
contractual basis for a term not less than 30 days is exempt from the sales and
use tax.
Data Source
2007 Economic Census data
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Garment Services
Citation: N.J.S.A. 54:32B-3(b)(2)(iii)
Effective Date: 12/19/2008
60
Objective:
The sale of most clothing and footwear, other than certain specialty items, is
not subject to sales tax. This exemption ensures that certain garment services
are also provided without the payment of the tax.
Description:
Charges for laundering, dry cleaning, tailoring, weaving, and pressing, limited
specifically to clothing, are exempt.
Gas, Water, Steam and Fuel in Containers and Bulk
Citation: N.J.S.A. 54:32B-8.7
Effective Date: 6/1/1998
Objective:
This ensures that utilities' sales, including the unbundling of energy products
and services is provided at as low cost as possible, advancing competitiveness.
Description:
The law exempts sales of gas, other than natural gas, water, steam, or fuel
delivered to consumers through mains, lines, pipe, or in containers or bulk.
- 87 -
Sales and Use Tax
61
Gold and Silver
Citation: N.J.S.A. 54:32B-8.32
Effective Date: 9/11/1980
62
Objective:
Receipts from the sales of gold or silver, in the form that can be traded on an
exchange, are exempt from the tax imposed under the Sales and Use Tax Act.
Description:
Receipts from the sales of gold or silver and storage thereof, in the form that
can be traded on an exchange are exempt from the tax imposed under the
Sales and Use Tax Act.
Government-owned Ships and Other Vessels
Citation: N.J.S.A. 54:32B-8.12
Effective Date: 11/24/1999
63
Objective:
To further clarify that the sales tax is not imposed on various purchases by the
state and federal government, including these vessels.
Description:
Governmentally-owned ships, barges and other vessels, including property
used by or purchased for the use of such vessels, is exempt from tax.
Hotel Occupancy by a Permanent Resident
Citation: N.J.S.A. 54:32B-2(m)
Effective Date: 12/19/2008
Objective:
This exemption attempts to differentiate between short-term rentals and more
permanent ones by allowing rentals of 90 days or more freedom from taxation.
Description:
Charges for lodging at a hotel, motel or similar facility where the occupant
resides at the lodging facility for at least 90 consecutive days.
- 88 -
Sales and Use Tax
64
Human Blood and its Derivatives
Citation: N.J.S.A. 54:32B-8.1
Effective Date: 12/19/2008
65
Objective:
This exemption is a part of the large body of medically-related tax exemptions.
Many medical procedures and relates cervices are exempt to the end
consumer of those services.
Description:
The law exempts sales of human blood and its derivatives.
Imprinting Services
Citation: N.J.S.A. 54:32B-8.48
Effective Date: 1/12/1998
66
Objective:
The act provides a sales tax exemption for imprinting services performed on
production machinery.
Description:
The law exempts charges for imprinting services when performed on
production or manufacturing equipment.
Inconsequential Tangible Personal Property
Citation: N.J.S.A. 54:32B-(2)(e)(4)(A)
Effective Date: 12/19/2008
Objective:
The sales tax is assessed on the sale of tangible personal property and certain
related services to that property to end consumers. Most professional,
insurance and personal services are not subject to tax in that they do not
transfer tangible items as a consequential element of those services.
Description:
Professional, insurance, or personal service transactions which involve the
transfer of tangible personal property as an inconsequential element, for which
no separate charges are made.
- 89 -
Sales and Use Tax
67
Initiation Fees and Membership Dues: Exempt Entity Operated
Citation: N.J.S.A. 54:32B-3(h)(2)
Effective Date: 12/19/2008
68
Objective:
The act does not subject to tax membership dues and related charges made to
patrons of nonprofit-operated health and fitness clubs.
Description:
The law exempts charges for initiation fees and membership dues of a health
and fitness, athletic, sporting or shopping club or organization operated by an
exempt religious, charitable, scientific, literary or educational organization.
Initiation Fees and Membership Dues: Youth Membership
Citation: N.J.S.A.54:32B-3(h)(1)
Effective Date: 7/1/2007
69
Objective:
To extend the benefits of health and fitness and related organizations to our
youth, the charges therefor are not subject to sales tax.
Description:
Although generally taxable, charges in the nature of initiation fees,
membership fees or dues of a health and fitness, athletic, sporting or shopping
club or organization whose members are predominantly age 18 or under are
exempt from sales tax.
Interest, Financing, and Carrying Charges
Citation: N.J.S.A. 54:32B-2(oo)(2)(B)
Effective Date: 12/19/2008
Objective:
Most intangible services, including various financing charges, are not subject to
tax as the tax is generally imposed on the sales of tangible personal property
and related services to that property.
Description:
The law does not tax separately stated interest, financing, and/or carrying
charges from credit extended on the sale of personal property or services.
- 90 -
Sales and Use Tax
70
Internet Access Service
Citation: N.J.S.A. 54:32B-2(cc)(12)
Effective Date: 12/19/2008
71
2015 Estimate:
$103,600,000
Objective:
This bill revises the State’s sales and use tax to conform with various provisions
of the multi-state Streamlined Sales and Use Tax Agreement (SSUTA). The
changes are intended to simplify and modernize the State’s tax collection and
administrative procedures, and to ensure New Jersey remains compliant with
the provisions of the SSUTA.
Description:
Internet access service charges, including the routing of internet traffic, are not
subject to tax.
Data Source
Internet and Satellite Access Charges from Service Annual Survey Information
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Laundry and Dry Cleaning Services for Clothing
Citation: N.J.S.A. 54:32B-3(b)(2)(iii)
Effective Date: 12/19/2008
2015 Estimate:
$14,000,000
Objective:
Generally, the sales of most clothing and footwear, other than certain specialty
items, is not subject to the sales tax. This exemption ensures that the
laundering and/or dry cleaning of those items also remains exempt.
Description:
Charges for laundering, dry cleaning, tailoring, weaving, and pressing, limited
specifically to clothing, are exempt.
Data Source
2002 and 2007 Economic Census
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
- 91 -
Sales and Use Tax
72
Limousine Services - Funerals
Citation: N.J.S.A.54:32B-3(b)(13)
Effective Date: 12/19/2008
73
Objective:
Generally, the transportation of persons or property is not subject to the sales
tax; this exemption ensures that limousine transportation is treated in a like
manner.
Description:
Charges for limousine transportation provided in connection with funeral
services.
Limousines and Limousine Repairs
Citation: N.J.S.A. 54:32B-8.52
Effective Date: 5/10/2001
74
Objective:
As the transportation services provided by limousines are exempt from tax, the
repairs of the vehicles providing such transportation are likewise tax exempt.
Description:
Limousines sold to a person licensed under New Jersey law to operate a
limousine service and charges for the repair, including replacement parts, of a
limousine operated by a person so licensed or by a person licensed by another
state or by the United States to operate a limousine service.
Locomotives, Railroad Cars and Other Railroad Rolling Stock
Citation: N.J.S.A. 54:32B-8.27
Effective Date: 9/11/1980
Objective:
To exclude receipts from sales of locomotives, railroad cars and other railroad
rolling stock, including repair and replacement parts, track materials, and
communication, signal and power transmission equipment from the tax
imposed under the Sales and Use Tax Act.
Description:
Receipts from sales of locomotives, railroad cars and other railroad rolling
stock, including repair and replacement parts, track materials, and
communication, signal and power transmission equipment are exempt from
the tax imposed under the Sales and Use Tax Act.
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75
Magazines and Periodicals
Citation: N.J.S.A. 54:32B-8.5
Effective Date: 7/8/2006
76
Objective:
This exemption has been in effect since the tax was enacted in 1966.
Description:
Magazines and Periodicals are exempt from tax, but only when sold by
subscription.
Marine Terminal Facility equipment and apparatus (as defined in N.J.S.A.
54:32B-8.12)
Citation: N.J.S.A. 54:32B-8.12 (L. 1980, c. 105, § 24; amended 1981, c. 218, § 1; 1988, c. 53; 1999, c.
273, eff. Nov. 24, 1999).
Effective Date: 11/24/1999
Applied Date: 11/1/1996
Objective:
To provide economic incentives for the shipping industry, receipts from sales or
charges for repairs, alterations or conversion of commercial ships or any
component thereof including cargo containers of any type whatsoever, barges
and other vessels of 50-ton burden or over, primarily engaged in interstate or
foreign commerce, machinery, apparatus and equipment for use at a marine
terminal facility in loading, unloading and handling cargo carried by those
commercial ships, barges and other vessels and certain other related
equipment are not subject to the New Jersey Sales and Use Tax Act (N.J.S.A.
54:32B-1 et seq.).
Description:
The law exempts purchases of machinery, apparatus and equipment if they are
for use at a marine terminal facility in loading, unloading and handling cargo
carried by commercial ships, barges and other vessels.
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Sales and Use Tax
77
Marine Terminal Services (as defined in N.J.S.A. 54:32B-8.12)
Citation: N.J.S.A. 54:32B-8.12
Effective Date: 11/24/1999
78
Objective:
To provide economic incentives for the shipping industry, receipts from sales or
charges for repairs, alterations or conversion of commercial ships or any
component thereof including cargo containers of any type whatsoever, barges
and other vessels of 50-ton burden or over, primarily engaged in interstate or
foreign commerce, machinery, apparatus and equipment for use at a marine
terminal facility in loading, unloading and handling cargo carried by those
commercial ships, barges and other vessels and certain other related
equipment are not subject to the New Jersey Sales and Use Tax Act (N.J.S.A.
54:32B-1 et seq.).
Description:
Storage and other services rendered with respect to loading, unloading and
handling cargo at a marine terminal facility are exempt from the sales tax.
Massage Therapy Services (as defined in N.J.S.A. 54:32B-3(b)(9))
Citation: N.J.S.A. 54:32B-3(b)(9) (L. 2008, c.123)
Effective Date: 12/19/2008
2015 Estimate:
$2,000,000
Applied Date: 1/1/2009
Objective:
To provide an individual with massage, bodywork or somatic services tax free
in order to treat a physical aliment or another purpose prescribed by a doctor.
Description:
Massage therapy services performed pursuant to a doctor's prescription or
performed at a licensed medical professional's place of business to treat a
physical ailment is exempt from tax.
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
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Sales and Use Tax
79
Medical Oxygen
Citation: N.J.S.A. 54:32B-8.1
Effective Date: 12/19/2008
80
Objective:
The majority of medically-necessary items designed to alleviate human
suffering have been exempt since the tax was enacted in 1966.
Description:
The law exempts sales of oxygen used for medicinal purposes.
Membership Periodicals
Citation: N.J.S.A. 54:32B-8.5
Effective Date: 7/8/2006
81
Objective:
This exemption demonstrates State support of the distribution of otherwisetaxable periodicals to members of nonprofit organizations in an effort to
reduce administrative burdens to those organizations and to reduce costs to
their members.
Description:
Any periodical distributed by a nonprofit organization to its members as a
benefit of membership in the organization.
Milk Sales by Coin-Operated Vending Machine
Citation: N.J.S.A. 54:32B-3(c)(2)
Effective Date: 12/19/2008
Objective:
Sales of milk have been included in exempt food sales since the tax was
enacted in 1966. This exemption ensures that purchases of milk remain taxexempt regardless of whether sold at a retail outlet or through a vending
machine.
Description:
Receipts from the sale of milk through coin-operated vending machines are
exempt from tax, regardless of price.
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Sales and Use Tax
82
Mobility Enhancing Equipment
Citation: N.J.S.A. 54:32B-8.1
Effective Date: 12/19/2008
83
Objective:
Mobility enhancement equipment is tax exempt in the same manner as other
tangible personal property furnished to end consumers as medically necessary
items intended for the alleviation of human suffering.
Description:
Sales of mobility enhancing equipment including canes, crutches, wheelchairs,
wheelchair lifts, hand controls for vehicles if purchased with a prescription.
The purchase of repair and replacement parts are included under this
exemption.
Motor, Airplane and Railroad Fuels
Citation: N.J.S.A. 54:32B-8.8
Effective Date: 9/11/1980
2015 Estimate:
$462,700,000
Objective:
These fuels, dependent on their use, may be subject to state motor fuels
taxation.
Description:
The sale of fuels for use in motor vehicles, airplanes and railroad cars is
exempt.
Data Source
US Energy Information Administration
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
- 96 -
Sales and Use Tax
84
Municipal Parking Charges
Citation: N.J.S.A. 54:32B-3(i)
Effective Date: 12/19/2008
85
2015 Estimate:
$12,100,000
Objective:
The majority of services provided to the users of government services have
been tax exempt since the tax was enacted in 1966. This exemption provided
that benefit to parking facilities so operated.
Description:
The law exempts charges for parking, storing or garaging provided a motor
vehicle by a municipality, county, or municipal or county parking authority.
Data Source
Governmental Finances in 2010 and Governmental Finances in 2009. Local
Government Parking Charges
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Newspapers
Citation: N.J.S.A. 54:32B-8.5
Effective Date: 7/8/2006
Objective:
The sale of newspapers has been exempt since the tax was enacted in 1966.
Description:
The sales of newspapers are exempt from sales tax.
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Sales and Use Tax
86
Non-Reimbursed Discounts
Citation: N.J.S.A. 54:32B-2(oo)(2)(A)
Effective Date: 12/19/2008
87
Objective:
Discounted items for which the seller is not reimbursed by a third party are
seen as actual reduction in the sales price subject to tax, whereas items where
the discounted price is a due to third-party reimbursement (normally provided
by transfer of the customer coupon received by the retailer to the third party)
are taxed at the price which includes the reimbursed amount.
Description:
When a taxable item is purchased at a discounted price, or with a coupon, sales
tax is due only on the reduced sale amount so long as the seller is not being
reimbursed by a third-party, such as a manufacturer's coupon, for the
discounted amount.
Out-of-State Sales
Citation: N.J.S.A. 54:32B-8.10
Effective Date: 9/11/1980
Objective:
New Jersey's sales and use tax is a transaction tax and it is imposed on all sales
of taxable tangible personal property made within this State. Sales to our-ofstate end consumers are subject to the laws of that state or jurisdiction.
Description:
The law does not tax sales of taxable products where the customer receives or
takes possession of the goods outside of New Jersey.
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Sales and Use Tax
88
Over-the-Counter Drugs
Citation: N.J.S.A. 54:32B-8.1
Effective Date: 12/19/2008
89
2015 Estimate:
$51,952,000
Objective:
The sales of over the counter drugs are included under the general exemption
of medically necessary items sold to end consumers to alleviate human
suffering.
Description:
Sales of over-the-counter drugs where there is a label identifying the product
as a drug, such as a Drug Facts panel or a statement of active ingredients.
Data Source
Economic Census 2002-2007
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Parking Charges Subject to Other Taxes
Citation: N.J.S.A. 54:32B-3(i)
Effective Date: 12/19/2008
90
Objective:
Parking charges subject to other taxes, such as municipal taxes, are not subject
to State sales tax to ensure against double taxation of these services.
Description:
Charges for parking or storing a motor vehicle are not subject to sales tax when
they are taxed pursuant to any other law or ordinance, such as municipal
parking tax.
Parking Charges Subject to the Atlantic City Parking Fee
Citation: N.J.S.A. 54:32B-3(i)
Effective Date: 12/19/2008
Objective:
Parking charges subject to other taxes, such as municipal taxes, are not subject
to State sales tax to ensure against double taxation of these services.
Description:
Charges for parking or storing a motor vehicle are not subject to sales tax when
they are taxed pursuant to the Atlantic City Parking Fee.
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Sales and Use Tax
91
Participatory Sporting Activities
Citation: N.J.S.A. 54:32B-3(e)(1)
Effective Date: 12/19/2008
92
2015 Estimate:
$15,100,000
Objective:
The exemption from tax is related to the participatory nature of the sport, as
opposed to mere admission charges for viewing an event, which are generally
subject to tax.
Description:
Charges for sporting activities where the purchases pays a fee to engage as a
participant such as kart racing or batting cage fees.
Data Source
Economic Census 2002-2007
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Partnership Distributions (as defined in N.J.S.A. 54:32B-(2)(e)(4)(D))
Citation: N.J.S.A. 54:32B-(2)(e)(4)(D)
Effective Date: 12/19/2008
Objective:
To clarify that distribution of property by a partnership to its partners in
liquidation is not considered to be a sale for sales and use tax purposes, and
therefore is not be taxed.
Description:
Distribution of property by a partnership to its partners in whole or partial
liquidation is not considered to be a sale for sales and use tax purposes.
Effectiveness: Partnership distributions are subject to tax under the Gross Income Tax Act
(N.J.S.A. 54A:1-1 et seq., and therefore are not subject to sales and use taxes.
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Sales and Use Tax
93
Prepared Food Delivered to Homebound
Citation: N.J.S.A. 54:32B-3(c)(1)
Effective Date: 12/19/2008
94
Objective:
In general, prepared food is subject to the sales tax, however this exemption
recognizes that nonprofits who are providing direct social services to elderly
residents of New Jersey need not be burdened with additional costs.
Description:
Charges for prepared food delivered to homebound elderly, age 60 or older,
and to disabled persons and meals as all or part of any food service project
funded by the government or by a nonprofit food service project are exempt
from sales tax.
Prescribed Drugs and Medications
Citation: N.J.S.A. 54:32B-8.1
Effective Date: 12/19/2008
2015 Estimate:
$681,859,000
Objective:
The general medical exemption for medication and related items provided to
end consumers to alleviate human suffering encompasses prescribed
medications.
Description:
Drugs sold pursuant to a doctor's prescription are exempt from tax provided
there is a label identifying the product as a drug, such as a Drug Facts panel or
a statement of active ingredients.
Data Source
Using 2002 and 2007 Economic Census, Merchandise Line Sales: Prescriptions
New Jersey
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
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Sales and Use Tax
95
Printed Advertising Material Delivered Out-of-State
Citation: N.J.S.A. 54:32B-8.39
Effective Date: 12/19/2008
96
Objective:
This exemption follows the general rule that items shipped out of state for use
out of state are subject to the laws of that state, and not to the New Jersey
sales and use tax.
Description:
Charges for printing or production of direct mail for subsequent shipment to
out-of-state customers is not subject to sales tax to the extent that it will be
shipped to non-resident customers.
Private Services to a Homeowner
Citation: N.J.S.A. 54:32B-3(b)(2)(i)
Effective Date: 12/19/2008
Objective:
Services to homeowners rendered by individuals hired to provide services to
the home of that homeowner have been exempt from the tax since it went
into effect in 1966.
Description:
Sales tax is not imposed on charges for services rendered by an individual who
is engaged directly by a private homeowner or lessee in or about his residence
and who is not in a regular trade or business offering his services to the public.
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Sales and Use Tax
97
Production Machinery
Citation: N.J.S.A. 54:32B-8.13(a)
Effective Date: 1/8/2002
98
Objective:
Machinery used directly in the production of items for eventual sale to end
consumers has been exempt since the tax went into effect in 1966. Tax will be
assessed on taxable tangible personal property sold to end consumers.
Exemption of the machinery which produces taxable items avoids taxing
previously-assessed sales tax, as some small portion of the cost of the machine
may be included in the total cost of the product as sold at retail.
Description:
Machinery and equipment used directly and primarily in the production of
merchandise by manufacturing, assembling, processing, and refining. The
exemption also applies to parts with a useful life of more than one year, and to
imprinting services performed on such machinery.
Property Contributed Towards Partnership Interest
Citation: N.J.S.A. 54:32B-(2)(e)(4)(F)
Effective Date: 12/19/2008
Objective:
Partners' contributed capital, combined with earnings and other income and
expense items, comprises the total value of the partnership ascribed to each
individual partner based on the specifics of his or her participation and the
partnership agreement itself. The sale of that partner's interest may result in a
capital gain subject to state income taxes. The sales tax is assessed on tangible
personal property and certain enumerated services. Partnership earnings are
intangible.
Description:
Under the Sales and Use Tax Act, the term "retail sale" does not include the
contribution of property to a partnership in consideration for a partnership
interest therein.
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Sales and Use Tax
99
Property Purchased for Film or Video Productions
Citation: N.J.S.A. 54:32B-8.49
Effective Date: 12/1/1999
2015 Estimate:
$1,200,000
Objective:
To encourage the expansion of the commercial production of motion pictures
and videos in New Jersey.
Description:
Tangible personal property used directly and primarily in the production of film
or video for sale including charges for installing, maintaining, servicing, or
repairing such property are exempt from tax.
Data Source
2010 and 2011 NJ Motion Picture & Television Commission Reports
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Effectiveness: Massachusetts has done an extensive study of its similar film tax credit.
http://www.mass.gov/Ador/docs/dor/News/2010FilmIncentiveReport.pdf
100
Property Used in Research and Development or Laboratory Sense
Citation: N.J.S.A. 54:32B-8.14
Effective Date: 12/19/2008
Objective:
Since the sales tax law went into effect in 1966, the purchase of property used
in research and development has been exempt from tax.
Description:
Tangible personal property purchased for use or consumption directly and
exclusively in research and development in the experimental or laboratory
sense.
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Sales and Use Tax
101
Prosthetic Devices
Citation: N.J.S.A. 54:32B-8.1
Effective Date: 12/19/2008
102
2015 Estimate:
$17,100,000
Objective:
Prosthetic devices fall within the meaning of the general exemption for
medically necessary items purchased by end consumers for the alleviation of
human suffering.
Description:
The sale of prosthetic devices, including repair parts and replacement parts, is
exempt from sales tax.
Data Source
Global Industry Analysts and Census Bureau
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Protective Work Equipment
Citation: N.J.S.A. 54:32B-8.4
Effective Date: 12/19/2008
Objective:
Although the vast majority of clothing and footwear items are exempt from
tax, certain specialty clothing is taxable. This exemption ensures that
equipment which is designed to safeguard the health of workers is not taxed as
specialty clothing.
Description:
The sale of protective equipment is exempt if the equipment is necessary for
daily work of the user.
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Sales and Use Tax
103
Public Passenger Buses
Citation: N.J.S.A. 54:32B-8.28 (P.L. 1991, c.497)
Effective Date: 1/18/1992
104
Objective:
Purchases of motor vehicles are generally subject to tax when those purchases
are made by end consumers. This exemption ensures that the purchase of
buses used for public transportation is not burdened by taxation.
Description:
Receipts from sales of buses for public passenger transportation, including
repair and replacement parts and labor, to bus companies whose rates are
regulated by the Interstate Commerce Commission or the Department of
Transportation or to an affiliate of said bus companies or to common or
contract carriers for their use in the transportation of children to and from
school are exempt from the tax imposed under the Sales and Use Tax Act.
Purchases for Resale
Citation: N.J.S.A. 54:32B-2(e)(1)
Effective Date: 12/19/2008
2015 Estimate:
$3,661,900,000
Objective:
One of the basic tenets of the sales tax laws in this state is that tax is levied on
the purchase of taxable goods and services by end consumers. All purchases
for resale, whether they are finished goods acquired for retail sale or work in
process acquired by manufacturers to finish or add value to the product, such
purchases are not subject to tax as the final sale of the finished good to an end
consumer, reflecting all added value, will be taxed.
Description:
Items purchased to resell, or to be incorporated into other products for resale,
are exempt from sales tax.
Data Source
Wholesale and Construction Exemptions in Sales Tax Reports
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
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Sales and Use Tax
105
Radio and Television Programming Services
Citation: N.J.S.A. 54:32B-2(cc)(13)
Effective Date: 12/19/2008
106
Objective:
A number of broadcast services and related purchases have been made tax
exempt in order to support media-related industry.
Description:
Radio and television audio and video programming services, including cable
and satellite television service, is exempt from tax.
Recycling Eqauipment purchases (as defined in N.J.S.A. 54:32B-8.36)
Citation: N.J.S.A. 54:32B-8.36
Effective Date: 10/1/2005
107
Objective:
To ensure that recycling equipment, which provides environmental benefits, is
not subject to the tax.
