NJ – Division’s claim for repayment of refund upheld

The Appellate Division of the New Jersey Superior Court upheld the Tax Court’s grant of summary judgment to the Division of Taxation (Division) in its claim for a refund of gross income (personal income) taxes erroneously made to beneficiaries of a New Jersey resident trust because a taxpayer, who was acting on behalf of the beneficiaries, failed to establish that the Division’s determination concerning the repayment of refund was incorrect.

NJ Delinquency grace period enacted for taxpayers affected by natural disasters

Enacted New Jersey legislation provides that interest may not be charged to a delinquent property taxpayer in a municipality that has experienced a flood, hurricane, superstorm, tornado, or other natural disaster

Printing and publishing equipment tax in NJ

NJ – Printing and publishing industries publication revised

The New Jersey Division of Taxation has revised a publication that discusses the sales and use tax treatment of printing and publishing industries. The New Jersey sales and use tax law specifically exempts from tax the sale of printing and publishing production machinery, apparatus, or equipment used directly and primarily in publishing newspapers. The exemption also applies to the sale of machinery, apparatus, or equipment used by a commercial printer in the production of tangible property for sale. Commercial printers include those businesses engaged in periodical, book, manifold business form, greeting card, or miscellaneous publishing and typesetting; photoengraving; electrotyping and stereotyping; and lithographic platemaking. Printers and publishers may purchase machinery and equipment without paying sales tax by issuing an Exempt Use Certificate (Form ST-4) or Streamlined Sales and Use Tax Agreement Certificate of Exemption (Form ST-SST) to their supplier. Supplies used with the machinery as well as wrapping equipment and supplies are also exempt when purchased with Form ST-4 or Form ST-SST. However, charges for installation or maintenance contracts for such machinery and equipment are taxable. Publication ANJ-18, New Jersey Division of Taxation, November 23, 2015

 

NJ guidelines for nexus-creating activities

NJ – General guidelines issued for nexus-creating activities

The New Jersey Division of Taxation has issued a bulletin that provides general guidelines for determining whether the activities of a person or business entity create nexus with New Jersey for the purpose of imposing sales and use tax. Specifically, activities occurring in New Jersey that create nexus for sales tax purposes include, but are not limited to:

• selling, leasing, or renting tangible personal property or specified digital products or services;
• maintaining an office, distribution house, showroom, warehouse, service enterprise (like a restaurant, entertainment center, business center, etc.), or other place of business;
• having employees, independent contractors, agents, or other representatives (including salespersons, consultants, customer representatives, service or repair technicians, instructors, delivery persons, and independent representatives or solicitors acting as agents of the business) working in the state;
• selling, storing, delivering, or transporting energy to users or customers;
• collecting initiation fees, membership fees, or dues for access to or use of health, fitness, athletic, sporting or shopping club property or facilities; and
• parking, storing, or garaging motor vehicles.

Click-through nexus:
New Jersey has a rebuttable presumption that an out-of-state seller who makes taxable sales of tangible personal property, specified digital products, or services is soliciting business and has nexus in New Jersey if that seller meets the following conditions: (1) the seller enters into an agreement with a New Jersey independent contractor or other representative for compensation in exchange for referring customers via a link on its website, or otherwise, to that out-of-state seller; and (2) the seller has sales from these referrals to customers in New Jersey in excess of $10,000 for the prior four quarterly periods ending on the last day of March, June, September, and December.

An out-of-state seller that meets both of these conditions is presumed to be soliciting business and has nexus with New Jersey. The out-of-state seller must register for sales tax purposes and collect and remit sales tax on all sales delivered to New Jersey. Since this is a rebuttable presumption, the out-of-state seller may provide proof that the independent contractor or representative did not engage in any solicitation on its behalf in New Jersey. The burden is on the seller to prove that it is not required to collect and remit sales tax.
Technical Bulletin TB-78, New Jersey Division of Taxation, July 30, 2015

Same-sex marriage affects federal, state taxation

The Supreme Court’s decision in Obergefell v. Hodges (2015-1 ustc ¶50,357) on June 26, 2015 continues what was set in motion in 2013: the expansion of tax benefits to same-sex married couples. In Obergefell, the Court ruled 5 to 4 that the Fourteenth Amendment requires a state to license a marriage between two people of the same sex. The Court further held that states must recognize a marriage between two people of the same sex when a marriage was lawfully licensed and performed out of state.

Background

In 2013, the Supreme Court decided Windsor v. U.S (2013-2 ustc ¶50,400). Windsor was an estate tax case, which challenged Section 3 of the federal Defense of Marriage Act (DOMA). Section 3 defined marriage as a man-woman relationship for federal purposes. The Court in Windsor struck down Section 3 as unconstitutional.

After Windsor, the IRS issued Rev. Rul. 2013-17. The IRS announced that it would take a place of celebration approach to same-sex marriage. The IRS would recognize, for federal tax purposes, a marriage of same-sex individuals that was validly entered into even if the married couple is domiciled in a state that did not recognize the validity of same-sex marriages. In Notice 2014-19, the IRS issued guidance for retirement plans, reflecting Windsor.