Description:
Receipts from the sales of recycling equipment used exclusively to sort and
prepare solid waste for recycling or in the recycling of solid waste is exempt
from the tax.
Rental of Tangible Personal Property to Related Parties
Citation: N.J.S.A. 54:32B-8.53
Effective Date: 8/1/2003
Objective:
These rentals are not considered to be arms-length, end user transactions, so
the tax is not levied thereon.
Description:
Receipts from the rental of tangible personal property, on which sales tax was
paid, between related persons, not engaged in the regular trade or business of
renting that property to other persons are exempt from the tax.
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Sales and Use Tax
108
Repairs to Certain Aircraft
Citation: N.J.S.A. 54:32B-8.35(b)
Effective Date: 1/1/2000
109
Objective:
In support of passenger airline service, the law exempts replacement parts and
repair services directly related to larger aircraft.
Description:
Repairs, and installed replacement parts, to aircraft which have a certified
maximum takeoff weight of 6,000 pounds or more are exempt from sales tax.
Resale of Taxable Services
Citation: N.J.S.A. 54:32B-3(b)
Effective Date: 12/19/2008
2015 Estimate:
$203,830,000
Objective:
The resale of otherwise-taxable services is treated in an identical manner to
the resale of otherwise taxable goods; these transactions are exempt from tax.
The sales tax in New Jersey is levied on the sale, to end consumers of taxable
tangible personal property and certain taxable services.
Description:
The law exempts services when purchased by a contractor or vendor for resale
such as in subcontracted service.
Data Source
Division of Taxation Reports 2008-2013
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
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Sales and Use Tax
110
Residential Home Heating System services (as defined in N.J.S.A. 54:32B3(b)(4))
Citation: N.J.S.A. 54:32B-3(b)(4)
Effective Date: 12/19/2008
111
Objective:
This exemption is designed to reduce the cost of maintenance for residential
heating systems serving very few residents.
Description:
The sales tax law specifically exempts from tax the charges for maintaining or
repairing residential heating system units serving no more than three families,
provided that the families live independently of each other and do their own
cooking on the premises.
Residential Parking
Citation: N.J.S.A. 54:32B-3(i)
Effective Date: 12/19/2008
Objective:
The charges for parking, storing and/or garaging of a motor vehicle directly
related to a taxpayer's personal residence are not subject to tax.
Description:
Charges for parking, storing or garaging a motor vehicle are exempt from tax if
used exclusively for residential purposes.
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Sales and Use Tax
112
Sale-Leaseback Transactions
Citation: N.J.S.A. 54:32B-8.57
Effective Date: 10/1/2005
113
Objective:
An arrangement where the seller of an asset leases back the same asset from
the purchaser. In a leaseback arrangement, the specifics of the arrangement
are made immediately after the sale of the asset, with the amount of the
payments and the time period specified. Essentially, the seller of the asset
becomes the lessee and the purchaser becomes the lessor in this arrangement.
This type of transaction has both financial and tax-related benefits to the
eventual lessee and lessor and is not a transaction subject to the sales tax.
Description:
A sale-leaseback is considered to be a financing arrangement and is not
considered to be a "retail sale".
Salem County Reduced Sales Tax
Citation: N.J.S.A. 54:32B-8.45
Effective Date: 7/8/2006
2015 Estimate:
$2,368,400
Objective:
There is a 50% reduction in the sales tax rate on certain otherwise fully taxable
purchases within the entire county of Salem. This preferential tax treatment
was enacted to allow for competitiveness with the state of Delaware which has
no sales tax.
Description:
Sales of tangible personal property, except for motor vehicles, are subject to
New Jersey sales tax at a reduced 50% rate.
Data Source
Division of Taxation Reports
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
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Sales and Use Tax
114
Sales by a Mortician, Undertaker or Funeral Director
Citation: N.J.S.A. 54:32B-8.17
Effective Date: 9/11/1980
115
Objective:
This exemption ensures that otherwise-taxable sales to the bereaved are not
burdened by taxation.
Description:
Receipts from sales of tangible personal property sold by a mortician,
undertaker or funeral director are exempt from the tax.
Sales of Certain Aircraft
Citation: N.J.S.A. 54:32B-8.35(a)
Effective Date: 1/1/2000
116
Objective:
The sales tax law, in an effort to support the passenger airline industry,
exempts the sales, replacement parts and repair costs for passenger aircraft.
Description:
The law exempts the sale of aircraft to be used as air carriers. The exemption
includes the purchase of repairs and installation of replacement parts.
Sales of Property held for Security
Citation: N.J.S.A. 54:32B-(2)(e)(4)(G)
Effective Date: 12/19/2008
Objective:
This bill revises the State’s sales and use tax to conform with various provisions
of the multi-state Streamlined Sales and Use Tax Agreement (SSUTA). The
changes are intended to simplify and modernize the State’s tax collection and
administrative procedures, and to ensure New Jersey remains compliant with
the provisions of the SSUTA.
Description:
Under the Sales and Use Tax Act, the term "retail sale" does not include the
sale of tangible personal property if the purpose of the vendee is to hold the
thing transferred as security for the performance of an obligation of the seller.
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Sales and Use Tax
117
School Textbooks
Citation: N.J.S.A. 54:32B-8.21
Effective Date: 10/1/2005
118
2015 Estimate:
$14,400,000
Objective:
The sales tax law has exempted textbooks from tax since the law became
effective in 1966. In general, books, whether in physical form or delivered
electronically, are taxable. This exemption recognizes the value of books for
educational purposes.
Description:
The sale of textbooks for use by students in a school, college, university, or
other educational institution, approved as such by the Department of
Education, when the educational institution declares that the books are
required reading for school purposes.
Data Source
Economic Census 2002-2007 Merchandise Line Sales
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Services Performed as an Employee
Citation: N.J.S.A. 54:32B-3
Effective Date: 12/19/2008
Objective:
Wages, salaries and other forms of employee compensation are subject to
income taxation in this State. They are not subject to the sales tax, avoiding
double taxation.
Description:
Wages, salaries, and other compensation paid by an employer to an employee
for performing as an employee a taxable service.
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Sales and Use Tax
119
Services Rendered by Certain Individuals
Citation: N.J.S.A. 54:32B-3(b)(2)(v)
Effective Date: 12/19/2008
120
Objective:
Like the treatment of casual sales, those otherwise-taxable services rendered
by individuals not in the business of providing such services are not subject to
the sales tax.
Description:
Services rendered by an individual who is not in the regular trade or business
offering his services to the public.
Services to Exempt Medical Equipment
Citation: N.J.S.A. 54:32B-3(b)(2)
Effective Date: 12/19/2008
Objective:
In general, if the sale of tangible personal property, such as exempt medical
equipment, is not subject to the sales tax, then services, repairs and/or
alterations to that property is also exempt.
Description:
Sales tax is not imposed on charges for services performed to exempt medical
equipment.
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Sales and Use Tax
121
Sewing Materials
Citation: N.J.S.A. 54:32B-8.4
Effective Date: 12/19/2008
122
2015 Estimate:
$4,000,000
Objective:
In general, clothing and footwear for human use, other than certain specified
specialty items, is exempt from tax. The law provides that the materials which
are incorporated into normally exempt clothing are also exempt.
Description:
Receipts from sales of sewing materials, such as fabrics, thread, knitting yarn,
buttons and zippers, purchased by noncommercial purchasers for
incorporation into clothing as a constituent part thereof, are exempt from the
tax imposed under the Sales and Use Tax Act.
Data Source
2002 and 2007 Economic Census
Reliability:
4 Based on average or marginal tax rates applied to aggregate data
Shoe Repairs
Citation: N.J.S.A. 54:32B-3(b)(2)(iv)
Effective Date: 12/19/2008
Objective:
In general, footwear for human use, other than certain specified specialty
items, is not subject to the sales tax. These services, which preserve, enhance
or extend the useful life of footwear are also exempt.
Description:
Receipts from shoe repairing and shoe shining services are exempt from tax.
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Sales and Use Tax
123
Solar Energy Devices and System Components
Citation: N.J.S.A. 54:32B-8.33
Effective Date: 9/11/1980
124
Objective:
To support the solar energy industry, these approved energy-generation
systems have been made tax exempt. Qualification for exemption are
determined by standards set by The Division of Energy Planning and
Conservation.
Description:
Devices or systems specifically approved by the Board of Public Utilities,
Division of Energy and designed to provide heating or cooling or electrical or
mechanical power by converting solar energy to some other usable energy
source, including devices for storing solar-generated energy.
Storage of Property Held for Sale
Citation: N.J.S.A. 54:32B-3
Effective Date: 12/19/2008
125
Objective:
The storage of tangible personal property, whether that of an individual or
business entity is not subject to the tax.
Description:
Charges for storage space which is used to store property that is held for sale is
not subject to sales tax, such as charges for the storage of a business’s
inventory.
Tax Exempt Organizations: National Guard and War Veteran Posts
Citation: N.J.S.A. 54:32B-9(b)(4)
Effective Date: 7/8/2006
Objective:
In support of organizations which themselves promote or support our
veterans, services provided by these organizations are exempt from tax.
Description:
A National Guard organization, post or association, or a post or organization of
war veterans, and the Marine Corps League, including auxiliary units or
societies of any such post, organization or association are exempt from sales
tax.
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Sales and Use Tax
126
Tax Exemption for Certain Fishing Vessels and Equipment
Citation: N.J.S.A. 54:32B-8.12 (P.L. 1980, c. 105, § 24; amended 1981, c. 218, § 1; 1988, c. 53; 1999,
c. 273)
Effective Date: 11/24/1999
127
Objective:
The harvesting of fish, shellfish and other crustaceans and aquatic organisms
has been determined to be an important economic activity in this state,
therefore the sale of vessels for use directly and primarily within this industry is
not subject to tax.
Description:
The sale of vessels, regardless of tonnage, primarily engaged in commercial
fishing or shell fishing, including equipment necessary for harvesting fish,
shellfish and other crustaceans and aquatic organisms are exempt from tax.
Taxes Imposed on the Consumer
Citation: N.J.S.A. 54:32B-2(oo)(2)(c)
Effective Date: 7/2/2005
Objective:
When an invoice separately lists taxes imposed on the sale of tangible personal
property, the sales tax is only charged on the property itself, to avoid the
payment of tax on other taxes.
Description:
Any taxes legally imposed directly on the consumer that are separately stated
on the invoice, bill of sale, or similar document given to the purchaser are
exempt from sales tax. Examples include Federal excise taxes imposed on a
consumer's telecommunications services.
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Sales and Use Tax
128
Transfer of Property for Corporate Stock
Citation: N.J.S.A. 54:32B-(2)(e)(4)(E)
Effective Date: 12/19/2008
129
Objective:
The transfer of property for consideration, as in the receipt of the stock of that
corporation is deemed to be an acquisition of an ownership interest in the
corporation. Shares of stock are intangible ownership rights and therefore not
subject to tax. The sales and use tax is assessed on the sale of taxable tangible
personal property and certain enumerated services to end consumers.
Description:
The transfer of property to a corporation upon its organization in consideration
for the issuance of its stock is not considered a sale for sales and use tax
purposes.
Transfer of Property to a Corporation
Citation: N.J.S.A. 54:32B-(2)(e)(4)(B)
Effective Date: 12/19/2008
Objective:
The transfer of property for consideration, as in the receipt of the stock of that
corporation is deemed to be an acquisition of an ownership interest in the
corporation. Shares of stock are intangible ownership rights and therefore not
subject to tax. The sales and use tax is assessed on the sale of taxable tangible
personal property and certain enumerated services to end consumers.
Description:
The transfer of tangible personal property to a corporation, solely in
consideration for the issuance of its stock, pursuant to a merger or
consolidation effected under the laws of New Jersey or any other jurisdiction is
not considered a 'retail sale' under the act and is, therefore, not subject to tax.
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Sales and Use Tax
130
Transportation Charges Exemption
Citation: N.J.S.A. 54:32B-8.11 (P.L. 1980, c. 105, § 23; amended 1997, c. 162, § 22; 2006, c. 44, § 8)
Effective Date: 7/8/2006
131
Objective:
As described above, most transportation charges for persons and property
have long been exempt from the sales and use tax.
Description:
Receipts from charges for the transportation of persons or property are
exempt from the tax imposed under the Sales and Use Tax Act, except for
delivery charges; transportation services provided by a limousine operator; and
the transportation of energy.
Urban Enterprise Zone Exempt Business Purchases
Citation: N.J.S.A. 52:27H-79 (P. L. 1983, c. 303, § 20; amended 1990, c. 40, § 9; 1997, c. 162, § 31;
2006, c. 34, § 1, eff. July 15, 2006; 2007, c. 328, § 1, eff. Jan. 13, 2008; 2008, c. 118, § 1)
Effective Date: 12/17/2008
2015 Estimate:
$132,600,000
Objective:
Urban Enterprise Zones, of which there are currently 32, are a designated
portion of a city or town where it has been deemed that it is a public purpose
to stimulate economic activity. A great variety of face-to-face sales made at
business locations within these designated areas are subject to 50% of the
current sales tax rate. The law provided cetain advantages for hiring local
citizens as well. This exemption permits those urban enterprise zone-located
businesses to purchase items for the use of the business within that location
without payment of the sales tax.
Description:
There is a 100% sales and use tax exemption for UEZ businesses on purchases
of tangible personal property and services for exclusive use at their UEZ
location.
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
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Sales and Use Tax
132
Urban Enterprise Zone Special Sales Tax Rate
Citation: N.J.S.A.52:27H-80 (P.L. 1983, c. 303, § 21; amended 1987, c. 135; 1988, c. 93, § 6; 1990, c.
40, § 10; 1993, c. 144; 1993, c. 367, § 6; 1996, c. 124, § 8, eff. Nov. 6, 1996; 1997, c. 162, §
32, eff. Jan. 1, 1998; 2001, c. 347, § 9, eff. Jan. 6, 2002; 2011, c. 49, § 15, eff. Apr. 8, 2011,
operative May 1, 2011).
Effective Date: 8/15/1983
2015 Estimate:
$150,000,000
Applied Date: 8/15/1983
Objective:
To allow for a reduced sales tax rate on certain purchases in designated Urban
Enterprise Zones (UEZs) in order to stimulate economic activity in those areas. A UEZ
is a designated area within a municipality which has suffered economic
problems and meets certain other criteria. UEZs are created through legislation
enacted by the State Legislature that provides
for the designation of additional UEZs following a review of applications that are
submitted
by cities that meet the required criteria. Decisions are based upon the need of the city
for economic development, the unemployment rate, the percentage of families on
welfare, the potential benefits as demonstrated by the application, and other similar
factors.
133
Description:
Allows qualified businesses in a UEZ to collect sales tax at one-half the regular rate on
the retail sale of goods other than motor vehicles, alcoholic beverages, cigarettes,
manufacturing equipment, and energy.
Data Source
Division of Taxation GENTS records
Reliability:
2 Based on a sample of verified tax returns
Utility Equipment Purchases (as defined in N.J.S.A. 54:32B-8.13(b))
Citation: N.J.S.A. 54:32B-8.13(b)
Effective Date: 7/14/1997
Objective:
The act provides a full sales and use tax exemption for sales of machinery,
apparatus and equipment directly and primarily used in the production,
generation, transmission and distribution of gas, electricity, refrigeration,
steam and water for sale and in the operation of sewerage system.
Description:
Sales of machinery, apparatus and equipment directly and primarily used in the
production, generation, transmission and distribution of gas, electricity,
refrigeration, steam and water for sale and in the operation of sewerage
system are exempt from tax.
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Sales and Use Tax
134
Vessels of 50-ton burden or more (as defined in N.J.S.A. 54:32B-8.12)
Citation: N.J.S.A. 54:32B-8.12 (P.L. 1980, c. 105, § 24; amended 1981, c. 218, § 1; 1988, c. 53; 1999,
c. 273)
Effective Date: 11/24/1999
135
Objective:
One of a number of maritime industry-related exemptions provided within the
law to promote and support intrastate and interstate commerce.
Description:
The sale of vessels of 50-ton burden or over primarily engaged in interstate or
foreign commerce are exempt from sales tax.
Volunteer Fire and Similar Emergency Companies' purchases (as defined in
N.J.S.A. 54:32B-9(b))
Citation: N.J.S.A. 54:32B-9(b)
Effective Date: 7/8/2006
Objective:
To relieve volunteer fire companies and similar organizations, who perform
public services at no cost to the State's taxpayers, from the added financial
burden of the payment of sales taxes on certain purchases made for the use of
those organizations.
Description:
The law provides a sales tax exemption on purchases made by a volunteer fire
company, rescue, ambulance, first aid and emergency company or squad.
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Sales and Use Tax
136
Wrapping Supplies
Citation: N.J.S.A. 54:32B-8.15
Effective Date: 7/8/2006
137
Objective:
Since the tax went into effect, such supplies, which are used to package
tangible personal property for sale to end consumers, where such packaging
does not add material value, have been exempt from tax. This provides for a
reduced cost for such materials which facilitate tangible personal property
sales.
Description:
Wrapping paper, bags, cartons, tape, rope, twine, labels, nonreturnable
containers, and all other packaging supplies when the use of the supplies is
incidental to the delivery of merchandise.
Zero Emission Vehicles
Citation: N.J.S.A. 54:32B-8.55 (P.L. 2003, c. 266, § 11)
Effective Date: 1/14/2004
2015 Estimate:
$17,000,000
Objective:
There are stringent standards to be met, set by the Environmental Protection
Administration, to attain the designation of 'zero-emission vehicle' and if a
vehicle meets such standards, as the reduction of atmospheric pollutants helps
to improve the quality of life of our State's residents, the sale of such vehicle is
tax exempt. Most motor vehicle sales are subject to sales tax.
Description:
Receipts from sales of zero emission vehicles are exempt from the tax imposed
under the Sales and Use Tax Act.
Data Source
Motor Sources, Department of Environmental Protection
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
Effectiveness: None available at this time
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Corporation Business Tax
Overview
Description
The Corporation Business Tax Act imposes a franchise tax on a domestic corporation for the privilege
of existing as a corporation under New Jersey law, and on a foreign corporation for the privilege of
having or exercising its corporate charter in this State or doing business, employing or owning capital
or property, maintaining an office, deriving receipts, or engaging in contracts in New Jersey. The tax
applies to all domestic corporations and all foreign corporations having a taxable status unless
specifically exempt. The tax also applies to joint-stock companies or associations, business trusts,
limited partnership associations, financial business corporations, and banking corporations, including
national banks. Also, a corporation is defined as any other entity classified as a corporation for
Federal income tax purposes and any state or Federally chartered building and loan association or
savings and loan association. Taxpayers must pay the greater of their liability under the net income
tax or the alternative minimum assessment. The income-based tax is measured by that portion of
the net income allocable to New Jersey. The tax applies to net income for the firm’s accounting
period (calendar year or fiscal year), or any part thereof during which the corporation has a taxable
status within New Jersey. The alternative minimum assessment is based on apportioned gross
receipts or gross profits. Exempt from the tax are certain agricultural cooperative associations;
Federal corporations which are exempt from state taxation; corporations created under the limiteddividend housing corporation law; nonprofit cemetery corporations; nonprofit corporations without
capital stock; non-stock mutual housing corporations; railroad and canal corporations; sewerage and
water corporations; insurance companies subject to premiums tax; and certain municipal electric
corporations.
Rate
The tax rate is 9% upon entire net income, or the portion of entire net income allocated to New
Jersey. For tax years beginning in calendar year 2002 and thereafter, the minimum Corporation
Business Tax is $500 or $2,000 for all members of a controlled or affiliated group of corporations if
the aggregate annual payroll for all corporations is $5 million or more. Rates for New Jersey S
corporations were also changed in 2002. New Jersey S corporations with an entire net income of
$100,000 or less are still subject to the minimum tax, but if entire net income exceeds $100,000, the
rate for periods ending on or before June 30, 2006, is 1.33%. For periods ending on or after July 1,
2006, but on or before June 30, 2007, the rate is 0.67%
For accounting years beginning on and after January 1, 2002, the 7.5% Corporation Business Tax rate
for corporations with entire net income of $100,000 or less is reduced to 6.5% for corporations with
entire net income of $50,000 or less.
For privilege periods ending on or after July 1, 2006, but before July 1, 2009, each taxpayer shall be
assessed and must pay a surtax equal to 4% of the amount of tax liability remaining after applying
credits against liability, other than credits for installment payments, estimated payments made with
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a request for extension to file a return, or overpayments from a prior privilege period.
For calendar years beginning in 2006 and thereafter, the minimum tax shall be based on New Jersey
gross receipts as defined in the Business Tax Reform Act (P.L. 2002, C. 40).
For New Jersey gross receipts of less than $100,000, the minimum tax is $500. For New Jersey gross
receipts equal to or greater than $100,000, but less than $250,000, the minimum tax is $750. For
New Jersey gross receipts equal to or greater than $250,000, but less than $500,000, the minimum
tax is $1,000. For New Jersey gross receipts equal to or greater than $500,000, but less than
$1,000,000, the minimum tax is $1,500. For New Jersey gross receipts equal to or greater than
$1,000,000, the minimum tax is $2,000.
The minimum tax for affiliated or controlled groups remains the same, $2,000 for each member of a
group that has a total payroll of $5,000,000 or more for a privilege period.
Disposition of Revenues
Revenues collected from general business corporations are deposited in the State Treasury for
general State use. Revenues collected from banking and financial corporations are distributed 25% to
counties, 25% to municipalities, and 50% to the State.
Article 8, Section 2, paragraph 6, of the State Constitution was amended to dedicate 4% of
Corporation Business Tax revenue to fund hazardous discharge cleanup, underground storage tank
improvements, and surface water quality projects.
Chapter 40, P.L. 2002, Section 32, created within the General Fund a restricted reserve fund to be
known as the “Corporation Business Tax Excess Revenue Fund.”
History
Corporation Business Taxes date back to 1884 when a franchise tax was imposed upon all domestic
corporations. Between 1884 and 1946, the franchise tax was based upon the total amount of capital
stock issued by the taxpayer and outstanding as of January 1 of each year (C. 159, P.L. 1884).
There was no franchise tax on foreign corporations prior to 1936, when provision was made for an
annual tax (C. 264, P.L. 1936). This tax was replaced in 1937 (C. 25, P.L. 1937) with a new franchise
tax providing for allocation of capital stock of foreign corporations.
Effective January 1, 1946 (C. 162, P.L. 1945), the tax became a net worth tax applicable to both
domestic and foreign corporations and measured by net worth allocated to New Jersey. Allocation
was measured by the greater of an assets factor or a three-part business factor (property, sales, and
payroll).
Chapter 88, Laws of 1954, increased the tax on allocable net worth from 8/10 mills per $1 to 2 mills
per $1.
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Chapter 63, Laws of 1958, amended the Corporation Business Tax Act by adding a tax at 1¾% based
upon allocated net income to the tax based upon allocated net worth. The 1958 amendment also
changed the tax year from a calendar year for all corporations to a privilege period coinciding with
the accounting year for each taxpayer.
In 1975, the Corporation Business Tax was imposed on banking corporations and incorporated
financial businesses.
In 1982, there was enacted into law a measure phasing out the Corporation Business Tax on net
worth. The tax was phased out at 25% per year over a four-year period with taxpayers whose
accounting or privilege periods began on or after April 1, 1983 (C. 55, P.L. 1982). The net worth tax
has been eliminated for periods beginning after June 30, 1986.
Net Income Tax rates have changed as follows:
Effective Date
Rate
January 1, 1959 (C. 63, P.L. 1958)
1¾%
January 1, 1967 (C. 134, P.L. 1966)
3¼%
January 1, 1968 (C. 112, P.L. 1968)
4¼%
January 1, 1972 (C. 25, P.L. 1972)
5½%
January 1, 1975 (C. 162, P.L. 1975)
7½%
January 1, 1980 (C. 280, P.L. 1980)
9%
For taxable years ending after June 30, 1984, a carryover of net operating loss was allowed as a
deduction from entire net income for seven years following the year of the loss (C. 143, P.L.1985,
approved April 22, 1985).
A surtax of 0.417% was invoked for privilege periods ending between July 1, 1990, and June 30, 1991;
and 0.375% for privilege periods ending between July 1, 1989, and June 30, 1990, and July 1, 1991,
through June 30, 1993. The 0.375% surtax on corporate net income was repealed effective January 1,
1994. The surtax had been scheduled to end July 1, 1994 (C. 3, P.L. 1994).
A new jobs investment tax credit, enacted in 1993 (C. 170), allows corporations to take a credit
against Corporation Business Tax and property taxes for qualified investments in new or expanded
business facilities resulting in new jobs in the State. The credit against Corporation Business Tax is for
up to 50% of the portion of the tax that results from investment in new or expanded facilities. The
credit was extended to midsize businesses by P.L. 2002, C. 40. P.L. 1993, Chapter 171, allows for a
credit against Corporation Business Tax for investment in qualified equipment. The credit is 2% of
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the cost of qualified machinery purchased (the investment credit base). Taxpayers taking the 2%
equipment credit may also take an employment credit of $1,000 per new employee (up to a
maximum of 3% of the investment credit base). A small business benefit was added by P.L. 2004, C.
65. Chapter 175 P.L. 1993, allows for a credit for increased research activities.
Two changes in 1993 brought New Jersey corporation tax law into closer alignment with Federal
corporation tax law. Chapter 172 allows corporations to use the Federal modified accelerated cost
recovery system for depreciation of property under the New Jersey Corporation Business Tax for
property placed in service for accounting years beginning after July 7, 1993. Chapter 173 allows, for
the first time, an S election to be made under New Jersey law. As noted above, a New Jersey S
corporation pays a reduced tax rate on that portion of entire net income not subject to Federal
corporate income tax. The shareholder is taxed on net pro rata share of S corporation income under
the Gross Income Tax.
The allocation formula for multistate corporations was changed in 1995. Under prior law, multistate
corporation income was allocated to New Jersey based on equally weighted New Jersey property,
payroll, and sales compared to total property, payroll, and sales. The new formula counts sales twice,
so that sales account for half the allocation formula (C. 245, P.L. 1995).
The legislature continued to provide additional tax benefits for corporation business taxpayers.
These include a tax benefit certificate transfer program to assist certain emerging companies (C. 334,
P.L. 1997), later modified by P.L. 1999, C. 140 and P.L. 2004, C. 65, and supplemented by a credit
transfer program P.L. 2004, C. 65, the Small New Jersey Based High Technology Business Investment
Tax Credit Act (C. 349, P.L. 1997), the carryforward of net operating losses under the Corporation
Business Tax for certain taxpayers (C. 350, P.L. 1997), the extension of the carryforward of the
research and development tax credit (C. 351, P.L. 1997), and the Neighborhood and Business Child
Care Tax Incentive Program (C. 102, P.L. 1999).
Other credits against Corporate Business Tax liability have also been enacted for effluent equipment
(P.L. 2001, C. 321), neighborhood revitalization (P.L. 2001, C. 415), HMO credit (P.L. 2000, C. 12), the
economic recovery tax credit (P.L. 2002, C. 43), and the remediation tax credit (P.L. 2003, C. 296).
Electric and telephone companies were subjected to the Corporation Business Tax effective January
1, 1999.
Chapter 369, P.L. 1999, excludes certain hedge fund activity income of corporations of foreign
nations from taxation under the Corporation Business Tax.
Chapter 12, P.L. 2000, provides that holders and former holders of a certificate of authority to
operate a health maintenance organization are allowed a Corporation Business Tax credit for certain
payments they are required to make.
Chapter 23, P.L. 2001, provides for a three-year phase-out of the corporate taxation of the regular
income of S corporations with annual income in excess of $100,000, and for S corporations whose
net income is under $100,000 whose privilege periods end on or after July 1, 2001. Also, the bill
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provides for the adjusted minimum tax amount to be rounded to the next highest multiple of $10.
Chapter 136, P.L. 2001, provides for the Corporation Business Tax payment obligations of certain
partnerships and limited liability companies for privilege periods beginning on and after January 1,
2001.
Chapter 40, P.L. 2002, among other things, effects the most extensive changes in the Corporation
Business Tax since 1945. This law provides for a partnership filing fee, an alternative minimum
assessment, nonresident partner withholding, a “throwout rule” on corporations apportioning
income outside New Jersey, and new rules for related-party transactions. It also increases the
minimum tax and broadens the definition of corporations that are subject to this tax.
Chapter 43, P.L. 2002, includes some provisions for incentives in the form of Corporation Business
Tax credits to qualifying taxpayers engaged in a business in the qualified municipality during the
municipality’s “period of rehabilitation and economic recovery.”
P.L. 2004, C. 47, limits the Corporation Business Tax application of net operating losses to 50% of
taxable income for tax years 2004 and 2005.
P.L. 2004, C. 65, decouples Corporation Business Tax from changes in Federal bonus depreciation and
certain expensing principles under IRC section 179.
P.L. 2005, C. 127, uncouples Corporation Business Tax from many provisions of the IRC Section 199
deduction for certain qualified production activities income.
P.L. 2005, C. 318, allows Corporation Business Tax credit to businesses providing employment to
qualified handicapped persons at sheltered workshops.
P.L. 2005, C. 345, provides a credit under the Corporation Business Tax for film production expenses
incurred in New Jersey and provides for the transfer of those tax credits to other taxpayers.
P.L. 2006, C. 38, imposes a 4% surcharge on the Corporation Business Tax liability and increases the
minimum tax. The surcharge was in effect between July 1, 2006 and June 30, 2010.
P.L. 2007, C. 89, increases the amount of State tax credits granted to businesses providing funding to
qualified neighborhood revitalization projects.
Installment Payments of Estimated Tax
Taxpayers are required to make installment payments of estimated tax. The requirement for making
these payments is based on the amount of the total tax liability shown on the most recent return.
(a) If the total tax liability is $500 or more, the taxpayer must make installment payments. These
payments are due on or before the 15th day of the 4th, 6th, 9th, and 12th month of the tax year.
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(b) If the total tax liability is less than $500, installment payments may be made as shown in (a)
above or, in lieu of making installment payments, the taxpayer may make a payment of 50% of the
total tax liability.
The Business Tax Reform Act (C. 40, P.L. 2002) provides for two significant changes regarding
corporate estimated tax. First, for the tax year beginning on or after January 1, 2002, all corporations
must base their fourth quarter payment on 25% of the actual 2002 tax computed under the changes
to avoid penalty. This one-time change supersedes the prior rules for estimated returns. The fourth
quarter payment must be 25% of the year 2002 liability even if the corporation may have already
satisfied all or substantially all of its year 2002 corporation tax liability through prior year’s
overpayments or quarterly estimated payments in the first three quarters. The corporation must
nonetheless remit 25% of the year 2002 tax to avoid penalties.
Secondly, for large corporations with sales of over $50 million, beginning with the year 2003, the
second and third quarter payments, normally due on the 15th day of the 6th and 9th months, will be
combined into a single 50% payment due on the 15th day of the 6th month. No payments will be due
for such corporations on the 15th day of the 9th month, and normal 25% payments will be due in the
4th and 12th months.
Partnerships
Chapter 40, P.L. 2002, establishes a $150 per partner filing fee for partnerships, LLPs, and LLCs
deriving income from New Jersey sources. In general, the $150 per partner fee is based on the
number of K-1s issued. For professional service corporations, the $150 fee applies for each registered
professional who owns or is employed by the enterprise and is calculated using a quarterly average.
In addition to the filing fee for the year, an installment payment equal to 50% of the filing fee is also
required with the New Jersey partnership return. The annual fee is capped at $250,000.
New Jersey partnership payments made on behalf of out-of-State corporate and noncorporate
partners are based on taxable income whether the income is distributed or undistributed and are
designated as a tax at a rate of 9% for nonresident corporate partners and 6.37% for noncorporate
partners. Qualified investment partnerships and partnerships listed on a U.S. national stock
exchange are not subject to the tax. The calculation is based on the partnership’s “entire net
income” multiplied by the partnership’s New Jersey apportionment percentages computed under
the Corporation Business Tax, not under Gross Income Tax.
Chapter 40, P.L. 2002, subjects savings banks and savings and loan associations to the Corporation
Business Tax and repeals the Savings Institution Tax and the Corporation Income Tax.
Effective beginning with the 2002 tax year, P.L. 2003, C. 256, exempts investment clubs from the
$150 per owner annual partnership filing fee and from the requirement that partnerships remit
Gross Income Tax payments on behalf of their nonresident noncorporate partners. To meet the
definition of “investment club,” the partnership must have income below $35,000 per individual (up
to a total of $250,000) and satisfy other limitations and criteria.
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P.L. 2005, C. 288, requires partners and other owners of pass-through entities to credit payments
made on their behalf against estimated taxes to end double withholding. In addition, for privilege
periods beginning on or after January 1, 2007, partnerships that are required to make tax payments
on behalf of nonresident partners must make installment payments of 25% of that tax on or before
the 15th day of the 4th, 6th, and 9th months of the privilege period, and on or before the 15th day of
the 1st month following the close of the privilege period.
Banking and Financial Corporations
Banking and financial corporations are subject to the Corporation Business Tax Act at the rate of 9%
on net income or to the lesser rates stated above if their income meets those thresholds.
Chapter 170, P.L. 1975, provides that during each of privilege years 1976, 1977, and 1978, the
amount paid by each banking corporation as taxes shall be the greater of (1) the amount which such
banking corporation paid in calendar year 1975 as Bank Stock Tax, or (2) a sum equal to total of taxes
paid by such banking corporation as Corporation Business Tax and Business Personal Property Tax.
Formerly, banks were subject to a tax of 1.5% on net worth under the Bank Stock Tax Act. Bank Stock
Tax was formerly administered by the Division of Taxation and the 21 separate County Boards of
Taxation. The corporate tax upon banks is now administered solely by the Division.
Financial business corporations were formerly subject to the Financial Business Tax. These included
such corporations as small loan companies and mortgage finance companies which are now subject
to Corporation Business Tax.
Chapter 171, P.L. 1975, provides that during each of the years 1976, 1977, and 1978, each financial
business corporation shall pay as taxes, the greater of (1) a sum equal to the amount such financial
business corporation paid under the Financial Business Tax Act in the calendar year 1975, or (2) a
sum equal to the total of the taxes payable by such financial business corporation pursuant to the
Corporation Business Tax Act. Chapter 40, P.L. 1978, extended the save harmless provision through
1979. It expired in 1980. As a result of changes in the Federal and State banking laws, interstate
banking is now permitted (C. 17, P.L. 1996). An administrative rule adopted by the Division of
Taxation (N.J.A.C. 18:7-1.14, effective June 16, 1997) sets forth certain conditions under which
foreign banks and certain domestic banks will be taxed in New Jersey.
Investment Companies
A taxpayer qualifying and electing to be taxed as an investment company is subject to an allocation
percentage of 40% of the net income base. Investment companies are subject to a minimum tax of
$500.
Regulated Investment Company means any corporation which, for a period covered by its reports, is
registered and regulated under the Investment Company Act of 1940 (54 Stat. 789), as amended.
The Corporation Business Tax on regulated investment companies was eliminated (P.L. 1983, C. 75),
approved on February 24, 1983. Regulated investment companies in New Jersey were formerly
taxed on both entire net worth and entire net income. These taxes were eliminated and a flat tax of
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$500 per year is imposed.
Real estate investment trusts qualifying and electing to be taxed as such under Federal law are taxed
at 4% of entire net income.
Deferred Predissolution Payment
Chapter 367, P.L. 1973, approved in 1974, eliminated the requirement for a certificate to be obtained
in the case of merger or consolidation involving a domestic or foreign corporation qualified to
transact business in New Jersey. It also provided alternatives to actual payment of taxes, or payment
on account of such taxes by providing in lieu thereof, for a written undertaking to be given by a
domestic corporation, or a foreign corporation authorized to transact business in New Jersey, to pay
all taxes when payable on behalf of a corporation which otherwise would have to pay all taxes prior
to taking certain corporate actions.
Allocation Factor
If a taxpayer has a regular place of business outside New Jersey, its tax liability is measured by net
income allocated to New Jersey, according to a three-fraction formula based on an average of
property, payroll, and sales, which is counted twice. The factor is computed by adding the
percentage of the property and payroll fractions, and a fraction representing two times the sales
receipts, and dividing the total by four.
The Business Tax Reform Act (P.L. 2002, C. 40) imposes a “throwout rule” on corporations
apportioning income outside the State. The tax effect of the throwout rule on an affiliated or
controlled group having $20 million or more in net income is capped at $5 million.
Chapter 40, P.L. 2002, also introduced an alternative minimum assessment (AMA) on apportioned
gross receipts or gross profits of C corporations when the AMA exceeds the normal Corporation
Business Tax. The assessment is based on either gross receipts or gross profits, with the taxpayer
electing which formula to use. This formula must also be used for the next four tax periods. S
corporations, professional corporations, investment companies, and unincorporated businesses are
exempt from the AMA. The AMA also applies to non-New Jersey businesses deriving income from
New Jersey sources with or without physical presence in the State that are not currently subject to
the Corporation Business Tax.
For privilege periods beginning after June 30, 2006, the AMA is $0, except for taxpayers claiming
exemption under Pub. L. 86-272, for whom the previously prescribed rate will continue. For privilege
periods beginning after December 31, 2006, the AMA for taxpayers otherwise subject to the AMA
that consent to jurisdiction and pay the Corporation Business Tax will be $0.
The use of net operating losses is suspended for tax years 2002 and 2003. For 2004 and 2005 net
operating losses were limited to 50% of taxable income.
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Corporation Business Tax
1
60% of Investment Company Income
Citation: N.J.S.A. 54:10A-5(d) (P.L. 1945, c. 162)
Effective Date: 4/13/1945
2015 Estimate:
$74,000,000
Applied Date: 1/1/1946
2
Objective:
To exclude 60% of income earned by an investment company from the
Corporate Business Tax, providing reduced exposure to taxation for income
from these entities.
Description:
Corporation Business Tax assessed and due for any investment company is
measured by 40% of its entire net income and 40% of its entire net worth,
rather than the entire net income.
Data Source
Division of Taxation Reports 2010-2011
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
96% of Real Estate Investment Trust/Regulated Investment
Citation: N.J.S.A. 54:10A-5(d)
Effective Date: 2/24/1983
2015 Estimate:
$6,800,000
Objective:
To exclude 96% of net income of a Real Estate Investment Trust from the
Corporate Business Tax, yielding 4% of their net income to assessed for tax.
Also excludes 85% of the firm's net worth for tax. This treatment greatly
reduces the tax consequences of the activities carried out by these entities.
Description:
For a real estate investment trust, Corporation Business Tax is assessed and
due measured by 4% of the trust's entire net income and 15% of its entire net
worth rather than the entire net income.
Data Source
Extrapolator
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
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Corporation Business Tax
3
Agricultural Co-operatives
Citation: N.J.S.A. 54:10A-3(c) (P.L. 1960. Ch 174)
Effective Date: 1/10/1961
4
2015 Estimate:
$0
Objective:
The nature of these businesses and the integral role that agriculture plays in
our State were the driving forces behind this exemption from the tax.
Description:
Agricultural cooperatives are statutorily excluded from the payment of
Corporation Business Tax.
Data Source
There are no agricultural co-ops. Department of Agriculture.
All Income of New Jersey S Corporations
Citation: N.J.S.A. 54:10A-5.22 (L. 1993, c. 173)
Effective Date: 7/7/1993
2015 Estimate:
$150,000,000
Objective:
To give small businesses a tax break and prevent dual taxation. The statute
provides a special corporation business tax rate for businesses organized as S
corporations under the federal tax code who have sought that same treatment
for New Jersey purposes.
Description:
Federal S-Corporations who have elected to be treated as New Jersey SCorporations are not subject to the corporate tax rate on net profits from
business. NJ S-Corporations pay only the statutory minimum tax.
Data Source
Division of Taxation Reports 2007-2010
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
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Corporation Business Tax
5
AMA Tax Credit
Citation:
N.J.S.A. 54:10A-5af
Effective Date: 7/1/2002
2015 Estimate:
$40,500,000
Objective:
To provide that, if a taxpayer incurs an AMA (Alternative Minimum
Assessment) liability in excess of the regular Corporation Business Tax (CBT)
liability, the excess may be carried over to subsequent years and used as a
credit against the regular CBT liability. The carryovers were designed never to
expire. There are, however, limitations as to how much credit can be taken on
any single return.
Description:
1) If the alternative minimum assessment for a taxpayer computed pursuant to
this section exceeds the tax computed pursuant to section 5 of P.L.1945, c.165
(C.54:10A-5) for a privilege period, the taxpayer shall be allowed an amount of
credit equal to the amount by which the alternative minimum assessment
computed pursuant to this section for the privilege period exceeds the tax
computed pursuant to section 5 of P.L.1945, c.165 (C.54:10A-5) for that
privilege period; provided however, that a taxpayer shall not be allowed a
credit for any amount of alternative minimum assessment for a privilege period
for which a credit is allowed pursuant to section 29 of P.L.2002, c.40
(C.54:10A-5b). The amount of credit may be carried forward for application in
subsequent privilege periods subject to the limitations of paragraph (2) of this
subsection.
2)A taxpayer may apply all or a portion of the credits allowed by paragraph (1)
of this subsection against the tax computed pursuant to section 5 of P.L.1945,
c.162 (C.54:10A-5), for a privilege period for which the tax pursuant to that
section exceeds the alternative minimum assessment computed for the
privilege period pursuant to this section; provided however, that the amount of
credit applied shall not reduce the amount of tax otherwise due to less than
the alternative minimum assessment as computed pursuant to this section for
the privilege period, shall not reduce the amount of tax otherwise due by more
than 50%, and shall not reduce the amount of tax otherwise due below the
statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162
(C.54:10A-5).
Data Source
Division of Taxation Reports 2007-2011
Reliability:
1 Based on the population of verified tax returns
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Corporation Business Tax
6
Business Income of Non-Profits
Citation: N.J.S.A. 54:10A-3(e)
Effective Date: 7/2/2002
Objective:
The corporate business tax is levied on for-profit entities organized under this
state's statutes or authorized to do business in this state if organized under the
laws of another jurisdiction. Nonprofit organizations are organized as such and
are statutorily not subject to taxation.
Description:
Nonprofit corporations, associations or organizations established, organized or
chartered, without capital stock, under the provisions of Title 15, 16 or 17 of
the Revised Statutes, Title 15A of the New Jersey Statutes or under a special
charter or under any similar general or special law of this or any other state,
and not conducted for pecuniary profit of any private shareholders or
individual.
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Corporation Business Tax
7
Business Retention and Relocation Tax Credit
Citation: N.J.S.A. 34:1B-114
Effective Date: 7/1/2004
8
2015 Estimate:
$2,400,000
Objective:
These credits are authorized by the Economic Development Authority to assist
businesses in retaining jobs in or locating jobs to New Jersey. Eligible
businesses will be awarded a credit reflective of those retained or relocated to
New Jersey.
Description:
The Business Retention and Relocation Assistance Grant Program is hereby
established as a program under the jurisdiction of the New Jersey Commerce
and Economic Growth Commission and shall be administered by the Chief
Executive Officer and Secretary of the New Jersey Commerce and Economic
Growth Commission. The purpose of the program is to encourage economic
development and job creation and to preserve jobs that currently exist in New
Jersey but which are in danger of being relocated to premises outside of the
State. To implement that purpose, and to the extent that funding for the
program is available, the program may provide grants of tax credits but in no
case shall the amount of an individual grant of tax credits exceed 80% of the
projected State tax revenues from the retained full-time jobs covered by the
project agreement of an applicant for a grant of tax credits.
Data Source
Division of Taxation Reports 2007-2011 Extrapolated Using Mean
Reliability:
1 Based on the population of verified tax returns
Cemetery Corporations not conducted for profit
Citation: N.J.S.A. 54:10A-3(d)
Effective Date: 4/13/1945
Objective:
As set forth in the original Corporate Business Tax Act of 1945, cemetery
corporations not conducted for profit are excluded from the imposition of
corporate taxes.
Description:
Nonprofit cemetery corporations first became exempt from the Corporation
Business Tax in 1945.
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Corporation Business Tax
9
Digital Media Production Credit
Citation: N.J.S.A. 54:10A-5.39
Effective Date: 1/11/2008
Objective:
In order to provide support to entities who are creating digital media content
in New Jersey, 20% of the expenses directly related to the creation of such
content are provided as a credit to reduce the digital media company's
corporate business tax liability. The carryforward provision ensures that the
business gets the full advantage of the approved credit to reduce future
income.
Description:
Allows for a credit equal to 20% of a companies qualified digital media
production expenses in new Jersey to be applied against Corporation Business
Tax in the year the expenses are incurred. The amount of the digital media
production tax credit, when used with other eligible tax credits, cannot exceed
50% of the tax liability. Unused credit amounts can be carried forward to
future CBT years or transferred to another CBT filer. This tax credit expires
January 15, 2015.
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Corporation Business Tax
10
Dividend Exclusion (ALL)
Citation: N.J.S.A. 54:10A-4(k)(2)(B)
Effective Date: 1/1/2002
2015 Estimate:
$3,804,591,300
Objective:
The Corporation Business Tax has, since its inception, provided for a deduction
for dividends received. This ensures profits are not The Corporation Business
Tax has, since its’ inception, provided for a deduction for dividends received.
This ensures profits are not taxed twice.
Description:
Entire net income shall be determined without the exclusion, deduction or
credit of any part of any income from dividends or interest on any kind of
stock, securities or indebtedness.
NOTE:
Entire net income shall exclude 100% of dividends which were included in
computing such taxable income for federal income tax purposes, paid to the
taxpayer by one or more subsidiaries owned by the taxpayer to the extent of
the 80% or more ownership of investment described in subsection (d) of this
section and shall exclude 50% of dividends which were included in computing
such taxable income for federal income tax purposes, paid to the taxpayer by
one or more subsidiaries owned by the taxpayer to the extent of 50% or more
ownership of investment, such ownership of investment calculated in the same
manner as the 80% or more of ownership of investment is calculated as
described in subsection (d) of this section.
Data Source
Division of Taxation Reports 2006-2011 extrapolated using the mean
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
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Corporation Business Tax
11
Dividend Exclusion (less than 50% owned)
Citation: N.J.S.A. 54:10A-4(k)(5)
Effective Date: 1/1/2002
2015 Estimate:
$125,000,000
Objective:
Prior law excluded 100 percent of dividends received from companies in which
the taxpayer has an ownership interest of 80 percent or more; and excluded 50
percent of all other dividends received. The Business Tax reform Act disallowed
the deduction for dividends received from a corporation in which the taxpayer
has less than a 50 percent ownership interest.
Description:
Entire net income shall exclude 100% of dividends which were included in
computing such taxable income for federal income tax purposes, paid to the
taxpayer by one or more subsidiaries owned by the taxpayer to the extent of
the 80% or more ownership of investment described in subsection (d) of this
section and shall exclude 50% of dividends which were included in computing
such taxable income for federal income tax purposes, paid to the taxpayer by
one or more subsidiaries owned by the taxpayer to the extent of 50% or more
ownership of investment, such ownership of investment calculated in the same
manner as the 80% or more of ownership of investment is calculated as
described in subsection (d) of this section.
Data Source
Division of Taxation Reports 2009-2011 Extrapolated Using the Mean
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
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Corporation Business Tax
12
Economic Recovery Tax Credit
Citation: N.J.S.A. 52:27BBB-54, 52:27BBB-55
Effective Date: 6/30/2002
2015 Estimate:
$0
Objective:
To expand the economic development incentives provided by the "Municipal
Rehabilitation and Economic Recovery Act," P.L.2002, c.43, to encourage more
business organizations or a wider variety to locate in municipalities qualified
under that act. To increase the potential maximum amount of the incentive to
a business under the “Qualified Municipality Open For Business Incentive
Program" from 75% of the incentive payment to 100% of the incentive
payment if the New Jersey Economic Development Authority determines that a
particular business relocation or business expansion will more effectively
contribute to the municipal rehabilitation and economic recovery in a
distressed municipality.
Description:
A taxpayer engaged in the conduct of business within a qualified municipality
and who is not receiving a benefit under the "New Jersey Urban Enterprise
Zones Act," P.L.1983, c.303 (C.52:27H-60 et seq.), may apply to receive a tax
credit against the amount of tax otherwise imposed under the "Corporation
Business Tax Act (1945)," P.L.1945, c.162 (C.54:10A-1 et seq.), or the tax
imposed on insurers pursuant to P.L.1945, c.132 (C.54:18A-1 et seq.), section 1
of P.L.1950, c.231 (C.17:32-15) and N.J.S.17B:23-5, equal to: $2,500 for each
new full-time position at that location in credit year one and $1,250 for each
new full-time position at that location in credit year two.
b. (1) The credit pursuant to subsection a. of this section for credit year one
shall be allowed for the privilege period or reporting period in which or with
which credit year one ends; the credit pursuant to subsection a. of this section
for credit year two shall be allowed for the privilege period or reporting period
in which or with which credit year two ends.
(2) An unused credit may be carried forward, if necessary, for use in the
privilege periods or reporting periods following the privilege period or
reporting period for which the credit is allowed.
(3) The order of priority of the application of the credit allowed under this
section and any other credits allowed by law shall be as prescribed by the
Director of the Division of Taxation. The amount of the credit applied under
this section against the tax imposed pursuant to section 5 of P.L.1945, c.162
(C.54:10A-5) for a privilege period, together with any other credits allowed by
law, shall not exceed 50% of the tax liability otherwise due and shall not reduce
the tax liability to an amount less than the statutory minimum provided in
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Corporation Business Tax
subsection (e) of section 5 of P.L.1945, c.162.
c. (1) Notwithstanding the provisions of subsection b. of this section to the
contrary, the credit allowed for credit year one may be refundable at the close
of the privilege period or reporting period in which or with which credit year
two ends, pursuant to the requirements and limitations of this subsection.
(2) That amount of the credit received for credit year one remaining, if any,
after the liabilities for the privilege period or reporting period in which or with
which credit year two ends and for any prior period have been satisfied,
multiplied by the sustained effort ratio, shall be an overpayment for the
purposes of section R.S.54:49-15 for the period in which or with which credit
year two ends; that amount of the credit received for credit year one
remaining, if any, that is not an overpayment pursuant to this paragraph may
be carried forward pursuant to subsection b. of this section.
d.The burden of proof shall be on the taxpayer to establish by clear and
convincing evidence that the taxpayer is entitled to the credits or refund
allowed pursuant to this section. The director shall by regulation establish
criteria for the determination of when new or expanded operations have
begun at a location. No taxpayer shall be allowed more than a single 24month continuous period in which credits shall be allowed for activity at a
location within a qualified municipality pursuant to P.L.2002, c.43
(C.52:27BBB-1 et al.).
13
Data Source
Division of Taxation Unpublished Data 2007-2011
Reliability:
1 Based on the population of verified tax returns
Effluent Equipment Tax Credit
Citation: N.J.S.A. 54:10A-5.31
Effective Date: 7/1/2002
2015 Estimate:
$100,000
Objective:
To establish a credit against the corporation franchise tax (P.L.1945, c.162
C.54:10A-1 et seq.) for the purchase of treatment equipment that is used
exclusively for the treatment of effluent from a wastewater treatment system.
Description:
Tax credit for purchase of effluent treatment, conveyance equipment
Data Source
Division of Taxation Unpublished Data 2007-2011
Reliability:
1 Based on the population of verified tax returns
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Corporation Business Tax
14
Exceptions to Related Intangible Costs Expense Add Back
Citation: N.J.S.A. 54:10A-4.4(c) (P.L. 2002, c. 40)
Effective Date: 7/2/2002
2015 Estimate:
$119,000,000
Objective:
To revise and update the corporation business tax to close loopholes and limit
certain tax benefits.
Description:
Intangible expenses are not added back when computing entire net income if
intangible expenses and costs are directly or indirectly paid, accrued or
incurred to a related member in a foreign nation which has in force a
comprehensive income tax treaty with the United States or the taxpayer
establishes by clear and convincing evidence, as determined by the director,
that the adjustments are unreasonable or the taxpayer and the director agree
in writing to the application or use of an alternative method of apportionment.
Data Source
Division of Taxation Reports 2009-2010 Extrapolated Using Mean
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
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Corporation Business Tax
15
Film Production Tax Credit
Citation: N.J.S.A. 54:10A-5.39
Effective Date: 1/12/2006
2015 Estimate:
$1,100,000
Objective:
To support and expand business opportunities to produce films in this State, a
tax credit is provided to businesses under the corporation business tax for
certain qualified film production expenses incurred in New Jersey. The carryforward provisions of the credit ensure that the entirety of allowable expenses
may be used to reduce future tax liability.
Description:
Allows for a credit equal to 20% of a company's qualified film production
expenses in new Jersey to be applied against Corporation Business Tax in the
year the expenses are incurred. The amount of the film production tax credit,
when used with other eligible tax credits, cannot exceed 50% of the tax
liability. Unused credit amounts can be carried forward to future CBT years or
transferred to another CBT filer. This tax credit expires January 15th, 2015.
Data Source
Division of Taxation Reports 2007-2011
Reliability:
1 Based on the population of verified tax returns
Effectiveness: Massachusetts has done an extensive study of its similar film tax credit.
http://www.mass.gov/Ador/docs/dor/News/2010FilmIncentiveReport.pdf
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Corporation Business Tax
16
HMO Assistance Fund Tax Credit
Citation: N.J.S.A. 17B:32B-12
Effective Date: 4/6/2000
2015 Estimate:
$1,400,000
Objective:
To reimburse health care professionals and health care facilities, who were
participating providers of HIP Health Plan of New Jersey, Inc. and American
Preferred Provider Plan, Inc. on contractual obligations that were unpaid and
were incurred prior to insolvency of those organizations.
Description:
A member organization may offset against its corporation business tax liability
an amount of not more than 10% of any assessment for each of the five
privilege periods beginning on or after the third calendar year commencing
after the assessment was paid, except that no member organization may offset
more than 20% of its corporation business tax liability in any one year.
To claim this credit, the taxpayer must complete Form 310 and attach it to the
tax return.
Reliability:
17
1 Based on the population of verified tax returns
Lack of Throw Back
Citation: N/A
Effective Date:
2015 Estimate:
$125,000,000
Objective:
The taxation of receipts based on physical presence allows for certain receipts
to avoid taxation in any state.
Description:
When a corporation with facilities in the state has income that is not taxed by
any state (because it does not have sufficient physical presence in some states
where it has sales), then that income is "thrown back" and taxed in the state
where the company has facilities. New Jersey does not have a throwback
provision within our taxing statutes. Please note that there is no strict
provision to account for the lack of a throwback.
Data Source
Division of Taxation Reports 2007-2008
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
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Corporation Business Tax
18
Manufacturing Equipment and Employment Investment Tax Credit
Citation: N.J.S.A. 54:10A-5.16 - N.J.S.A. 54:10A-5.21
Effective Date: 1/1/1994
2015 Estimate:
$15,900,000
Objective:
The purpose of the Manufacturing Equipment and Employment Investment Tax
Credit is to offset the purchase of manufacturing equipment and to support the
creation of new jobs. The law allows a corporate business tax credit of 2
percent on the purchase price on new machinery or equipment during the first
year of operation. For each of the next two years, a company could qualify for
an additional credit of 3 percent by creating new jobs, capped at $1,000 per
additional employee.
Description:
A taxpayer shall be allowed a credit against the tax imposed pursuant to
section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to 2% of the
investment credit base of qualified equipment placed in service in the tax year,
up to a maximum allowed credit for the tax year of $1,000,000; provided
however, that if a taxpayer has 50 or fewer employees (an average number of
full-time employees and full-time employee equivalents of 50 or less) and
entire net income to be used as a measure of the tax determined pursuant to
section 6 of P.L.1945, c.162 (C.54:10A-6) of less than $5,000,000 for the tax
year, the taxpayer shall be allowed a credit against the tax imposed pursuant
to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to 4% of the
investment credit base of qualified equipment placed in service in the tax year,
up to a maximum allowed credit for the tax year of $1,000,000.
Data Source
Division of Taxation Unpublished Data 2007-2011 extrapolated as a mean of
reported numbers.
Reliability:
1 Based on the population of verified tax returns
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Corporation Business Tax
19
Neighborhood Revitalization State Tax Credit
Citation: N.J.S.A. 52:27D-490
Effective Date: 7/1/2002
2015 Estimate:
$4,200,000
Objective:
To create an incentive for businesses to invest in neighborhood revitalization
and preservation projects sponsored by nonprofit corporations through the
granting of a tax credit.
Description:
A business entity shall be eligible for a certificate for neighborhood
revitalization State tax credits if it has provided funding for a qualified project
that has been approved in accordance with sections 4 and 5 of P.L.2001, c.415
(C.52:27D-493 and C.52:27D-494).
a.Credits may be granted in an amount up to 100 percent of the approved
assistance provided to a nonprofit organization to implement a qualified
neighborhood preservation and revitalization project.
b.The credit may be applied by the business entity receiving the certificate as
credit against tax imposed on business related income, other than tax imposed
under the New Jersey Gross Income Tax, including, but not limited to, business
income subject to the provisions of the Corporation Business Tax Act (1945),
P.L.1945, c.162 (C.54:10A-1 et al.), "The Savings Institution Tax Act," P.L.1973,
c.31 (C.54:10D-1 et seq.), the tax imposed on marine insurance companies
pursuant to R.S.54:16-1 et seq., the tax imposed on insurers generally,
pursuant to P.L.1945, c.132 (C.54:18A-1 et seq.), the sewer and water utility
excise tax imposed pursuant to section 6 of P.L.1940, c.5 (C.54:30A-54) and the
petroleum products gross receipts tax imposed pursuant to section 3 of
P.L.1990, c.42 (C.54:15B-3).
c.The credit allowed to a business entity under this section may not exceed for
any taxable year $1,000,000 or the total amount of tax otherwise payable by
the business entity for the taxable year and, in addition, shall not exceed
limitations placed on the amounts of credits or carryforward credits allowed, if
any, under the relevant statute as enumerated in subsection b. of this section
concerning the tax for which a credit is being claimed.
d.Credit shall not be allowed for activities for which the business entity is
receiving credit under any other provision against any tax on business related
income other than the New Jersey Gross Income Tax, including, but not limited
to, the corporate business tax, corporate income tax, insurance premiums tax,
petroleum products gross receipts tax, public utilities franchise tax, public
utilities gross receipts tax, public utility excise tax, railroad franchise tax, and
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Corporation Business Tax
the saving institution tax.
e.The tax credit shall be awarded only for assistance provided within the same
year in which the commissioner issued the certificate, or if the commissioner
approved assistance for more than one year, within the year in which payment
was scheduled and made. The provisions of this subsection may be waived for
good cause shown.
f.The total tax credits certified for all qualified projects proposed in a fiscal year
shall not exceed $10,000,000.
20
Data Source
Division of Taxation Reports
Reliability:
1 Based on the population of verified tax returns
Net Operating Loss Deduction
Citation: N.J.S.A. 54:10A-4(k)(6)(A) (P.L. 1985, Chapter 143)
Effective Date: 4/22/1985
2015 Estimate:
$558,000,000
Objective:
To clarify that net operating loss deduction as one of the allowable deductions
used to arrive at income subject to tax.
Description:
There are certain statutory exemptions and deductions allowable to arrive at
income subject to tax. Among those is the net operating loss deduction. There
shall be allowed as a deduction for the privilege period the net operating loss
carryover to that period.
Data Source
Division of Taxation Reports 2006-2010 Extrapolated Using Mean
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
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Corporation Business Tax
21
New Jersey Economic Opportunity Act of 2013
Citation: N.J. S.A. 52:27D-489p
Effective Date: 9/18/2013
2015 Estimate:
$0
Applied Date: 9/18/2013
Objective:
The Act serves to make Grow NJ the State’s primary business attraction and retention
incentive and the ERGG the State’s sole redevelopment incentive. It allows for a
greater geographic area of New Jersey to be eligible for its benefits.
Description:
Five incentive business programs were reduced to two, expanding the Grow New
Jersey Assistance Program (Grow NJ) and the Economic Development and Growth
Grant (ERGG), which are administered by the New Jersey Economic Development
Authority (NJEDA), and eliminating the Business Employment Incentive Program
(BEIP), the Business Retention and Relocation Assistance Grant (BRRAG) and the
Urban Transit Hub Tax Credit (UTHTC)
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Corporation Business Tax
22
New Jobs Investment Tax Credit
Citation: N.J.S.A. 54:10A-5.5 – N.J.S.A. 54:10A-5.15
Effective Date: 7/7/1993
2015 Estimate:
$1,200,000
Objective:
To create a corporate business tax credit for creating new jobs in New Jersey.
The credit percentage depends on the type of investment and the number of
jobs created, and can be as high as 10% of the investment costs. The credit
would be available to most sectors including manufacturing, wholesale
distribution, warehousing, retailing and service-related businesses. The size of
the business will determine how many new jobs must be created in order to
quality: 50 for a large business and five jobs for a small business. The credit
would be calculated by multiplying the costs of new machinery/equipment by a
"jobs creation" factor.
Description:
A taxpayer shall be allowed a credit against the portion of the tax imposed in
section 5 of P.L.1945, c.162 (C.54:10A-5), that is attributable to and the direct
consequence of the taxpayer's qualified investment in a new or expanded
business facility in this State which results in the creation of at least five new
jobs in the case of a small or mid-size business taxpayer, or at least 50 new jobs
in the case of any other taxpayer, provided that the median compensation of
all new jobs included in the taxpayer's determination of the new jobs factor
shall not be less than $27,000 per year, provided that beginning with tax years
commencing on and after January 1 next following the operative date of this
act the director shall adjust the median annual compensation which shall apply
as provided in subsection e. of this section. The amount of this credit shall be
determined and applied as hereinafter provided.
Reliability:
1 Based on the population of verified tax returns
- 148 -
Corporation Business Tax
23
Non-Profit Corporations
Citation: N.J.S.A. 54:10A-3(e) (P.L. 1945, c. 162)
Effective Date: 1/1/1992
24
Objective:
To exempt non-profit corporations from the taxes imposed by the Corporate
Business Tax Act.
Description:
Nonprofit corporations, associations or organizations established, organized or
chartered, without capital stock, under the provisions of Title 15, 16 or 17 of
the Revised Statutes, Title 15A of the New Jersey Statutes or under a special
charter or under any similar general or special law of this or any other state,
and not conducted for pecuniary profit of any private shareholders or
individual.
Non-Profit Retirement Communities
Citation: N.J.S.A. 54:10A-3(h) (P.L. 1973, c. 275)
Effective Date: 11/29/1973
Objective:
To exempt non-profit corporations, whose primary purpose is to provide for its
members housing in a retirement community, from the taxes imposed by the
Corporate Business Tax Act.
Description:
Corporations not for profit organized under any law of this State where the
primary purpose thereof is to provide for its shareholders or members housing
in a retirement community as the same is defined under the provisions of the
"Retirement Community Full Disclosure Act," P.L. 1969, c. 215.
- 149 -
Corporation Business Tax
25
Non-Stock Residential Housing
Citation: N.J.S.A. 54:10A-3(g) (P.L. 1963. Ch 59)
Effective Date: 5/27/1963
Objective:
To exempt non-stock corporations, providing mutual ownership housing, from
the taxes imposed by the Corporate Business Tax Act.
Description:
Non-stock corporations organized under the laws of this State or of any other
state of the United States to provide mutual ownership housing under federal
law by tenants, provided, however, that the exemption hereunder shall
continue only so long as the corporations remain subject to rules and
regulations of the Federal Housing Authority and the Commissioner of the
Federal Housing Authority holds membership certificates in the corporations
and the corporate property is encumbered by a mortgage deed or deed of trust
insured under the National Housing Act as amended by subsequent Acts of
Congress.
- 150 -
Corporation Business Tax
26
Redevelopment Authority Project Tax Credit
Citation: N.J.S.A. 55:19-3, (P.L. 1985, c. 227)
Effective Date: 7/26/1991
2015 Estimate:
$0
Objective:
Another tax credit available to qualifying corporations who create jobs.
Description:
Any person, firm or corporation actively engaged in the conduct of business at
a location within a project, as defined in this act, which is subject to the
provisions of the "Corporation Business Tax Act (1945)," P.L. 1945, c. 162
(C.54:10A-1 et seq.), and the business of which at that location consists
primarily of manufacturing or other business that is not retail sales or
warehousing oriented, shall, for a period of two years from the date upon
which an agreement for the undertaking of the project was entered into
pursuant to section 8 or 9 of this act, be entitled to an annual credit against the
amount of tax imposed under that act of $1,500.00 for each new employee
employed at that location who is a resident of the qualified municipality and
who immediately prior to such employment was unemployed at least 90 days
or was dependent upon public assistance as the primary source of income. A
credit for which an employer taxpayer qualifies under this section shall be
allowed in the tax year next following the tax year of qualification, and may be
continued into a second tax year if such qualification continues, but it shall be
allowed only for those new employees who were employed for at least six
consecutive months by the employer taxpayer in the year of qualification.
Data Source
Division of Taxation Unpublished Data 2007-2011 Extrapo[lated as Mean of
Reported Data
Reliability:
1 Based on the population of verified tax returns
- 151 -
Corporation Business Tax
27
Remediation Tax Credit
Citation: N.J.S.A. 54:10A-5.33 (P.L. 2003, c. 296)
Effective Date: 1/14/2004
2015 Estimate:
$100,000
Objective:
Contaminated site remediation is a critically important function in an urbanized
state and the corporate business tax credit herein described reduces tax
liability by the expended eligible costs of these cleanups for the period that the
credit was in existence.
Description:
A taxpayer shall be allowed a credit against the tax imposed pursuant to
section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to 100% of the
eligible costs of the remediation of a contaminated site as certified by the
Department of Environmental Protection pursuant to section 2 of P.L.2003,
c.296 (C.54:10A-5.34) and the Director of the Division of Taxation in the
Department of the Treasury pursuant to section 3 of P.L.2003, c.296
(C.54:10A-5.35) performed during privilege periods beginning on or after
January 1, 2004 and before January 1, 2007.
Data Source
GENTS Remediation Credit Data 2006-2011 Extrapolated Using Mean of Three
Most Recent Actual Years Data
Reliability:
1 Based on the population of verified tax returns
- 152 -
Corporation Business Tax
28
Research and Development Tax Credit
Citation: N.J.S.A. 54:10A-5.24
Effective Date: 1/1/1998
2015 Estimate:
$65,600,000
Objective:
Research and development costs have been deemed to be critical corporate
expenditures as they could result in future economic activity based on product
discovery and innovation. This credit is one of the most used credits available
to corporations, clear demonstration of its importance.
Description:
1. a. A taxpayer shall be allowed a credit, subject to the provisions of
subsection b. of this section, against the tax imposed pursuant to section 5 of
P.L.1945, c.162 (C.54:10A-5), in an amount equal to
(1) 10% of the excess of the qualified research expenses for the fiscal or
calendar accounting year (referred to hereafter in this section as the "tax
year") over the base amount; and
(2) 10% of the basic research payments determined in accordance with
section 41 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.41, as in
effect on June 30, 1992, and provided that subsection (h) of 26 U.S.C. s.41
relating to termination shall not apply. Provided however, that the terms
"qualified research expenses," "base amount," "qualified organization base
amount period," "basic research" and any other terms determined by the
Director of the Division of Taxation to affect the calculation of the credit shall
include only expenditures for research conducted in this State.
b. No credit shall be allowed under section 42 of P.L.1987, c.102
(C.54:10A-5.3), or under the "Manufacturing Equipment and Employment
Investment Tax Credit Act," P.L.1993, c.171 (C.54:10A-5.16 et al.), or under
P.L.1993, c.170 (C.54:10A-5.4 et seq.), for property or expenditures for which a
credit is allowed, or which are includable in the calculation of a credit allowed,
under this section.
The tax imposed for a fiscal or calendar accounting year pursuant to section 5
of P.L.1945, c.162, shall first be reduced by the amount of any credit allowed
pursuant to section 19 of P.L.1983, c.303 (C.52:27H-78), then by any credit
allowed pursuant to section 12 of P.L.1985, c.227 (C.55:19-13), then by any
credit allowed pursuant to section 42 of P.L.1987, c.102 (C.54:10A-5.3), then by
any credit allowed under section 3 of P.L.1993, c.170 (C.54:10A-5.6), and then
by any credit allowed under section 3 or 4 of P.L.1993, c.171 (C.54:10A-5.18 or
C.54:10A-5.19), prior to applying any credits allowable pursuant to this section.
Credits allowable pursuant to this section shall be applied in the order of the
credits' tax years. The amount of the credits applied under this section against
- 153 -
Corporation Business Tax
the tax imposed pursuant to section 5 of P.L.1945, c.162, for an accounting
year shall not exceed 50% of the tax liability otherwise due and shall not
reduce the tax liability to an amount less than the statutory minimum provided
in subsection (e) of section 5 of P.L.1945, c.162. The amount of tax year credit
otherwise allowable under this section which cannot be applied for the tax
year due to the limitations of this subsection may be carried over, if necessary,
to the seven accounting years following a credit's tax year.
29
Data Source
Division of Taxation Unpublished Data RY 2007-2011 Extrapolated as mean of
reported numbers
Reliability:
1 Based on the population of verified tax returns
Sheltered Workshop Tax Credit
Citation: N.J.S.A 54:10A-5.38
Effective Date: 1/12/2006
2015 Estimate:
$0
Objective:
To provide corporation business tax and gross income tax credits to businesses
that provide employment at an occupational training center/sheltered
workshop, under a contract with the workshop, for the performance of
services (usually product assembly and packaging services) by the workshop's
handicapped clients.
Description:
A taxpayer shall be allowed a credit against the tax imposed pursuant to
section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to 20% of the
salary and wages paid by the taxpayer during the privilege period for the
employment of a qualified person, but not to exceed $1,000 for each qualified
person for the privilege period.
Qualified person" means an extended employee, within the meaning of that
term as set forth in section 2 of P.L.1971, c.272 (C.34:16-40), to whom the
Commissioner of Labor and Workforce Development, under subsection (b) of
section 18 of P.L.1966, c.113 (C.34:11-56a17), shall have issued a special license
authorizing employment at wages less than the minimum wage rate, and who,
for at least 26 weeks during the privilege period, shall have performed at least
25 hours per week of work at or under the supervision of a sheltered workshop
pursuant to a contract between the taxpayer and the sheltered workshop.
Reliability:
1 Based on the population of verified tax returns
- 154 -
Corporation Business Tax
30
Urban Enterprise Zone Employee Tax Credit
Citation: N.J.S.A. 52:27H-78a-b (P.L. 1983, c. 303)
Effective Date: 8/4/1988
31
2015 Estimate:
$0
Objective:
To allow a business, which is not retail sales or warehouse oriented, within a
specified enterprise zone to receive an employee tax credit against the tax
imposed by the Corporate Business Tax Act.
Description:
Any qualified business subject to the provisions of the "Corporation Business
Tax Act (1945)," P.L. 1945, c. 162 (C. 54:10A-1 et seq.), as actively engaged in
the conduct of business from a location within an enterprise zone designated
pursuant to this act, which business at that location consists primarily of
manufacturing or other business which is not retail sales or warehousing
oriented, shall receive an enterprise zone employee tax credit against the
amount of tax imposed under the "Corporation Business Tax Act (1945),"
Data Source
RY 2007-10 from Division of Taxation reports
Reliability:
1 Based on the population of verified tax returns
Urban Enterprise Zone Investment Tax Credit
Citation: N.J.S.A. 52:27H-78c (P.L. 1988, c. 93)
Effective Date: 8/4/1988
2015 Estimate:
$0
Objective:
To allow a business within a specified enterprise zone, which is not retail sales
or warehouse oriented and is unable to receive employee tax credits, to
receive a one-time tax credit against the tax imposed by the Corporate
Business Tax Act for new investment into the enterprise zone.
Description:
A qualified business which is not entitled to an employee tax credit under this
section, but meets the eligibility criteria pursuant to the provisions of
subsection c. of section 27 of P.L. 1983, c. 303 (C. 52:27H-86), shall receive a
one-time credit in an amount equal to 8% of each new investment made by the
qualified business in the enterprise zone under an agreement approved by the
authority.
Reliability:
1 Based on the population of verified tax returns
- 155 -
Corporation Business Tax
32
Urban Transit Hub Tax Credit
Citation: N.J.S.A. 34:1B-207-209 (P.L. 2007, c. 346)
Effective Date: 7/28/2009
2015 Estimate:
$117,000,000
Objective:
To promote economic development in urban transit hubs through a tax credit
program for capital investment and increased employment. The approved tax
credit is only allowable after the capital expenditure has actually been made.
Description:
This tax credit is based on a capital investment made by a qualified business to
a location defined as an Urban transit hub. An Urban Transit hub is property
located within a 1/2 mile radius surrounding the mid point of a New Jersey
Transit Corporation, Port Authority Transit Corporation or Port Authority TransHudson Corporation rail station platform area, including all light rail stations,
and property located within a one mile radius of the mid point of the platform
area of such a rail station if the property is in a qualified municipality under the
"Municipal Rehabilitation and Economic Recovery Act," P.L.2002, c.43 or a
property located within a 1/2 mile radius surrounding the mid point of one of
up to two underground light rail stations' platform areas that are most
proximate to an interstate rail station or a property adjacent to, or connected
by rail spur to a freight rail line, if the business utilizes that freight line for
loading and unloading freight cars on trains per declaration made by the
Economic Development Authority.
Reliability:
1 Based on the population of verified tax returns
- 156 -
9-1-1 System and Emergency Response Assessment
Overview
Description
P.L. 2004, C. 48, enacted June 29, 2004, for certain services, imposes a fee on periodic billings to
mobile telecommunications and telephone exchange customers. This fee is charged by:
• Mobile telecommunications companies for each voice grade access service number as part of
mobile telecommunications service provided to a customer billed by or for the customer’s home
service provider and provided to a customer with a place of primary use in this State; and
• Telephone exchange companies for each telephone voice grade access service line provided as
part of that telephone exchange service.
The fee is not applicable to the Federal government, its agencies, or instrumentalities. On and after
January 1, 2005, the law provides an exemption for State, county and municipal governments, and
school districts from the fee imposed on telephone exchange services.
Rate
The 9-1-1 System and Emergency Response Fee is $.90 for each voice grade access service number
and line to mobile telecommunications and telephone exchange customers.
Disposition of Revenues
The revenue collected pursuant to the fee will serve to replace the current 9-1-1 infrastructure
Statewide with a state-of-the-art enhanced 9-1-1 system. Revenue collected is also applied to pay
for costs of funding the State’s capital equipment, facilities, and operating expenses that arise from
emergency preparedness, emergency response training, counter-terrorism measures, security at
State facilities including transportation infrastructure, preparation for first responders to chemical or
biohazard emergencies, and any expenses of the Office of Emergency Management in the Division of
State Police in the Department of Law and Public Safety.
- 157 -
9-1-1 System and Emergency Response Assessment
1
Exempt Telephone Lines
Citation: N.J.S.A. 52:17C-17 et seq. (P.L. 2004, c.48)
Effective Date: 6/29/2004
2015 Estimate:
$1,000,000
Applied Date: 7/1/2004
Objective:
To continue an established tradition of providing 9-1-1 system equipment and
maintaining this system without any cost to local governments.
Description:
Exemptions include lines billed to customers enrolled in the Lifeline
Telecommunication program, or in receipt of Lifeline Telecommunication or
Universal Service Fund benefits, State government agencies, and county and
municipal governments and their agencies, and school districts.
Reliability:
1 Based on the population of verified tax returns
- 158 -
Alcoholic Beverage Tax
Overview
Description
Under the Alcohol Beverage Tax Law at N.J.S.A. 54:43-1 et seq. (P.L. 1933, c. 434, § 301, p. 1165),
New Jersey imposes licensing requirements, permit fees and requires taxes to be paid on the
manufacture, sale and distribution of alcoholic beverages in New Jersey.
Rates
Alcoholic beverages are subject to excise taxes on each gallon. The tax on beer is imposed at 12 ¢ per
gallon. The tax on liquor is imposed at $5.50 per gallon ($4.40 prior to August 1, 2009). The tax on
wine, vermouth, and sparkling wine is imposed at 87.5 ¢ per gallon (70 ¢ prior to August 1, 2009).
Cider containing at least 3.2% of alcohol by volume but no more than 7% of alcohol by volume is
taxed at the rate of 15¢ per gallon (12¢ prior to August 1, 2009). (N.J.S.A. 54:43-1; P.L. 1933, c. 434 §
301, p. 1165)
Tax on bitters, grenadine and other mixers: All bitters, grenadine, highballs, cocktails, cordials and
other mixes which are classified by the IRS as intoxicating liquors and which require federal strip
stamps are taxable at the rate of $4.40 per gallon. (N.J.A.C. 18:3-3.4)
The tax must be paid once on any alcoholic beverages held within the state. (N.J.S.A. 54:43-3; P.L.
1933, c. 434, § 301, p. 1165) Sales or deliveries of alcoholic beverages to churches, convents or other
religious societies and organizations, whether for sacramental purposes or otherwise, are taxable.
(N.J.A.C. 18:3-3.5)
Disposition of Revenues
Revenues are deposited in the State Treasury for general State use, except that beginning on July 1,
1992, $11 million of the tax revenue is deposited annually into the Alcohol Education, Rehabilitation
and Enforcement Fund. A small percentage also goes to the New Jersey Wine Promotion Account.
- 159 -
Alcoholic Beverage Tax
1
Out-of-State Sales - Beer and Malt
Citation: N.J.S.A. 54:43-2 (P.L. 1938, c. 319, p. 800, 7; P.L. 1942, c. 171, p. 527, 5; P.L. 1968, c. 298, 2)
Effective Date: 6/14/1938
2015 Estimate:
$4,800,000
Applied Date: 7/1/1938
Objective:
Out of state sales are not subject to the tax.
Description:
No tax imposed by this subtitle shall be payable on any sale of alcoholic
beverages by any State licensee for resale and consumption outside of this
State, or directly for consumption outside of this State, when said sale is
accompanied by the actual transportation of such beverages out of this State
and by the delivery of such beverages in full compliance with the laws of the
place or places of delivery; provided, evidence of such sales and deliveries
satisfactory to the director is submitted.
Reliability:
1 Based on the population of verified tax returns
Effectiveness: No data available at this time
2
Out-of-State Sales - Liquor
Citation: N.J.S.A. 54:43-2 (P.L. 1938, c. 319, p. 800, 7; P.L. 1942, c. 171, p. 527, 5; P.L. 1968, c. 298, 2)
Effective Date: 6/14/1938
2015 Estimate:
$11,900,000
Applied Date: 7/1/1938
Objective:
Out of state sales of these products are not subject to the tax.
Description:
No tax imposed by this subtitle shall be payable on any sale of alcoholic
beverages by any State licensee for resale and consumption outside of this
State, or directly for consumption outside of this State, when said sale is
accompanied by the actual transportation of such beverages out of this State
and by the delivery of such beverages in full compliance with the laws of the
place or places of delivery; provided, evidence of such sales and deliveries
satisfactory to the director is submitted
Reliability:
1 Based on the population of verified tax returns
- 160 -
Alcoholic Beverage Tax
3
Out-of-State Sales - Still Wine
Citation: N.J.S.A. 54:43-2 (P.L. 1938, c. 319, p. 800, 7; P.L. 1942, c. 171, p. 527, 5; P.L. 1968, c. 298, 2)
Effective Date: 6/14/1938
2015 Estimate:
$4,200,000
Applied Date: 7/1/1938
4
Objective:
Out of state sales of these products are not subject to the tax.
Description:
No tax imposed by this subtitle shall be payable on any sale of alcoholic
beverages by any State licensee for resale and consumption outside of this
State, or directly for consumption outside of this State, when said sale is
accompanied by the actual transportation of such beverages out of this State
and by the delivery of such beverages in full compliance with the laws of the
place or places of delivery; provided, evidence of such sales and deliveries
satisfactory to the director is submitted.
Reliability:
1 Based on the population of verified tax returns
Out-of-State Sales - Vermouth/Sparking Wine/Apple Cider
Citation: N.J.S.A. 54:43-2 (P.L. 1938, c. 319, p. 800, 7; P.L. 1942, c. 171, p. 527, 5; P.L. 1968, c. 298, 2)
Effective Date: 6/4/1938
2015 Estimate:
$1,000,000
Applied Date: 7/1/1938
Objective:
Out-of-state sales of these products are not subject to the tax.
Description:
No tax imposed by this subtitle shall be payable on any sale of alcoholic
beverages by any State licensee for resale and consumption outside of this
State, or directly for consumption outside of this State, when said sale is
accompanied by the actual transportation of such beverages out of this State
and by the delivery of such beverages in full compliance with the laws of the
place or places of delivery; provided, evidence of such sales and deliveries
satisfactory to the director is submitted.
Reliability:
1 Based on the population of verified tax returns
- 161 -
Cigarette Tax
Overview
Description
The Cigarette Tax is collected primarily from licensed distributors who receive cigarettes directly
from out-of-state manufacturers. Unless otherwise provided by law, every package of cigarettes
must be stamped before being transferred from the original acquirer in New Jersey. This tax is not
imposed on other tobacco products.
Sales to the United States Government or the Veterans Administration, and sales in interstate
commerce are exempt.
Rate
Effective July 1, 2009, the tax rate is $2.70 per pack of 20 cigarettes. Formerly, the tax was $2.575
per pack of 20 cigarettes.
A distributor is allowed a .00174757% discount on the purchase of 1,000 or more stamps or meter
impressions.
Disposition of Revenues
Revenues are deposited in the State Treasury for general State use (Pursuant to P.L. 1998, C. 264,
the first $150 million are deposited in the Health Care Subsidy Fund).
- 162 -
Cigarette Tax
1
Director’s Redemption of Certain Stamps
Citation: N.J.S.A. 54:40A-19 (P.L. 1948, c. 65, p. 163, §409, Amended by L. 1957, c. 92, p. 179, 1)
Effective Date: 6/21/1957
2015 Estimate:
$1,200,000
Applied Date: 4/16/1956
2
Objective:
To allow any distributor or dealer to receive a credit for any unused or
mutilated, but identifiable, stamps for the face value of the given stamp.
Description:
The director shall redeem any unused or mutilated, but identifiable, stamps
that any distributor or dealer may present for redemption, and issue a refund
of the face value.
Reliability:
1 Based on the population of verified tax returns
Distributor Discounts
Citation: N.J.S.A. 54:40A-11 (P.L. 1948, c. 65, p. 159, §401)
Effective Date: 10/31/2008
2015 Estimate:
$1,400,000
Objective:
To allow for a tax credit of 1.8%, due to the service and expense of the
distributor in affixing and handling revenue stamps, for any sale of 1,000
stamps or more.
Description:
On sales of revenue stamps the director shall allow, as compensation for the
services and expenses of the distributor in affixing and handling of such
stamps, a discount of 1.80% of the face amount of any sale of 1,000 stamps or
more; provided, that the distributor has complied with all the provisions of this
act; and, provided, further, however, that the director shall be empowered to
adjust such discount to provide equivalent compensation with respect to the
face value of each 1,000 stamps or more. No discount shall be allowed on any
sale of less than 1,000 stamps and stamps shall not be sold in blocks of less
than 100 stamps.
Reliability:
1 Based on the population of verified tax returns
- 163 -
Cigarette Tax
3
U.S. Constitution Federal laws
Citation: N.J.S.A. 54:40A-8 through N.J.S.A. 54:40A-10, N.J.A.C. 18:5-2.4
Effective Date: 12/7/2009
4
Objective:
To ensure that the State of New Jersey does not levy a tax upon cigarettes to
hospitalized veterans, which is prohibited by the Constitution and Statutes of
the United States.
Description:
No tax imposed by this act shall be levied upon cigarettes or the sale of
cigarettes which this State is prohibited from taxing under the Constitution or
the statutes of the United States or where an authorized agent of the United
States Veterans Administration purchases cigarettes from donations for free
distribution to and for consumption by hospitalized veterans housed in State
institutions.
U.S. V.A. for Free Distribution to Hospitalized Veterans.
Citation: N.J.S.A. 54:40A-10 (P.L. 1948, c. 65, p. 159, §303, amended P.L. 1955, c. 18)
Effective Date: 5/16/1955
Objective:
To exempt the purchase of cigarettes to be donated and distributed to
hospitalized veterans from the tax.
Description:
Purchases of cigarettes to be donated to hospitalized veterans are exempt
from the tax.
Reliability:
1 Based on the population of verified tax returns
- 164 -
Domestic Security Fee
Overview
Description
A statutory assessment designated as the “Domestic Security Fee” is imposed under P.L. 2002, C. 34,
on motor vehicle rental companies for each day or part thereof that a motor vehicle is rented under
rental agreements of not more than 28 days. This fee applies with respect to rental agreements in
New Jersey entered into on or after August 1, 2002.
Rate
The fee is assessed at the rate of $5 per day effective July 8, 2006, on all motor vehicle rental
companies doing business in this State for each rental day a motor vehicle is rented under
agreements of 28 days or less. The fee applies only to the first 28 days of a rental agreement with
the same renter. Thus, the maximum rental fee in the aggregate is $140 even if the actual rental
extends beyond 28 days. Prior to July 8, 2006, the rate was $2 per day.
Disposition of Revenues
The fee is paid to the Division of Taxation for deposit in the New Jersey Domestic Security Account
established in the General Fund.
Domestic Security Fee
1
Total Deductions
Citation: N.J.S.A. App. A:9-78 (P.L. 2002, C. 34)
Effective Date: 7/1/2002
2015 Estimate:
$1,000,000
Applied Date: 8/1/2002
Objective:
The exemption for certain motor vehicles from the sales and use tax is likewise
applied to the domestic security fee on those exempted vehicles.
Description:
The law does not impose the Domestic Security Fee on motor vehicle rentals
that are exempt for Sales and Use tax purposes, such as resale transactions
and rentals to tax exempt organizations or government agencies.
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
- 165 -
Hotel/Motel Occupancy Fee and Municipal Occupancy Tax
Overview
Description
P.L. 2003, C. 114, imposes a State Occupancy Fee and authorizes the imposition of a Municipal
Occupancy Tax on charges for the rental of a room in a hotel, motel, or similar facility in most New
Jersey municipalities.
Rate
The State Occupancy Fee rate is 7% for occupancies from August 1, 2003, through June 30, 2004, and
5% for occupancies on and after July 1, 2004, or at a lower rate in cities in which such occupancies
are already subject to tax:
Atlantic City—1%
Newark and Jersey City—1%
The Wildwoods—3.15%
The majority of the municipalities that have enacted a municipal occupancy tax have authorized the
tax rate to increase to 3% as of July 1, 2004; however, Cape May City (Cape May County), Glassboro
Borough (Gloucester County), Berkeley Township (Ocean County), and Somers Point City (Atlantic
County) impose the tax at the rate of 2%.
Disposition of Revenues
The monies collected from the State Occupancy Fee are deposited to the General Fund and are
statutorily allocated, in varying percentages, to the New Jersey State Council on the Arts for cultural
projects; the New Jersey Historical Commission; the New Jersey Commerce and Economic Growth
Commission for tourism advertising and promotion; and the New Jersey Cultural Trust. Any amount
over the dedication is allocated to the General Fund. Collections from the Municipal Occupancy Tax
are distributed back to the municipality.
- 166 -
Hotel/Motel Occupancy Fee
1
Government Exemption
Citation: N.J.S.A. 54:32D-1b (P.L. 2003, c. 114)
Effective Date: 7/1/2003
2015 Estimate:
$29,500,000
Applied Date: 7/1/2003
2
Objective:
To allow occupancies that are exempt for Sales and Use Tax purposes, including
occupancies for government use, a credit from the Hotel/Motel occupancy fee.
Description:
The law provides that the Hotel/Motel Occupancy Fee will not apply on
occupancies that are exempt for Sales and Use Tax purposes, including
occupancies for government use.
Reliability:
1 Based on the population of verified tax returns
Permanent Resident Exemption
Citation: N.J.S.A. 54:32D-1b. (P.L. 2003, c. 114)
Effective Date: 7/1/2003
2015 Estimate:
$80,100,000
Objective:
To allow occupancies that are exempt for Sales and Use Tax purposes or motel
occupancy where the purchaser resides at the lodging facility for at least 90
day, a deduction/exemption from the Hotel/Motel occupancy fee.
Description:
The law provides that the Hotel/Motel Occupancy Fee will not apply on
occupancies that are exempt under the Sales and Use Tax Act such as a hotel
or motel occupancy where the purchaser resides at the lodging facility for at
least 90 days.
Reliability:
1 Based on the population of verified tax returns
- 167 -
Hotel/Motel Occupancy Fee
3
Rooms for Assembly
Citation: N.J.S.A. 54:32D-1 (P.L. 2003, c. 114)
Effective Date: 7/1/2003
2015 Estimate:
$6,000,000
Objective:
To allow occupancies that are exempt for Sales and Use Tax purposes or using
rooms for the purpose of assembly a exclusion from the Hotel/Motel
Occupancy fee.
Description:
The law provides that the Hotel/Motel Occupancy Fee is imposed on rooms
used for occupancy. The fee is not imposed on rooms used for the purpose of
assembly, such as conference, meeting or banquet rooms.
Data Source
GENTS
Reliability:
1 Based on the population of verified tax returns
- 168 -
Local Property Tax Supported by State Government
Overview
Senior citizen, disabled and blind persons local property tax deduction. N.J.S.A. 54:4-8.40 et seq.
This is a $250 deduction from local property taxes for qualified senior citizens, disabled and blind
persons, and surviving spouses/civil union partners.
The deduction is granted where:
(1) The senior citizen is 65 years or more and the annual income of the senior citizen and any
spouse/civil union partner is not in excess of $10,000.
(2) The disabled person is under 65 years and permanently and totally disabled and the annual
income of that person and any spouse/civil union partner is not in excess of $10,000.
(3) The blind person is under 65 years and permanently and totally disabled and the annual income
of that person and any spouse/civil union partner is not in excess of $10,000.
(4) The surviving spouse/surviving civil union partner has not remarried/entered into a new civil
union partnership and was age 55 or more as of December 31 of the year prior to the tax year and at
time of his/her spouse's/civil union partner’s death.
$250 PROPERTY TAX DEDUCTION FORVETERANS OR SURVIVING SPOUSES N.J.S.A. 54:4-8.10, et seq.
$250 may be deducted each year from taxes due on the real or personal property of qualified war
veterans or their unmarried surviving spouses. In 1999, a constitutional amendment increased the
deduction from $50 to $100 for 2000; $150 for 2001; $200 for 2002 and $250 per year thereafter.
To qualify, the applicant must be an honorably discharged US Armed Forces war veteran or the
unmarried surviving spouse of such a war veteran or the unmarried surviving spouse of a
serviceperson who served in time of war and died while on active duty. The successful applicant
must be a property owner and a legal resident of New Jersey and, where applicable, prove that the
deceased veteran or serviceperson was a legal resident of New Jersey.
Claim Form V.S.S must be filed with the applicant’s municipal tax assessor or collector.
- 169 -
Local Property Tax support by State Government
1
Senior Citizen Real Estate Tax Deduction
Citation: N.J.S.A. 54:4-8.40 et seq. (P.L. 1989, c.252)
Effective Date: 1/3/1990
2015 Estimate:
$14,500,000
Applied Date: 1/1/1991
2
Objective:
To establish an annual deduction of $250 for real property taxes in the event a
given dwelling is owned by a qualified senior citizen.
Description:
An annual $250 deduction from real property taxes is provided for the
dwelling of a qualified senior citizen, disabled person or their surviving
spouse.
Reliability:
1 Based on the population of verified tax returns
Veteran’s Deduction
Citation: N.J.S.A. 54:4-8.11 (P.L.2000, c,9, s.1)
Effective Date: 3/30/2000
2015 Estimate:
$60,800,000
Objective:
To implement the State constitutional amendment, approved by the voters of
the State on November 2, 1999, which provides for a veteran's property tax
deduction and to increase that annual property tax deduction for certain
veterans and surviving spouses of those veterans from $50 to $250.
Description:
The law provides a $250 real estate tax deduction for residents who served or
currently serve Armed Forces of the United States during a time of war and
who were honorably discharged. Surviving spouses are also eligible for this
deduction.
Reliability:
1 Based on the population of verified tax returns
- 170 -
Motor Fuels Tax
Overview
Description
A tax on motor fuels is applied to gasoline, diesel fuel and liquefied petroleum gas used in motor
vehicles on public highways.
Rate
The general motor fuels tax rate is $0.105 per gallon of gasoline. A tax of $0.0525 per gallon is
imposed on petroleum gas and liquefied petroleum gas sold or used to propel motor vehicles on
public highways.
The diesel fuel tax rate is $0.135 per gallon, of which $0.03 per gallon is refundable for fuel used in
passenger automobiles and motor vehicles of less than 5,000 pounds gross weight (C. 73, P.L. 1984,
effective September 1, 1985).
Tax exempt sales include sales to the United States or any agency or instrumentality thereof and to
the State of New Jersey and its political subdivisions, departments and agencies. Sales of dyed fuel
and sales for export are also exempt.
New Motor Fuels Law
Chapter 22, P.L. 2010, the Motor Fuels Tax Act, effective July 1, 2010, as amended, and operative
beginning January 1, 2011, repeals prior Motor Fuels legislation in order to make sweeping changes
in the licensing, reporting, and the imposition and collection of the Motor Fuels Taxes.
For purposes of comparison of tax expenditures, there are no taxes paid, nor exemptions to be
claimed by any seller of motor fuels other than suppliers, distributors and certain retail dealers.
Distributors, jobbers, importers and seller-users of special fuels previously collected the tax and were
able to take exemptions through December 31, 2010.
Disposition of Revenues
Certain revenues are credited to a special account in the General Fund and are dedicated from the
gasoline tax, the petroleum products tax, and the Sales and Use Tax to the Transportation Trust Fund
for maintenance of the State's transportation system (New Jersey Constitution, Article 8, Section 2,
paragraph 4).
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Motor Fuels Tax
1
Exported Fuels (as required by N.J.S.A. 54:39-112)
Citation: N.J.S.A. 54:39-112 (L. 2010, c. 22, § 12, eff. June 29, 2010, operative Jan. 1, 2011 operative
date amended 2010, c. 79, § 29; amended 2010, c. 79, § 11, eff. Oct. 1, 2010).
)
Effective Date: 6/29/2010
2015 Estimate:
$40,000
Applied Date: 10/1/2010
2
Objective:
To stipulate that fuels exported outside of the State are, in general, exempt
from the tax imposed with certain limitations applying.
Description:
Fuels exported outside New Jersey are generally exempt from imposition of
the tax, with certain limitations.
Reliability:
1 Based on the population of verified tax returns
Fuel Used by Aircraft
Citation: N.J.S.A. 54:39-112a.(4) (Previously N.J.S.A. 54:39-66(e)) also N.J.S.A. 54:39-27(a); P.L.
1983, c. 264, § 7)
Effective Date: 10/1/2010
2015 Estimate:
$100,000
Objective:
To exempt fuel used by aircrafts from the tax imposed by the Motor Fuels Tax
Act.
Description:
Fuel used by aircraft is exempt from the tax imposed by the "Motor Fuel Tax
Act," P.L.2010, c.22 (C.54:39-101 et seq.), and a refund of the tax imposed by
subsection a. of section 3 of P.L.2010, c.22 (C.54:39-103) may be claimed by the
consumer providing proof the tax has been paid and no refund has been
previously issued.
Reliability:
1 Based on the population of verified tax returns
- 172 -
Motor Fuels Tax
3
Fuel Used by Ambulances
Citation: N.J.S.A. 54:39-112a.(5) (Previously N.J.S.A. 54:39-66(f))
Effective Date: 10/1/2010
2015 Estimate:
$200,000
Objective:
To allow the fuel used by an ambulance to be exempt from the current Motor
Fuels tax, or receive a refund of taxes imposed.
Description:
Fuel used by ambulances is exempt from the tax imposed by the "Motor Fuel
Tax Act," P.L.2010, c.22 (C.54:39-101 et seq.), and a refund of the tax imposed
by subsection a. of section 3 of P.L.2010, c.22 (C.54:39-103) may be claimed by
the consumer providing proof the tax has been paid and no refund has been
previously issued.
Reliability:
1 Based on the population of verified tax returns
Effectiveness: Current law allows for the deduction or exclusion of certain vehicles, including
ambulances, from the motor fuels tax in order to reduce an entities expenses.
All eligible to benefit take advantage of either this deduction or exemption.
4
Fuel Used by Certain Agricultural Tractors and Farm Machinery
Citation: N.J.S.A. 54:39-112a.(2) (Previoulsy N.J.S.A. 54:39-66(c) P.L. 1935, c. 319, § 1202, p. 1035)
Effective Date: 10/1/2010
2015 Estimate:
$2,000
Objective:
Motor fuel used by certain vehicles for defined purposes are exempt from the
tax imposed by the Motor Fuel Tax Act of 2010.
Description:
Fuel used by agricultural tractors not operated on a public highway is exempt
from the tax imposed by the "Motor Fuel Tax Act," P.L.2010, c.22 (C.54:39-101
et seq.), and a refund of the tax imposed by subsection a. of section 3 of
P.L.2010, c.22 (C.54:39-103) may be claimed by the consumer providing proof
the tax has been paid and no refund has been previously issued.
Reliability:
1 Based on the population of verified tax returns
- 173 -
Motor Fuels Tax
5
Fuel Used by Certain Autobuses
Citation: N.J.S.A. 54:39-112a.(1) (Previously N.J.S.A. 54:39-66(b) P.L. 1935, c. 319, § 1202, p. 1035)
Effective Date: 10/1/2010
2015 Estimate:
$100,000
Objective:
Motor fuel used by certain vehicles for defined purposes are exempt from the tax
imposed by the Motor Fuel Tax Act of 2010.
Description:
Fuel used by autobuses while being operated over the highways of this State in
those municipalities to which the operator has paid a monthly franchise tax for
the use of the streets therein under the provisions of R.S.48:16-25 and
autobuses while being operated over the highways of this State in a regular
route bus operation as defined in R.S.48:4-1 and under operating authority
conferred pursuant to R.S.48:4-3, or while providing bus service under a
contract with the New Jersey Transit Corporation or under a contract with a
county for special or rural transportation bus service subject to the jurisdiction
of the New Jersey Transit Corporation pursuant to P.L.1979, c.150 (C.27:25-1 et
seq.), and autobuses providing commuter bus service which receive or
discharge passengers in New Jersey is exempt from the tax imposed by the
"Motor Fuel Tax Act," P.L.2010, c.22 (C.54:39-101 et seq.), and a refund of the
tax imposed by subsection a. of section 3 of P.L.2010, c.22 (C.54:39-103) may
be claimed by the consumer providing proof the tax has been paid and no
refund has been previously issued.
Reliability:
1 Based on the population of verified tax returns
- 174 -
Motor Fuels Tax
6
Fuel Used by Non-Highway Equipment
Citation: N.J.S.A. 54:39-112a.(1) (Previously N.J.S.A. 54:39-66(o))
Effective Date: 10/1/2010
7
2015 Estimate:
$100,000
Objective:
Motor fuel used by certain vehicles for defined purposes are exempt from the
tax imposed by the Motor Fuel Tax Act of 2010.
Description:
Fuel used by stationary machinery and vehicles or implements not designed for
the use of transporting persons or property on the public highways is exempt
from the tax imposed by the "Motor Fuel Tax Act," P.L.2010, c.22 (C.54:39-101
et seq.), and a refund of the tax imposed by subsection a. of section 3 of
P.L.2010, c.22 (C.54:39-103) may be claimed by the consumer providing proof
the tax has been paid and no refund has been previously issued.
Reliability:
1 Based on the population of verified tax returns
Off Road Use of On Road Vehicles
Citation: N.J.S.A. 54:39-112a.(8) (Previously N.J.S.A. 54:39-66(i))
Effective Date: 10/1/2010
2015 Estimate:
$0
Objective:
Motor fuel used by certain vehicles for defined purposes are exempt from the
tax imposed by the Motor Fuel Tax Act of 2010.
Description:
Fuel used by highway motor vehicles that are operated exclusively on private
property is exempt from the tax imposed by the "Motor Fuel Tax Act,"
P.L.2010, c.22 (C.54:39-101 et seq.), and a refund of the tax imposed by
subsection a. of section 3 of P.L.2010, c.22 (C.54:39-103) may be claimed by the
consumer providing proof the tax has been paid and no refund has been
previously issued.
Reliability:
1 Based on the population of verified tax returns
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Motor Fuels Tax
8
Total Exempt Government Sales
Citation: N.J.S.A. 54:39-112(c)3 (P.L. 2010, c.79)
Effective Date: 10/1/2010
2015 Estimate:
$2,000,000
Objective:
To stipulate that sales made to government entities are exempt under the
current Motor Fuels Tax Act and were exempt under the previous statute.
Description:
Sales made to government entities are exempt under the current motor fuels
law and were exempt under the previous statute.
Reliability:
1 Based on the population of verified tax returns
- 176 -
Motor Vehicle Tire Fee
Overview
Description
P.L. 2004, C. 46, imposes a fee on the sale of new motor vehicle tires, including new tires sold as a
component part of a motor vehicle, either sold or leased, that are subject to New Jersey sales tax.
The tire fee is imposed per tire, including the spare tire sold as part of a motor vehicle. The tire fee
also applies to sales of new tires in connection with a repair or maintenance service.
Rate
The motor vehicle tire fee is $1.50 per tire.
Disposition of Revenues
The revenue collected from the Motor Vehicle Tire Fee is deposited in the Tire Management and
Cleanup Fund established in the Department of Environmental Protection. Any additional revenue
collected is available for appropriation to the Department of Transportation to support snow
removal operations.
Motor Vehicle Tire Fee
1
Exempt Tires Sales Times $1.50 Tire Fee
Citation: N.J.S.A. 54:32F-1 et seq. (P.L. 2004, c.46)
Effective Date: 6/29/2004
2015 Estimate:
$4,000,000
Applied Date: 8/1/2004
Objective:
To offset the cost of proper scrap tire pile management.
Description:
The law exempts the Motor Vehicle Tire Fee on transactions where sales tax
would be exempt. Examples could include new tire sales for resale, tires sold to
exempt organization or government agency and vehicles purchased by nonresidents where the vehicle will be registered in their state of residency.
Reliability:
1 Based on the population of verified tax returns
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Nursing Home Provider Assessment
Overview
Description
The New Jersey "Nursing Home Quality of Care Improvement Fund Act" was signed into law on July
1, 2003 as P.L. 2003 c.105 and was subsequently amended on June 29, 2004, as P.L. 2004, c.41. The
Acts establish an assessment on nursing homes, in accordance with federal regulations set forth at
42 C.F.R. 433.68, in order to provide additional funds for improving the quality of care by increasing
Medicaid reimbursement for services delivered to those senior citizens and other persons residing in
New Jersey nursing homes.
The Department of Health and Senior Services is responsible for the oversight, coordination and
disbursement of fund monies. The New Jersey Division of Taxation is charged with the responsibility
for collecting the quarterly assessments. The fund will receive revenues from quarterly assessments
from nursing homes based upon payment of an assessment in accordance with 42 C.F.R. 433.68. This
assessment shall be paid to the Division of Taxation, Department of the Treasury.
Nursing Home Assessment
1
Exempt Days Times Rate
Citation: N.J.S.A. 26:2H-92 et seq. (P.L. 2003, c. 105, P.L. 2004, c. 41)
Effective Date: 6/29/2004
2015 Estimate:
$17,500,000
Applied Date: 7/1/2004
Objective:
To ensure compliance with applicable federal requirements that will enable the
State to receive its maximum share of federal Medicaid matching funds.
Description:
The New Jersey Nursing Home Quality Care Act established a quarterly
assessment on nursing homes in order to provide additional funds for
improving the quality of care by increasing Medicaid reimbursement for
services delivered to those senior citizens and other persons residing in New
Jersey nursing homes.
The current rate is $11.92 per non-Medicare day to applicable nursing homes.
The annual assessment rate is calculated by the Department of Health and
Senior Services, and may be up to a maximum of 6% of the aggregate amount
of annual revenues received by applicable nursing homes.
Reliability:
1 Based on the population of verified tax returns
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Petroleum Products Gross Receipts Tax
Overview
Description
The Petroleum Products Gross Receipts Tax is imposed on all companies engaged in refining and/or
distributing petroleum products for distribution in this State. It applies to the first sale, not for
export, of petroleum products within New Jersey.
Home heating oil (including #2, #4, and #6 heating oils) and propane gas and kerosene used for
residential heating are exempt from tax. Also exempt from tax are receipts from sales of petroleum
products used by marine vessels engaged in interstate or foreign commerce; receipts from sales of
aviation fuels used by airplanes in interstate or foreign commerce other than burnout portion;
receipts from sales of asphalt and polymer grade propylene used in the manufacture of
polypropylene; receipts from sales to nonprofit entities qualifying for exemption under the Sales and
Use Tax Act; and receipts from sales to the United States or the State of New Jersey.
Effective January 1, 2001, P.L. 2000, C. 156, phased out, over a three-year period, the Petroleum
Products Gross Receipts Tax for fuel used by any utility, co-generation facility, or wholesale
generation facility to generate electricity sold at wholesale or through certain retail channels.
Rate
The petroleum products tax is imposed at the rate of 2¾% on gross receipts from the first sale of
petroleum products in New Jersey. In the case of fuel oils, aviation fuels, and motor fuels, this rate is
converted to $0.04 per gallon pursuant to C. 48, P.L. 2000, adopted on June 30, 2000. Eligible
taxpayers may claim the Neighborhood Revitalization State Tax Credit against the petroleum
products gross receipts tax pursuant to P.L. 2001, C. 415.
Disposition of Revenues
Certain revenues are credited to a special account in the General Fund and dedicated to the
Transportation Trust Fund under the New Jersey Constitution, Article 8, Section 2, paragraph 4.
- 179 -
Petroleum Products Gross Receipts Tax
1
Withdrawn for Use Outside New Jersey
Citation: N.J.S.A. 54:15B-3 (P.L. 1990, c. 42, § 3)
Effective Date: 6/30/2000
2015 Estimate:
$2,500,000
Objective:
To set the petroleum products gross receipts tax rate on fuel oils, aviation fuels
and motor fuels subject to tax under R.S.54:39-1 et seq. at the current rate of 4
cents per gallon which is the minimum statutory rate allowed.
Description:
Petroleum Gross Receipts Tax is only levied upon petroleum products for use
or consumption within this State. Any such products withdrawn to be used
outside New Jersey are exempt.
Data Source
Division of Taxation records
Reliability:
1 Based on the population of verified tax returns
- 180 -
Realty Transfer Fee
Overview
Description
The Realty Transfer Fee is imposed upon the recording of deeds evidencing transfers of title to real
property in the State of New Jersey. The Realty Transfer Fee is calculated based on the amount of
consideration recited in the deed.
The Realty Transfer Fee does not apply to a deed: for a consideration of less than $100; by or to the
United States of America, this State, or any instrumentality, agency, or subdivision thereof; solely in
order to provide or release security for a debt or obligation; which confirms or corrects a deed
previously recorded; on a sale for delinquent taxes or assessments; on partition; by a receiver,
trustee in bankruptcy or liquidation, or assignee for the benefit of creditors; eligible to be recorded
as an “ancient deed” pursuant to R.S. 46:16-7; acknowledged or proved on or before July 3, 1968;
between husband and wife, or parent and child; conveying a cemetery lot or plot; in specific
performance of a final judgment; releasing a right of reversion; previously recorded in another
county and full Realty Transfer Fee paid or accounted for, as evidenced by written instrument,
attested by the grantee, and acknowledged by the county recording officer; by an executor or
administrator of a decedent to a devisee or heir to effect distribution of the decedent’s estate in
accordance with the provisions of the decedent’s will or the intestate laws of this State; recorded
within 90 days following the entry of a divorce decree which dissolves the marriage between grantor
and grantee; issued by a cooperative corporation, as part of a conversion of all of the assets of the
cooperative corporation into a condominium, to a shareholder upon the surrender by the
shareholder of all of the shareholder’s stock in the cooperative corporation and the proprietary lease
entitling the shareholder to exclusive occupancy of a portion of the property owned by the corporation.
Chapter 103, P.L. 2007, the Civil Union Act, became effective on February 19, 2007. This law grants
civil union couples the same benefits, protections, and responsibilities under law as are granted to
spouses in marriage. The law required amendatory language pertaining to partial and total
exemptions from the Realty Transfer Fee to be included on the Affidavit forms (RTF-1 and RTF-1EE)
and other Property Administration forms.
Rate
In accordance with Chapter 66, Laws of 2004, as amended by Chapter 19, Laws of 2005, the level or
rate of the Realty Transfer Fee is as follows:
Standard Transactions and New Construction
Total Consideration not Over $350,000
Consideration
Over
Rate/$500
but not over
- 181 -
$0
150,000
200,000
$150,000
200,000
350,000
$2.00
3.35
3.90
Total Consideration Over $350,000
Consideration
Over
$0
150,000
200,000
550,000
850,000
1,000,000
Rate/$500
but not over
$150,000
200,000
550,000
850,000
1,000,000
*
$2.90
4.25
4.80
5.30
5.80
6.05
Senior Citizens or Blind or Disabled Persons; Low and Moderate Income Housing
Total Consideration not Over $350,000
Consideration
Over
$0
150,000
Rate/$500
but not over
$150,000
350,000
$0.50
1.25
Total Consideration Over $350,000
Consideration
Over
$0
150,000
550,000
850,000
1,000,000
Rate/$500
but not over
$150,000
550,000
850,000
1,000,000
*
$1.40
2.15
2.65
3.15
3.40
Additional Fee Where Consideration Is Over $1 million
Effective February 1, 2005, a 1% fee is imposed upon grantees (buyers) on property transfers for
consideration in excess of $1 million for property class 2 “residential”; class 3A “farm property
(regular)” if effectively transferred with other property to the same grantee; and cooperative units,
which are class 4C. The 1% fee is imposed on the entire amount of such consideration recited in the
deed. The 1% fee is not imposed upon organizations determined by the Federal Internal Revenue
Service to be exempt from Federal income taxation that are the buyers in deeds for a consideration
- 182 -
in excess of $1 million.
Chapter 33, P.L. 2006, effective on August 1, 2006, provides that:
• A fee of 1% is imposed on Class 4A “commercial properties” for an entire consideration in
excess of $1 million as well as the classes already incurring the 1% fee.
• The 1% fee does not apply if real property transfer is incidental to a corporate merger or
acquisition and the equalized assessed value of the real property transferred is less than 20% of
the total value of all assets exchanged in the merger or acquisition.
• Buyers (grantees) in deeds involving Class 4A sales recorded on or before November 15, 2006,
that were transferred pursuant to a contract fully executed before July 1, 2006, who remit the
1% fee shall have it refunded by filing a Claim for Refund with the Division within one year
following the recording date of the deed.
• Affidavit of Consideration for Use by Seller (Form RTF-1) is required for all Class 4 property
deed recordings.
• A fee of 1% is imposed on nondeed transfers of a controlling interest in an entity which
possesses, directly or indirectly, a controlling interest in classified real property, payable to the
Director, by the purchaser of the controlling interest.
Disposition of Revenues
The Realty Transfer Fees per $500 of consideration will be allocated according to the type of
transaction as follows: Priority Fund and the State Extraordinary Aid Account. In Fiscal Year 2007, the
Extraordinary Aid Account received $105,903,326.
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Realty Transfer Fee
1
Exempt Sales Exceeding $1 million Where the Grantee Pays
Citation: N.J.S.A. 46:15-7.4 (P.L. 2006, c.33)
Effective Date: 7/8/2006
2015 Estimate:
$27,600,000
Applied Date: 8/1/2006
2
Objective:
In an effort to provide adequate funding for State services during what was
then an austere fiscal period, the Realty Transfer Fee was increased on certain
high-value income-producing properties (not including residential property,
farm property, industrial properties, and apartments) where the grantee
(purchaser) was required to pay the additional fee.
Description:
The 1% fee shall not apply to a deed if a real property transfer is incidental to a
corporate merger or acquisition and the equalized assessed value of the real
property transferred is less than 20% of the total value of all assets exchanged
in the merger or acquisition. A grantee claiming an exemption from the 1% fee
in such instances, when the deed is offered for recording, is now required to
file a merger document in addition to an Affidavit of Consideration for Use by
Buyer.
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
Partial Realty Transfer Fee Exemption (sales prices known)
Citation: N.J.S.A. 46:15-10.1 (P.L.2004, c.66, s.6)
Effective Date: 6/30/2004
2015 Estimate:
$16,700,000
Objective:
To generate revenue through the "general purpose fee" to be used for general
State purposes. The bill also makes a number of editorial revisions in the text of
the realty transfer fee statute for purposes of clarifying its provisions.
Description:
Under the partial Realty Transfer Fee exemption, the state portion of the fee is
not charged on sale of a one- or two-family residential premises owned and
occupied by a senior citizen, blind person or disabled seller or the sale of low
and moderate income housing. Transfers of title to real property upon which
there is new construction shall be 80% exempt from payment based on the
first $150,000 of consideration.
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
- 184 -
Realty Transfer Fee
3
Total Realty Transfer Fee Exemption for Sales Price Less than $100 (Sales Price
Known)
Citation: N.J.S.A. 46:15-10(a) (P.L. 1968, c. 49, § 6; amended 1974, c. 184, § 4; 1979, c. 293; 1985, c.
17; 1999, c. 357, § 1)
Effective Date: 1/14/2000
2015 Estimate:
$214,000,000
Objective:
To exempt the reality transfer fee to a deed imposed if the consideration is
less than $100.
Description:
The law does not impose a realty transfer fee to a deed where the
consideration, as defined in section 1(c) of the law, is less than $100.00.
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
- 185 -
Realty Transfer Fee
4
Total Realty Transfer Fee Exemption Where Such Sales Price Would Have
Exceeded $100 (Sales Price Known)
Citation: N.J.S.A.46:15-10 (P.L. 1968, c. 49, § 6; amended 1974, c. 184, § 4; 1979, c. 293; 1985, c.
17; 1999, c. 357)
Effective Date: 1/14/2000
2015 Estimate:
$11,500,000
Objective:
To clarify that the conversion of real property from a cooperative form of
ownership to a condominium form of ownership is not subject to the realty
transfer fee, which applies to sales and transfers of interests in real property,
by specifying an exemption for such conversions in the statute.
Description:
Statutory exemptions to the Realty Transfer Fee include: sales by or to the
United States of America, this State, or any instrumentality, agency, or
subdivision thereof; sales made solely in order to provide or release security for
a debt or obligation; a transaction which confirms or corrects a deed previously
recorded; on a sale for delinquent taxes or assessments; on partition; by a
receiver, trustee in bankruptcy or liquidation, or assignee for the benefit of
creditors; deeds eligible to be recorded as an "ancient deed" pursuant to R.S.
46:16-7; sales acknowledged or proved on or before July 3, 1968; sales
between husband and wife, or parent and child; sales conveying a cemetery lot
or plot; in specific performance of a final judgment; releasing a right of
reversion; previously recorded in another county and full Realty Transfer Fee
paid; sales by an executor or administrator of a decedent to a devisee or heir to
effect distribution of the decedent’s estate in accordance with the provisions of
the decedent’s will or the intestate laws of this State; sales recorded within 90
days following the entry of a divorce decree which dissolves the marriage
between grantor and grantee; q) issued by a cooperative corporation, as part
of a conversion of all of the assets of the cooperative corporation into a
condominium, to a shareholder upon the surrender by the shareholder of all of
the shareholder’s stock in the cooperative corporation and the proprietary
lease entitling the shareholder to exclusive occupancy of a portion of the
property owned by the corporation.
Reliability:
3 Based on data files of incomplete or unverified information from actual tax
returns
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Transfer Inheritance and Estate Taxes
Overview
Description
The Transfer Inheritance Tax applies to the transfer of all real and tangible personal property located
in New Jersey and intangible personal property wherever situated in estates of resident decedents.
In estates of nonresident decedents, the tax applies to real property and tangible personal property
located in the State of New Jersey.
The Estate Tax is imposed in addition to the Transfer Inheritance Tax on the estates of resident
decedents. An Estate Tax is payable if the Inheritance Tax paid to New Jersey is less than the portion
of the Federal credit for state death taxes which is attributable to New Jersey property.
Rate
The Transfer Inheritance Tax rates depend on the amount received and the relationship between the
decedent and the beneficiary. No tax is imposed on class A beneficiaries (father, mother,
grandparents, descendants, spouses, civil union partners, or domestic partners). Class C beneficiaries
(brother or sister of decedent; husband, wife, or widow(er) of a child of decedent; civil union partner
or surviving civil union partner of a child of decedent) are taxed at 11%–16%, with the first $25,000
exempt. Class D beneficiaries (not otherwise classified) are taxed at 15%–16%, with no tax on
transfers having an aggregate value of less than $500. Charitable institutions are exempt from tax.
For decedents dying on or before December 31, 2001, the Estate Tax is based upon the credit for
state inheritance, estate, succession, or legacy taxes allowable under the provisions of the Internal
Revenue Code in effect on the decedent’s date of death. For decedents dying after December 31,
2001, the Estate Tax is based upon the credit for state inheritance, estate, succession, or legacy taxes
allowable under the provisions of the Internal Revenue Code in effect on December 31, 2001.
During 2001 there was no Federal estate tax due on Federal estates of less than $675,000. Under the
provisions of the Federal Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the
applicable Federal exclusion amounts were increased to:
2002 and 2003
2004 and 2005
2006, 2007, and 2008
2009
2010
$ 1.0 Million
1.5 Million
2.0 Million
3.5 Million
Tax Repealed
The New Jersey Estate Tax exclusion was frozen at the 2001 level for decedents dying in 2002 and
thereafter. The Estate Tax is an amount equal to the Federal credit for inheritance, estate,
succession, and legacy taxes allowable under provisions of the Internal Revenue Code in effect on
December 31, 2001. A reduction is permitted for that portion of the credit which is attributable to
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property located outside New Jersey plus any Inheritance Tax paid to New Jersey.
Exemptions from Transfer Inheritance Tax
• All transfers having an aggregate value under $500;
• Life insurance proceeds paid to a named beneficiary;
• Charitable transfers for the use of any educational institution, church, hospital, orphan asylum,
public library, etc.;
• Transfers for public purposes made to New Jersey or any political subdivision thereof;
• Federal civil service retirement benefits payable to a beneficiary other than the estate,
executor, or administrator;
• Annuities payable to survivors of military retirees; and
• Qualified employment annuities paid to a surviving spouse, civil union partner, or domestic
partner.
Disposition of Revenues
Revenues are deposited in the State Treasury for general State use.
History
New Jersey first imposed an inheritance tax in 1892 at a rate of 5% on property transferred from a
decedent to a beneficiary.
In 1909, legislation was enacted which formed the basis of the present Transfer Inheritance Tax
(N.J.S.A. 54:33-1 et seq.).
In 1934, legislation was enacted which formed the basis of the Estate Tax (N.J.S.A. 54:38-1 et seq.).
On June 30, 1992, the filing date for estate taxes for decedents dying after March 1, 1992, was
shortened. The due date had been the later of 18 months after the date of death or 60 days after the
Federal notification of Federal estate tax due. The new due date is 9 months after date of death (C.
39, P.L. 1992). Estate taxes are paid by the estate to the extent that inheritance taxes are below the
Federal credit for State taxes.
On February 27, 1985, an amendment to the Transfer Inheritance Tax Act (C. 57, P.L. 1985)
eliminated from taxation transfers from decedents to surviving spouses (retroactive to January 1,
1985) and to other Class A beneficiaries on a phased-out basis through July 1, 1988. On July 1, 1988,
other Class A beneficiaries became totally exempt from the tax. Class C beneficiaries were granted a
$25,000 exemption effective on July 1, 1988.
In July 2002, legislation (C. 31, P.L. 2002) was enacted changing the manner in which Estate Tax is
computed for the estates of decedents dying after December 31, 2001. Under the changes made to
the Federal estate tax law, New Jersey’s Estate Tax would have been phased out over a three-year
period.
P.L. 2003, C. 246, the Domestic Partnership Act, recognized domestic partnerships and provided
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certain rights and benefits to individuals participating in them. The Act made significant changes to
the New Jersey Inheritance Tax for individuals dying on or after July 10, 2004. Transfers made to a
surviving domestic partner were made exempt from the Inheritance Tax.
P.L. 2004, C. 132, enacted August 31, 2004, and effective on the 180th day following enactment,
makes important changes in the way estates and trusts must be administered. This change would
indirectly affect both Inheritance and Estate Tax.
P.L. 2005, C. 331, provides a surviving domestic partner with the same intestacy rights as a surviving
spouse. Additionally, a surviving domestic partner now has the right to take an elective share in a
deceased partner’s estate, be appointed administrator of the estate, and make funeral
arrangements.
P.L. 2006, C. 103, provides a civil union partner with the same rights as a spouse. Surviving civil union
partners are exempt from the Inheritance Tax and are entitled to the same New Jersey Estate Tax
marital deduction as a surviving spouse.
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Transfer Inheritance and Estate Taxes
1
Increasing Class A Beneficiary to Highest Rate – Filed Returns
Citation: N.J.S.A. 54:34-1 et seq. (Amended 1951, c. 250; 1953, c. 51, § 139; 1979, c. 413; 1991, c.
91, § 510; 2003, c. 246, § 36, eff. July 10, 2004).
Effective Date: 1/12/2004
2015 Estimate:
$675,000,000
Applied Date: 7/10/2004
2
Objective:
To define the terms "estate", "property", and "transfer" for use throughout the
subsequent chapters.
Description:
Transfers to a spouse or domestic partner are totally exempt where the
decedent dies on or after January 1, 1985. Domestic partners dying on or after
July 10, 2004 and civil union partners dying after February 19, 2007 also
afforded the same treatment.
Reliability:
2 Based on a sample of verified tax returns
Increasing Class C Beneficiary Taxes to Highest Rate
Citation: N.J.S.A. 54:34-3a.(2)
Effective Date: 7/1/2002
2015 Estimate:
$50,000,000
Objective:
To recognize domestic partnerships and provide certain rights and benefits for
those participating in them. To grant both Class C beneficiaries and domestic
partners a 25,000 tax exemption.
Description:
For decedent who die on or after July 1, 1988 certain transfers of $25,000 or
less are exempt, for civil union partners the same rules apply for those dying
after February 19, 2007.
Data Source
Division of Taxation Records
Reliability:
2 Based on a sample of verified tax returns
- 190 -
Appendix I
The following statutory provisions, segregated by tax, have been deemed tax expenditures. This agency
cannot make estimates of their value at this time.
Gross Income Tax
Credit
23
N.J.S.A. 54A:6-21 (P.L. 1983, c. 571)
Employer 401(k) Contributions
Deduction/Exemption
28
Gambling Losses
N.J.S.A. 54A:5-1(g) (P.L. 1976, c.47;
amended 1977, c.40, 1977, c.273, 1981,
c.423, 1983, c.571, 1987, c.76, 1987,
c.310, 1990, c.79, 1993, c.173, 1997,
c.414, 1998, c.57)
6
Cafeteria Plan, Qualified Option
N.J.S.A. 54A:6-24 (P.L. 1995, c.111)
8
Cash or Assistance from a Charitable Organization
N.J.S.A. 54A:6-5, N.J.S.A. 54A:6-22
9
Certain Exclusions from Military Pay
N.J.S.A. 54A:6-7 (P.L. 1976, c. 47)
10
Charitable Trust or Pension/Profit Sharing Plan Trust
N.J.S.A. 54A:2-1 (P.L. 1976, c.47)
12
Commuter Transportation Benefits
N.J.S.A.54A:6-23 (P.L. 1993, c.108;
amended 1996, c.121; 2001, c.162)
14
Damages for Personal Injury or Illness
N.J.S.A. 54A:6-6 (P.L. 1976, c. 47)
20
Education IRA or State Tuition Plan Earnings
N.J.S.A. 54A:6-25 (P.L. 1997, c. 237;
amended P.L. 1999, c.46, c.116, P.L.
2001, c.262)
21
Employee 401(k) Contributions
N.J.S.A. 54A:6-21 (P.L. 1983, c. 571)
22
Employee's Death Benefits
N.J.S.A. 54A:6-4 (P.L. 1976, c. 47)
24
Employer Contributions to Retirement Plans
P.L. 1976, c.47
27
Family Leave Benefits
29
Gifts and Inheritances
N.J.S.A. 54A:6-5 (P.L. 1976, c. 47)
32
Holocaust Reparations and Restitution
N.J.SA. 54A:6-29 (P.L. 1998, c.113)
33
Homeless Persons' Assistance Programs
N.J.S.A. 54A:6-22 (P.L. 1988, c.29;
amended P.L. 2008, c.127)
34
Life Insurance Payments
N.J.S.A. 54A:6-4 (P.L. 1976, c. 47)
35
Loan Redemption
N.J.S.A. 54A:6-25.1 (P.L. 2005, c.157)
Exclusion
- 191 -
38
Medical Savings Account Contributions
N.J.S.A. 54A:6-27 (P.L. 1997, c.414)
39
Military Pension and Survivor's Benefit Payments
N.J.S.A. 54A:6-26 (P.L. 1997, c.409;
amended 2001, c.84)
44
Permanent Disability Exclusion
N.J.S.A. 54A:6-10 (P.L. 1976, c. 47)
49
Railroad Retirement Exclusion
N.J.S.A. 54A:6-3 (P.L. 1976, c. 47)
50
Roth IRA Distributions
N.J.S.A. 54A:6-28 (P.L. 1998, c.57)
51
Scholarships and Fellowship Grants
N.J.S.A. 54A:6-8 (P. L. 1976, c. 47)
58
Victims of September 11, 2001 Terrorist Attacks
(N.J.S.A. 54A:6-30) P.L. 2003, c.9
59
Welfare Assistance Payments
N.J.S.A. 54A:6-13
60
Worker's Compensation Exclusion
N.J.S.A. 54A:6-6 (P.L. 1976, c. 47)
Sales and Use Tax
Exclusion
1
Admission to Athletic Games: Elementary or
Secondary Schools
N.J.S.A. 54:32B-9(f)(2)(A) (P.L.1997,
c.162, s.27)
2
Admissions Charges from an Exempt Organization
N.J.S.A. 54:32B-9(f) (P.L. 1997, c.162)
10
Capital Improvements to Real Property
N.J.S.A. 54:32B-3(b)(4) (P.L. 1966, c.30)
12
Casino Parking Charges pursuant to an agreement
between the CRDA and a Casino Operator
N.J.S.A. 54:32B-3(i)
29
Direct Mail Advertising and Processing Services (as
defined in N.J.S.A. 54:32B-3(b)(5))
N.J.S.A. 54:32B-3(b)(5) (L. 2008, c.123)
31
Distribution of Certain Corporate Property
N.J.S.A. 54:32B-(2)(e)(4)(c)
36
Employer Provided Parking
N.J.S.A. 54:32B-3(i) (L. 2007, c.105)
52
Food and Drink for Airline Passengers
N.J.S.A. 54:32B-3
55
Food Sold by a Manufacturer
N.J.S.A. 54:32B-3(c)(3)(ii)(A)
56
Food Sold in an Unheated State
N.J.S.A. 54:32B-3(c)(3)(ii)(B)
57
Food that is Cut, Repacked or Pasteurized by the Seller N.J.S.A. 54:32B-3(c)(3)(i)(B)
59
Garment Services
N.J.S.A. 54:32B-3(b)(2)(iii)
63
Hotel Occupancy by a Permanent Resident
N.J.S.A. 54:32B-2(m)
66
Inconsequential Tangible Personal Property
N.J.S.A. 54:32B-(2)(e)(4)(A)
67
Initiation Fees and Membership Dues: Exempt Entity
Operated
N.J.S.A. 54:32B-3(h)(2)
68
Initiation Fees and Membership Dues: Youth
Membership
N.J.S.A.54:32B-3(h)(1)
69
Interest, Financing, and Carrying Charges
N.J.S.A. 54:32B-2(oo)(2)(B)
- 192 -
72
Limousine Services - Funerals
N.J.S.A.54:32B-3(b)(13)
81
Milk Sales by Coin-Operated Vending Machine
N.J.S.A. 54:32B-3(c)(2)
86
Non-Reimbursed Discounts
N.J.S.A. 54:32B-2(oo)(2)(A)
89
Parking Charges Subject to Other Taxes
N.J.S.A. 54:32B-3(i)
90
Parking Charges Subject to the Atlantic City Parking
Fee
N.J.S.A. 54:32B-3(i)
92
Partnership Distributions (as defined in N.J.S.A.
54:32B-(2)(e)(4)(D))
N.J.S.A. 54:32B-(2)(e)(4)(D)
93
Prepared Food Delivered to Homebound
N.J.S.A. 54:32B-3(c)(1)
96
Private Services to a Homeowner
N.J.S.A. 54:32B-3(b)(2)(i)
98
Property Contributed Towards Partnership Interest
N.J.S.A. 54:32B-(2)(e)(4)(F)
105
Radio and Television Programming Services
N.J.S.A. 54:32B-2(cc)(13)
110
Residential Home Heating System services (as defined N.J.S.A. 54:32B-3(b)(4)
in N.J.S.A. 54:32B-3(b)(4))
111
Residential Parking
N.J.S.A. 54:32B-3(i)
116
Sales of Property held for Security
N.J.S.A. 54:32B-(2)(e)(4)(G)
118
Services Performed as an Employee
N.J.S.A. 54:32B-3
119
Services Rendered by Certain Individuals
N.J.S.A. 54:32B-3(b)(2)(v)
120
Services to Exempt Medical Equipment
N.J.S.A. 54:32B-3(b)(2)
122
Shoe Repairs
N.J.S.A. 54:32B-3(b)(2)(iv)
124
Storage of Property Held for Sale
N.J.S.A. 54:32B-3
127
Taxes Imposed on the Consumer
N.J.S.A. 54:32B-2(oo)(2)(c)
128
Transfer of Property for Corporate Stock
N.J.S.A. 54:32B-(2)(e)(4)(E)
129
Transfer of Property to a Corporation
N.J.S.A. 54:32B-(2)(e)(4)(B)
Exemption
5
Barges
N.J.S.A. 54:32B-8.12 (P.L. 1988, c.53)
6
BPU-Regulated Service Provider purchases of
equipment (as defined in N.J.S.A. 54:32B-8.13©
N.J.S.A. 54:32B-8.13(c) (L. 1980, c. 105, §
25; amended 1985, c. 266; 1989, c. 2, §
1; 1995, c. 317; 1996, c. 26, § 18; 1997,
c. 162, § 23).
8
Building Materials and Supplies Purchased for an
Exempt Organization
N.J.S.A.54:32B-8.22 (P.L. 1980, c. 105,
amended 1983, c. 303, § 31; P.L. 1988, c.
83, § 1; P.L. 1988, c. 93, § 5; P.L. 2006,
c. 34, § 2)
- 193 -
11
Cargo Containers
N.J.S.A. 54:32B-8.12 (P.L. 1980, c. 105, §
24; amended P.L. 1981, c. 218, § 1; P.L.
1988, c. 53; P.L. 1999, c. 273)
13
Casual Sales
N.J.S.A. 54:32B-8.6 (P.L. 1980, c. 105, §
18; amended P.L. 1983, c. 400, § 7; P.L.
1989, c. 123, § 4; P.L. 2005, c. 126, § 10.)
15
Chemicals and Catalysts used in manufacturing
processes
N.J.S.A. 54:32B-8.20 (L. 1980, c. 105, 32,
eff. Sept. 11, 1980)
17
Cogeneration Facility purchases of machinery and
apparatus (as defined in N.J.S.A. 54:32B-8.13(d))
N.J.S.A. 54:32B-8.13(d)
18
Coin-Operated Telephone Service
N.J.S.A. 54:32B-8.58 (P.L. 2008, c. 123, §
16)
19
Coin-Operated Vending Machine Sales under $.25
N.J.S.A. 54:32B-8.9
20
Commercial Fishing Boats and Boat Repairs
N.J.S.A. 54:32B-8.12
21
Commercial Fishing Vessels
N.J.S.A. 54:32B-8.12
22
Commercial Trucks and Truck Repairs (as defined in
N.J.S.A. 54:32B-8.43)
N.J.S.A. 54:32B-8.43 (L. 1990, c. 115, § 3)
23
Commercial Trucks Used for Interstate Travel
N.J.S.A.54:32B-8.43
24
Concession Stand Sales: State-Owned Veterans
Facilities
N.J.S.A. 54:32B-8.54
26
Diabetic Supplies
N.J.S.A. 54:32B-8.1
28
Diplomats, Consulates and Foreign Embassies
N.J.S.A. 54:32B-9(a)(3)
32
Durable Medical Equipment
N.J.S.A. 54:32B-8.1 (P.L. 1980, c. 105, §
13; amended 1982, c. 227, § 5; 1987, c.
383, § 1; 2005, c. 126, § 7; 2008, c. 123,
§ 6).
35
Electronically Delivered Software for Business Use
N.J.S.A. 54:32B-8.56 (P.L. 2005, c. 126,
§15; amended 2006, c. 44, §12; 2008, c.
123, §11).
37
Energy and Utility Service
N.J.S.A. 54:32B-8.47 (P.L. 1997, c. 162, §
33; amended 2007, c. 94, § 1)
38
Equipment for Printing and Publishing
N.J.S.A. 54:32B-8.29 (P.L. 1980, c. 105,
41. Amended by L. 1985, c. 440, 1)
39
Equipment Used on Boats or Ships
N.J.S.A. 54:32B-8.12 (PL. 1980, c. 105, §
24; amended 1981, c. 218, § 1; 1988, c.
53; 1999, c. 273).
41
Exempt Organizations: Parent-Teachers Associations
N.J.S.A. 54:32B-9(b) (P.L. 1997, c.162)
42
Exempt Organizations: United Nations
N.J.S.A. 54:32B-9(a)(3)
- 194 -
44
Farm machinery and apparatus (as defined in
54:32B-8.16
45
Farm Vehicles and Vehicle Repairs
N.J.S.A. 54:32B-8.43
47
Ferryboats carrying passengers (as defined in N.J.S.A.
54:32B-8.12)
N.J.S.A. 54:32B-8.12 (L. 1980, c. 105, §
24; amended 1981, c. 218, § 1; 1988, c.
53; 1999, c. 273, eff. Nov. 24, 1999)
48
Films, Records and Tapes Used in Radio and Television N.J.S.A. 54:32B-8.18
49
Firearm Safety Locks
N.J.S.A. 54:32B-8.50
50
Firearm Storage Vaults
N.J.S.A. 54:32B-8.51
51
Flag sales (American and New Jersey State )
N.J.S.A. 54:32B-8.26 (P.L. 1980, c.105)
60
Gas, Water, Steam and Fuel in Containers and Bulk
N.J.S.A. 54:32B-8.7
61
Gold and Silver
N.J.S.A. 54:32B-8.32
62
Government-owned Ships and Other Vessels
N.J.S.A. 54:32B-8.12
64
Human Blood and its Derivatives
N.J.S.A. 54:32B-8.1
65
Imprinting Services
N.J.S.A. 54:32B-8.48
73
Limousines and Limousine Repairs
N.J.S.A. 54:32B-8.52
74
Locomotives, Railroad Cars and Other Railroad Rolling
Stock
N.J.S.A. 54:32B-8.27
75
Magazines and Periodicals
N.J.S.A. 54:32B-8.5
76
Marine Terminal Facility equipment and apparatus (as N.J.S.A. 54:32B-8.12 (L. 1980, c. 105, §
defined in N.J.S.A. 54:32B-8.12)
24; amended 1981, c. 218, § 1; 1988, c.
53; 1999, c. 273, eff. Nov. 24, 1999).
77
Marine Terminal Services (as defined in N.J.S.A.
54:32B-8.12)
N.J.S.A. 54:32B-8.12
79
Medical Oxygen
N.J.S.A. 54:32B-8.1
80
Membership Periodicals
N.J.S.A. 54:32B-8.5
82
Mobility Enhancing Equipment
N.J.S.A. 54:32B-8.1
85
Newspapers
N.J.S.A. 54:32B-8.5
87
Out-of-State Sales
N.J.S.A. 54:32B-8.10
95
Printed Advertising Material Delivered Out-of-State
N.J.S.A. 54:32B-8.39
97
Production Machinery
N.J.S.A. 54:32B-8.13(a)
100
Property Used in Research and Development or
Laboratory Sense
N.J.S.A. 54:32B-8.14
102
Protective Work Equipment
N.J.S.A. 54:32B-8.4
103
Public Passenger Buses
N.J.S.A. 54:32B-8.28 (P.L. 1991, c.497)
- 195 -
106
Recycling Eqauipment purchases (as defined in N.J.S.A. N.J.S.A. 54:32B-8.36
54:32B-8.36)
107
Rental of Tangible Personal Property to Related Parties N.J.S.A. 54:32B-8.53
108
Repairs to Certain Aircraft
N.J.S.A. 54:32B-8.35(b)
112
Sale-Leaseback Transactions
N.J.S.A. 54:32B-8.57
114
Sales by a Mortician, Undertaker or Funeral Director
N.J.S.A. 54:32B-8.17
115
Sales of Certain Aircraft
N.J.S.A. 54:32B-8.35(a)
123
Solar Energy Devices and System Components
N.J.S.A. 54:32B-8.33
125
Tax Exempt Organizations: National Guard and War
Veteran Posts
N.J.S.A. 54:32B-9(b)(4)
126
Tax Exemption for Certain Fishing Vessels and
Equipment
N.J.S.A. 54:32B-8.12 (P.L. 1980, c. 105, §
24; amended 1981, c. 218, § 1; 1988, c.
53; 1999, c. 273)
130
Transportation Charges Exemption
N.J.S.A. 54:32B-8.11 (P.L. 1980, c. 105, §
23; amended 1997, c. 162, § 22; 2006, c.
44, § 8)
133
Utility Equipment Purchases (as defined in N.J.S.A.
54:32B-8.13(b))
N.J.S.A. 54:32B-8.13(b)
134
Vessels of 50-ton burden or more (as defined in
N.J.S.A. 54:32B-8.12)
N.J.S.A. 54:32B-8.12 (P.L. 1980, c. 105, §
24; amended 1981, c. 218, § 1; 1988, c.
53; 1999, c. 273)
135
Volunteer Fire and Similar Emergency Companies'
purchases (as defined in N.J.S.A. 54:32B-9(b))
N.J.S.A. 54:32B-9(b)
136
Wrapping Supplies
N.J.S.A. 54:32B-8.15
Corporation Business Tax
Credit
9
Digital Media Production Credit
N.J.S.A. 54:10A-5.39
Exemption
6
Business Income of Non-Profits
N.J.S.A. 54:10A-3(e)
8
Cemetery Corporations not conducted for profit
N.J.S.A. 54:10A-3(d)
23
Non-Profit Corporations
N.J.S.A. 54:10A-3(e) (P.L. 1945, c. 162)
24
Non-Profit Retirement Communities
N.J.S.A. 54:10A-3(h) (P.L. 1973, c. 275)
25
Non-Stock Residential Housing
N.J.S.A. 54:10A-3(g) (P.L. 1963. Ch 59)
Cigarette Tax
Exemption
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3
U.S. Constitution Federal laws
N.J.S.A. 54:40A-8 through N.J.S.A.
54:40A-10, N.J.A.C. 18:5-2.4
4
U.S. V.A. for Free Distribution to Hospitalized Veterans. N.J.S.A. 54:40A-10 (P.L. 1948, c. 65, p.
159, §303, amended P.L. 1955, c. 18)
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Text0:
Taxes of the State of New Jersey
The following outline provides basic information regarding taxes imposed by the State of New Jersey
and administered by the Division of Taxation and the Division of Revenue which a new business may be
responsible for collecting and paying.
NEW JERSEY GROSS INCOME TAX
(N.J.S.A. 54:A:1-1 et seq.)
Personal income tax is imposed on the New Jersey taxable income of resident and nonresident
individuals, estates and trusts for taxable years ending on or after July 1, 1976. Residents are subject to
tax on all income, regardless of where it was earned, while nonresidents are only subject to tax on
income derived from sources within New Jersey.
The withholding requirements apply to every New Jersey employer making payment of taxable wages.
For New Jersey Gross Income Tax purposes, the term "employer" includes organizations that may be
exempt from Federal income tax or New Jersey Corporation Business Tax, such as religious
organizations and governmental agencies.
Generally, anything regarded as "wages" for Federal withholding purposes is subject to withholding for
the New Jersey Income Tax. Every employer is required to file a quarterly return of tax withheld
(NJ-927) for each calendar quarter. Some employers are also required to file a monthly remittance
(NJ-500). Employers classified as "weekly payers" must remit payment of withholdings by means of
Electronic Funds Transfer (EFT) on the Wednesday of the week following the week in which the taxes
were withheld. Employers not classified as weekly payers must remit the tax withheld with their
withholding return either monthly or quarterly, depending on the amount of withholding liability.
RECIPROCAL AGREEMENT
(New Jersey & Pennsylvania Residents Only)
Under the Reciprocal Tax Agreement, the compensation derived by residents of either state (New
Jersey or Pennsylvania) will be subject to income tax only in the state of residence including
compensation income derived from sources within the other state.
Compensation that is limited to the provisions of the Reciprocal Agreement means salaries, wages, tips,
fees, commissions, bonuses and other remuneration received for services rendered. Businesses or
professional income earned by a resident of either state is not covered by the Reciprocal Agreement
and is subject to the income tax of the state in which it is earned.
WITHOLDING REQUIREMENT FOR CONTRACTOR SERVICES
(N.J.S.A. 54A:7-1)
Effective January 1, 2007, the law requires persons, other than a governmental entity, homeowner, or
tenant, who maintains an office or transact business in New Jersey and make payments for services to
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certain unincorporated construction contractors and unregistered individuals to withhold New Jersey
gross income tax at the rate of 7% from those payments. For more information regarding the
withholding requirement for contractor services, go to the Division's Web site at:
www.state.nj.us/treasury/taxation/noticegit.shtml.
UNEMPLOYMENT & DISABILITY TAXES
If you are employing, or expect to employ, one or more persons, you should notify the Division of
Revenue so that a determination can be made as to whether or not you are subject to the law. Under
the law (N.J.S.A 43:21-19(h1) et seq.) it is your responsibility to make the fact known.
Determination of Liability - If you start a business and employ one or more individuals and pay wages
of $1,000 or more in a calendar year, you may be subject to the law.
If you acquire the organization, trade or business, or substantially all the assets of an employing unit
which is already subject to the law, you immediately become a subject employer.
If you are subject to the provisions of the Federal Unemployment Tax Act (FUTA) you automatically
become subject under the law, unless the services performed are specifically excluded under the New
Jersey law. An employing unit is generally subject to FUTA if it had covered employment during some
portion of a day in 20 different calendar weeks within the calendar year or had a quarterly payroll of
$1 ,500 or more.
Note: Agricultural Employers -You are liable for contributions on wages paid to agricultural employees
if:
1. You were already a registered employer, or
2. Not registered, you were or became subject to the Law, having paid wages of $1,000 or more in a
calendar year to one or more workers for services performed in a non-agricultural business
operation, or
3. You acquired the organization, trade or business, or substantially all the assets of an employing
unit already subject to the law, or
4. You are subject to the Federal Unemployment Tax Act, or
5. Not subject under the above provisions, you:
1. Paid gross cash remuneration of $20,000 or more to individuals employed in agricultural
labor during any calendar quarter, or
2. Employed ten or more individuals in agricultural labor, regardless of whether they were
employed at the same moment of time, for some portion of a day in each of 20 different
calendar weeks, whether or not such weeks were consecutive.
Special Employers - Under certain circumstances, a crew leader who provides a crew to an agricultural
employer, can be considered the employer of the crew for unemployment tax purposes. The
agreement between the crew leader and entity must comply with all Federal and State regulations and
the crew leader must be registered under the New Jersey Crew Leader Registration Act. For further
information contact any Regional Office.
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Domestic Employers - In order for you to become subject to the law, you must have paid gross cash
wages of at least $1,000 to domestic labor in a calendar quarter.
The State of New Jersey and its political subdivisions are subject to the law.
SET OFF OF INDIVIDUAL LIABILITY
(N.J.SA 54A:9-7 et seq.)
Public Laws of 1981, Chapter 239, provides the authority for the New Jersey Department of Treasury to
apply or cause to be applied any monies due a taxpayer as a Gross Income Tax refund or Homestead
Property Tax rebate, or both, if necessary, toward satisfaction of any indebtedness that the taxpayer
may have outstanding to any agency or institution of the New Jersey State Government or the Federal
Internal Revenue Service.
CORPORATION BUSINESS TAX
(N.J.S.A .. 54:10A-1 et seq.)
The Corporation Business Tax Act imposes a franchise tax for the privilege of having or exercising a
corporate charter, deriving income or doing business, employing or owning capital or property or
maintaining an office in New Jersey. The tax also applies to foreign corporations falling into one of the
following categories:
• Holds a general Certificate of Authority issued by the Division of Revenue to do business in New
Jersey, or
• Holds a certificate, license, or other authorization issued by another New Jersey department or
agency authorizing it to engage in business within New Jersey, or
• Employs or owns capital in New Jersey, or
• Employs or owns property in New Jersey, or
• Maintains an office in New Jersey, or
• Derives receipts from sources in New Jersey, or
• Engages in contacts in New Jersey, or
• Does business in New Jersey.
Returns are required to be filed on or before the 15th day of the fourth month following the close of
the taxpayer's accounting period.
Every corporation must, before commencing to do business in this State, obtain a Corporate Charter
from the Division of Revenue.
NEW JERSEY S CORPORATIONS
Chapter 173, P.L. 1993, provides that a corporation may elect to be treated as a New Jersey S
Corporation. A corporation may make the election to be treated as a New Jersey S Corporation only if
the corporation is or will be an S Corporation pursuant to Section 1361 of the Federal Internal Revenue
Code, and each initial shareholder of the corporation consents to the election and the jurisdiction
requirements by submitting the S Corporation election form (CBT-2553).
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NOTICE OF BUSINESS ACTIVITIES REPORTING ACT
(N.J.S.A. 14A:13-14 to 14A:13-23)
Foreign corporations which carryon any activity or own or maintain any property in this state, unless
specifically exempted, must file an annual Notice of Business Activities Report. No report is necessary if
the foreign corporation has received a Certificate of Authority to do business in New Jersey or has filed
a timely return as required under the Corporation Business Tax or the Corporation Income Tax Acts.
The failure of a foreign corporation to file a timely report may prevent the use of the courts in New
Jersey for all contracts executed and all causes of action that arose at any time prior to the end of the
last accounting period for which the corporation failed to file a required timely report.
CORPORATION BANKING AND FINANCIAL BUSINESS TAX
(N.J.S.A. 54:10A-l et seq.)
Banking and financial businesses that operate as corporate entities are subject to the provisions of the
New Jersey Corporation Business Tax Act. For a calendar year operation, a Banking and Financial
Corporation Return (BFC-l) is due on the 15th day of April or the 15th day of the fourth month after the
close of the fiscal year.
SALES AND USE TAX
(N.J.S.A. 54:32B-l et seq.)
A tax is imposed on the receipts from every retail sale or rental of tangible personal property, food and
beverage sold by restaurants or caterers, and charges for admissions and occupancies of hotel rooms
except as otherwise provided in the Act. The tax is also imposed on the receipts from every sale except
for resale of certain services as enumerated in the Act including, for example, installing, repairing or
maintaining tangible or real property, storage services, telecommunications, direct mail processing,
investigation and security services.
A use tax is imposed on items acquired for use in this State on which a sales tax would be due but has
not been paid.
The law exempts many items such as food ingredients for human consumption, prescription drugs,
ordinary clothing and footwear, and utilities such as water, steam, and fuel.
The Act further provides tax exemptions for certain items and services when used or consumed under
specifically defined conditions or circumstances.
The sales tax is imposed on the consumer; however, every person required to collect any tax imposed
by this Act shall be personally liable for collecting and remitting such tax.
Persons required to collect the tax and persons accepting exemption certificates must complete the
Registration Application (NJ-REG).
Sales and use tax returns (Forms ST-50/ST-51) must be filed electronically, either online or by phone. All
vendors are required to file quarterly returns (Form ST-50), and some vendors may also have to file
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monthly returns (ST-51).
SALEM COUNTY
(N.J.SA 54:32B-8.45 et seq.)
Certain sales made by businesses located in Salem County are taxable at a reduced sales tax rate. To
qualify for the rate, the sale must be made from a place of business regularly operated by the vendor
for the purpose of making retail sales at which items are regularly exhibited and offered for retail sale
and which is not utilized primarily for the purpose of catalogue or mail order sales. Also, merchandise
must be ordered or picked up in person by the purchaser at the place of business in Salem County.
Salem County vendors file the ST-450 return.
ATLANTIC CITY LUXURY SALES TAX
(N.J.S.A. 40:48-8.15 et seq.)
Atlantic City imposes a tax on specified retail sales or sales at retail occurring within the city limits.
"Retail sale" or "sale at retail" is defined to include:
• Any sale in the ordinary course of business for consumption of whiskey, beer or other alcoholic
beverages by the drink in restaurants, cafes, bars, hotels, and similar establishments;
• Any cover, minimum, entertainment or other similar charge made to any patron of any
restaurant, cafe, bar, hotel or other similar establishment;
• The hiring (with or without service) of any room in any hotel, inn, rooming or boarding house;
• The hiring of any rolling chair, beach chair or cabana; and
• Admissions to any theater, moving picture, pier, exhibition or place of amusement.
Vendors are required to be licensed. Sales to or by the State of New Jersey or its political subdivisions,
sales exempt under Federal law, and sales by a church or bona fide nonprofit charitable association are
exempt.
The ST-250 return is required to be filed by vendors on or before the 20th day of each month covering
receipts for the preceding calendar month. Taxes are paid by the purchaser to the vendor who remits
the tax to the State. Payment accompanies the return.
CAPE MAY COUNTY TOURISM SALES TAX
(N.J.S.A. 40:54D-l et seq.)
The Tourism Improvement and Development District Act authorizes qualified municipalities to levy an
additional sales tax on predominantly tourism-related retail sales. The retail sales to be taxed include
admissions, hotel occupancies, food and drink sold in restaurants, or similar establishments.
To qualify for the additional sales tax, all such retail sales must be taxable under the Sales and Use Tax
Act (P.L. 1966, c. 30; N.J.S.A. 54:32B-l et seq.). The local sales tax would "piggyback" onto the State
sales tax which would be collected by the Division of Revenue and placed in a special reserve fund to
pay principal and interest on bonds and notes issued by the tourism authority for financing tourism
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promotion activities and projects within the district. Businesses that make sales of tourism-related
items will file the ST-350 return on a monthly basis.
URBAN ENTERPRISE ZONE
(N.J.S.A. 52:27H-60 et seq.)
The Urban Enterprise Zone Act authorizes certain tax benefits for businesses designated as "qualified"
by the Department of Commerce and Economic Development. These tax benefits are covered under
the Sales and Use Tax Act and the Corporation Business Tax Act.
Application can be made with the Division of Revenue for these benefits only after the business has
been designated as "qualified" by the Department of Commerce and Economic Development.
STATE OCCUPANCY FEE AND MUNICIPAL OCCUPANCY TAX
(N.J.S.A. 40:48E-l et seq.)
As of August 1, 2003, there is a State Occupancy Fee imposed on the rental of a room in a hotel, motel
or similar facility, other than for assembly purposes. The rate in all municipalities other than Newark,
Jersey City, Atlantic City, Wildwood, Wildwood Crest and North Wildwood was 7% as of August 1, 2003,
and is reduced to 5% as of July 1, 2004. The State Occupancy Fee in those specific municipalities
remains constant at 1%, except for the Wildwoods, where it is 3.15%. In addition, each municipality
may adopt an ordinance imposing a Municipal Occupancy Tax which can be imposed at a rate of up to
1% as of August 1, 2003, and up to 3% as of July 1, 2004.
There is an exemption from the State Occupancy Fee and Municipal Occupancy Tax for rentals by
agencies and instrumentalities of the Federal government, agencies, instrumentalities and political
subdivisions of the State of New Jersey and the United Nations and similar organizations. Holders of an
Exempt Organization Certificate (ST-5) are not exempt from the Occupancy Fee or Tax.
All businesses engaged in renting rooms in a hotel or similar facility must file the HM-100 Return by the
20th of each month and report and remit the State Occupancy Tax and the Municipal Occupancy Fee, if
applicable. The HM-100 is also available on the Division's Web site.
ALCOHOLIC BEVERAGE TAX
(N.J.S.A. 54:43-1 et seq.)
The Alcoholic Beverage Tax Act imposes taxes on alcoholic beverages.
The Alcoholic Beverage Tax is to be paid by manufacturers, wholesalers and other persons licensed by
the Division of Alcoholic Beverage Control.
Retail licenses are authorized and issued by municipalities of New Jersey.
CIGARETTE TAX
(N.J.SA 54:40A-1 et seq.)
A tax is imposed on the sale, use or possession for sale or use within New Jersey of all cigarettes.
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License fees are payable by distributors, wholesalers, manufacturers, retailers and vending machine
retailers.
MOTOR FUELS TAX
(N.J.S.A. 54:39-101 et seq.)
The motor fuels tax applies to sales of gasoline, diesel fuel or liquefied petroleum gas used in motor
vehicles on pu blic highways.
NOTE: Motor Fuels Use Tax (N.J.S.A. 54:39A-1 et seq.) is administered by the New Jersey Division of
Motor Vehicles and imposes a fuel use tax on certain commercial and omnibus vehicles. This tax is
based on the amount of motor fuels used in their operations within New Jersey. For further
information, contact the New Jersey Division of Motor Vehicles, 20 S. Montgomery Street, Trenton,
New Jersey 08660 or at www.state.nj.us/mvs/
INSURANCE PREMIUMS TAX
(N.J.S.A. 54:16-1 et seq., 16A-1 et seq., 54:18A-1 et seq., 54:17-4 et seq.)
Insurance Premiums Tax applies to premiums collected on insurance risks in this State during the
preceding calendar year. The tax applies to every stock, mutual and assessment insurance company
organized or existing under any general or special law of this State or any other state or foreign country
transacting business in this State.
Taxable premiums of life insurance companies include all gross contract premiums except premiums
for reinsurance and annuity considerations, less certain specified deductions. Non-life companies
generally are taxed upon gross premiums and assessments except reinsurance premiums less certain
deductions.
An annual premium tax return, reporting the tax liability for the preceding calendar year, must be filed
and the tax paid by March 1 of each year. The March 1 return must also include a prepayment of the
current year's tax liability equivalent to 50% of the prior year's tax liability. An additional prepayment of
the current year's liability, also equivalent to 50% of the prior year's tax liability, is due June 1 of each
year.
A tax on the premiums for fire insurance written by a company not organized under the laws of New
Jersey must be reported and paid to the treasurer of a duly incorporated firemen's relief association in
which the fire insurance risk is located by March 1 of each year, covering the preceding calendar year.
The company must also report these premiums on the annual premium tax return. A deduction for the
amount of tax paid directly to a firemen's relief association(s) applicable to the calendar year covered
by the annual premium tax return is allowed.
A tax on the three-year average underwriting profits on ocean marine insurance is reported to the
Commissioner of Insurance by April 1 of each year.
A tax on premiums charged for surplus lines coverage is collected from the insured by the surplus lines
agent.
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Insurance companies may also be subject to retaliatory tax under certain provisions in the law (N.J.S.A.
17:32-15. 17B:23-5).
REALTY TRANSFER FEE
(N.J.S.A. 46:15-5)
Recording of deeds which transfer title to real property in New Jersey is subject to the Realty Transfer
Fee. The fee is collected by the County Clerk or County Registrar of Deeds when the deed is presented
for recording in the county in which the transfer of title occurred.
PUBLIC UTILITY FRANCHISE TAX
(N.J.S.A. 54:30A-49 et seq.)
The Public Utility Franchise and Gross Receipts Taxes apply to persons, co-partnerships, associations,
and corporations, other than those specifically exempted, operating as sewerage or water companies
or providing sewerage and water service in the State of New Jersey.
Inquiries concerning this tax should be directed to the Public Utility Tax Section of the Division of
Taxation at (609) 633-2576.
LOCAL PROPERTY TAX
(N.J.S.A. 54:4-1 et seq.)
The Local Property Tax is measured by property values and is apportioned among taxpayers according
to the assessed value of taxable property owned by each taxpayer. The tax applies to real estate and
tangible personal property of telephone and telegraph companies and messenger systems.
The property tax is a local tax assessed and collected by municipalities for the support of municipal and
county governments and local school districts. No part of it is used for support of State government.
SPILL COMPENSATION AND CONTROL TAX
(N.J.S.A. 58: 1 0-23.11 et seq.)
The Spill Compensation and Control Tax is imposed upon the transfer of petroleum products and other
hazardous substances, as determined by the New Jersey Department of Environmental Protection,
within New Jersey.
The tax is payable by:
1. the operator or owner of the receiving major facility or vessel on a transfer of a hazardous
substance from a major facility or vessel; or
2. the operator or owner of the transferring New Jersey major facility on a transfer of a previously
untaxed non petroleum hazardous substance to a non-major facility; or
3. the owner of a hazardous substance transferred to a public storage terminal from a major facility
or vessel.
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A major facility is a facility with a storage capacity of 200,000 gallons or more for all hazardous
substances, including petroleum products, or a storage capacity of 20,000 gallons or more of non
petroleum hazardous substances.
The SCC-5 return is required to be filed on or before the 20th day of each month for the preceding
month's hazardous substance transfers.
LITTER CONTROL FEE
(N.J.S.A 13:1 E-213 through 13:1 E-223)
The Clean Communities and Recycling Grant Act imposes an annual Litter Control Fee on all gross
receipts from wholesale sales and on all gross receipts from retail sales of litter-generating products
sold within or into New Jersey by each person engaged in business in the State as a manufacturer,
wholesaler, distributor, or retailer of such products. Any retailer with less than $500,000 in annual retail
sales of litter-generating products is excluded from this fee for that calendar year. Annual returns (LF-5)
are required to be filed on or before March 15 of each year.
Litter-generating products are: beer and other malt beverages, cigarette and tobacco products,
cleaning agents and toiletries, distilled spirits, food for human or pet consumption, glass containers
sold as such, groceries, metal containers sold as such, motor vehicle tires, newsprint and magazine
paper stock, nondrug drugstore sundry products, paper products and household paper other than roll
stock and wood pulp, plastic or fiber containers made of synthetic material and sold as such, soft drinks
and carbonated waters, and wine.
SANITARY LANDFILL TAXES
All sanitary landfill taxes are reportable on one consolidated Sanitary
Landfill Tax Return (Form SLT-5).
The Consolidated Sanitary Landfill Tax Return (Form SLT-5) must be filed by the 20th day of the month
following that in which tax liability was first incurred and monthly thereafter.
LANDFILL CLOSURE AND CONTINGENCY TAX
(N.J.S.A. 13:1 E-100 et seq.)
The Landfill Closure and Contingency Tax is levied upon the owner or operator of every sanitary landfill
facility located in New Jersey on all solid waste accepted for disposal.
The Act also requires the sanitary landfill facility owner or operator to establish an escrow account,
administered by the New Jersey Department of Environmental Protection, and to deposit into the
account $1.00 per ton of all solid waste accepted for disposal.
SOLID WASTE SERVICES TAX
(N.J.S.A. 13:1 E-138a)
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The Solid Waste Services Tax is levied on the owner or operator of every sanitary landfill facility in New
Jersey on all solid waste accepted for disposal.
The revenue collected from the Solid Waste Services Tax will be deposited in the Solid Waste Services
Tax fund to be administered by the New Jersey Department of Environmental Protection.
PETROLEUM PRODUCTS GROSS RECEIPTS TAX
(N.J.S.A. 54:15b-1 et seq.)
The Petroleum Products Gross Receipts Tax imposes a tax on (a) the gross receipts derived or gallons
sold from the first sale of petroleum products made to points in New Jersey, and (b) the dollar
consideration given or contracted to be given for petroleum products imported or caused to be
imported for use or consumption within New Jersey.
Receipts from (a) the sale of home heating oil and propane gas used exclusively for residential use, and
(b) the sale of petroleum products to governmental entities and exempt organizations are exempt. This
exemption does not extend to home heating oil and propane gas for commercial use.
Monthly remittances (PPT-41) and Quarterly reconciliation returns (PPT-40) are required to be filed no
later than the 25th day of the month following the end of the month the tax was collected.
TOBACCO PRODUCTS WHOLESALE SALES AND USE TAX
(N.J.S.A. 54:40B-1 et seq.)
The Tobacco Products Wholesale Sales and Use Tax is imposed on sales of all tobacco products
(excluding cigarettes as defined in N.J.S.A 54:40A-2) by a wholesaler or distributor.
Distributors and wholesalers who also sell tobacco products at retail or otherwise use the tobacco
products must pay a compensating use tax on the wholesale sales price of the products.
Monthly returns (TP-20) are required to be filed no later than the 20th day of the month following the
month the tax was collected.
DOMESTIC SECURITY FEE
(N.J.S.A. App. A:9-78 as amended by P.L. 2006, c.42 § 1 )
The Domestic Security Fee Act imposes a $5 per day fee on motor vehicle rental companies for each
day or part thereof that a motor vehicle is rented for the transportation of persons and noncommercial
freight, for a period of not more than 28 days. The fee, which must be designated as the "Domestic
Security Fee" in the rental agreement, is separate from and in addition to any sales tax imposed on the
rental transaction and is not to be included in the receipts subject to sales tax liability assessed
pursuant to the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-1 et seq.).
The fee must be reported on Form DSF-100, which is filed telephonically or by using an Internet based
application on the Division of Taxation's Web site. The quarterly return must be filed whether or not
there are any fees due for the quarter.
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See the Technical Bulletins on this fee at: http://www.state.nj.us/treasury/taxation/publtb.shtml
NEW JERSEY MOTOR VEHICLE TIRE FEE
(N.J.S.A. 54:32F-1)
As of August 1, 2004, a fee of $1.50 per tire is imposed on the retail sale of new motor vehicle tires,
including tires that are a component part of a motor vehicle that is sold or leased. The Motor Vehicle
Tire Fee is imposed on those transactions that are subject to the New Jersey Sales Tax Act. Thus, it is
not imposed on sales made to Federal or State governmental agencies and entities, qualified exempt
organizations; sales for an exempt use; sales to nonresidents. See the Division's July 1, 2004, Notice for
additional information about the Motor Vehicle Tire Fee and valid exemptions at:
www.state.nj.us/treasury/taxation
COSMETIC MEDICAL PROCEDURES GROSS RECEIPTS TAX
(N.J.S.A. 54:32E-1)
Effective September 1, 2004, the law imposes a 6% cosmetic medical procedures gross receipts tax
(CMPGRT) on the purchase of certain "cosmetic medical procedures," which are medical procedures
performed primarily in order to improve a person's appearance.
P.L. 2011, c. 189, which was signed into law on January 17, 2012, phases out the Cosmetic Medical
Procedures Gross Receipts Tax over the next two years. A reduction in the tax is applicable for periods
beginning in calendar year 2012.
Beginning July 1, 2012, the current 6% tax rate imposed on the gross receipts from cosmetic medical
procedures as defined by the Act (N.J.S.A. 54:32E-1) will be reduced. The schedule for the tax phase out
is as follows:
For procedures performed on or after July 1, 2012 but before July 1, 2013 the tax rate will be 4%.
For procedures performed on or after July 1, 2013 but before July 1, 2014, the tax rate will be 2%
For procedures performed on or after July 1, 2014 the tax rate will be 0% (the tax is entirely
eliminated).
Note: The first returns reflecting the collection of tax at the 4% rate will be due on October 20, 2012.
The tax does not apply to procedures that significantly serve to prevent or treat illness or disease or to
correct abnormalities caused by birth defects, developmental abnormalities, trauma, tumors, infection
or disease, or to promote proper functioning of the body. The tax also applies to the sale of goods and
of facility occupancies (e.g., hospital or clinic stays) that are required for or directly associated with the
taxable cosmetic medical procedure.
Providers of the taxable cosmetic medical procedures, or related goods or occupancies, must collect
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the CMPGRT from the person on whom the taxable procedure is performed. The 6% tax is calculated
on the amount charged to the subject of the taxable procedure for the procedure, or for the associated
goods or occupancies. Providers of taxable cosmetic medical procedures, goods, and occupancies may
include, but are not limited to, surgeons, dermatologists, electrologists, spas, hair replacement
facilities, salons, hospitals, and clinics that may at some time perform cosmetic medical procedures or
provide the subject with medical facility occupancies or goods required for or directly associated with
such procedures.
Every quarter, on the 20th of the month following the end of the quarter, providers must file a
quarterly cosmetic medical procedures gross receipts tax return, CMPT-100, via either Internet or
telephone, and at that time must remit any CMPGRT tax collected during the quarter.
EMERGENCY PREPAREDNESS AND 9-1-1 SYSTEM ASSESSMENT
(N.J.S.A. 52:17C-17 et seq.)
The "Emergency Preparedness and 9-1-1 System Assessment" fee of $.90 is to be charged by:
• Mobile telecommunications companies for each voice grade access service number as part of
mobile telecommunications service provided to a customer billed by or for the customer's home
service provider and provided to a customer with a place of primary use in this State, and
• Telephone exchange companies for each telephone voice grade access service line provided as
part of that telephone exchange service.
The law became effective July 1, 2004, for mobile telecommunications and August 1, 2004, for PBX
Systems.
The fee must be reported on Form ERF-100, which is required to be filed on or before the 20th day of
the month following the close of the calendar quarter and must be filed by phone. Payments must be
made by electronic check, electronic funds transfer, or credit card.
For more information on the "Emergency Preparedness and 9-1-1 System Assessment" fee, please see
"Notice to Telecommunications Providers" available on the Division's Web site found at:
http://www.state.nj.us/treasury/taxation/pdf/911fee.pdf
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