Since Windsor, a number of cases challenging state bans on same-sex marriage moved through the federal courts, including Obergefell. The Supreme Court agreed to hear Obergefell.

Obergefell decision

Justice Anthony Kennedy delivered the Court’s opinion in Obergefell. Kennedy wrote that the “the Fourteenth Amendment requires a State to license a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-State.”

State prohibitions on same-sex marriage, Kennedy added, “abridge central precepts of equality. Same-sex couples are denied all the benefits afforded to opposite-sex couples and are barred from exercising a fundamental right. The Equal Protection Clause, like the Due Process Clause, prohibits this unjustified infringement of the fundamental right to marry.”

However, four justices dissented. The dissenting judges would have held that the fundamental right to marry does not include a right to make a State change its definition of marriage. “The people of a State are free to expand marriage to include same-sex couples, or to retain the historic definition.”

Going forward

For federal tax purposes, the treatment of same-sex couples as on par with opposite-sex couples since the Windsor decision will continue unchanged. The IRS is likely to issue more guidance to reflect the Court’s decision in Obergefell. Many other federal agencies, such as the Social Security Administration, also are expected to issue guidance reflectingObergefell. The Obergefell decision also impacts retirement, pension and health care benefits of many same-sex married couples.

For state tax purposes, same-sex married couples in states that did not recognize their marriages have had to file as single individuals for state tax purposes. Under the Obergefell decision, these couples have a Constitutional right to file amended returns as married at the state level. Whether the normal three-year limitations period for filing these amended returns will apply remains to be tested. Also uncertain may be whether same-sex married couples must now retroactively file jointly or whether re-filing will be made optional, either state-by-state or nationwide.

If you have any questions about the Supreme Court’s decision in Obergefell and its impact on taxes, please contact our office.

NJ – Filing deadline for 2014 senior freeze applications extended

The New Jersey Department of the Treasury has announced that, for property tax purposes, the filing deadline for the 2014 Senior Freeze Program application has been extended to October 15, 2015. The program reimburses eligible senior citizens and disabled persons for property tax or mobile home park site fee increases on their principal residences. To qualify, a taxpayer must meet all the eligibility requirements for each year from the base year through the year for which the taxpayer is applying. Press Release, State of New Jersey Department of the Treasury, May 27, 2015

NJ – Guidance on treatment of virtual currency issued

The New Jersey Division of Taxation has issued guidance concerning the treatment of virtual currency, such as bitcoin and other cryptocurrencies for purposes of corporation business, gross income (personal), and sales and use taxes.

When a customer uses convertible virtual currency to pay for property, the sale is treated as a barter transaction. As a result, if a seller uses convertible virtual currency as consideration for goods or services, sales tax is due based on the amount allowed in exchange for the virtual currency. If the customer that provides convertible virtual currency in the trade receives property that is subject to tax, the customer owes tax based on the market value of the virtual currency at the time of the transaction, converted to U.S. dollars.

For purposes of corporation business tax and gross income tax, a taxpayer will realize gain or loss on the sale or exchange of convertible virtual currency. The fair market value of convertible virtual currency paid as wages is subject to New Jersey gross income tax withholding. The fair market value of convertible virtual currency received for services performed by an independent contractor must be measured in U.S. dollars on the date the contractor receives it. Finally, a payment made using convertible virtual currency is subject to information reporting requirements to the same extent as any other payment made in property. Technical Advisory Memorandum TAM-2015-1, New Jersey Division of Taxation, March 10, 2015

Information provided on Meadowlands regional hotel use assessment

The New Jersey Division of Taxation has issued a notice on legislation that created the New Jersey Meadowlands Tax Relief Act, which imposes a Meadowlands regional hotel use assessment of 3% of the rent charged for the occupancy of every hotel room located in the Meadowlands District, including any hotels located on state-owned land, beginning on or after March 1, 2015. The assessment is imposed on room rentals that are currently subject to the sales tax and is in addition to the sales tax, the state hotel/motel state occupancy fee, and the municipal occupancy tax, as well as any other tax or fee imposed by local ordinance on hotel occupancies. The assessment must be separately stated on any bill, receipt, invoice or similar document that the hotel provides to the occupant.

Taxpayers must report and remit the assessment on a monthly basis. Occupancies prior to March 1, 2015, are not subject to the hotel use assessment. If a taxable occupancy begins before March 1, 2015, only the rent for occupancy for March 1 and after is subject to assessment. The first return, covering the period of March 1, 2015, through March 31, 2015, is due on or before April 10, 2015.

Exemptions to the assessment: The Meadowlands regional hotel use assessment is not imposed on the rental of a room when the purchaser, user, or consumer is a New Jersey or federal agency, instrumentality, or political subdivision, or the United Nations, or any other international organization of which the United States is a member. Other exempt organizations, such as religious, educational, and charitable organizations that may qualify for exemption from New Jersey sales and use tax on purchases (Form ST-5 holders), are not exempt from the hotel use assessment. Notice, New Jersey Division of Taxation, February 27, 2015

 

NJ E-filing regulation issued

The New Jersey Division of Taxation has issued a new electronic filing and payment regulation affecting tax preparers and taxpayers who file corporation business tax (CBT) returns. For tax years beginning on or after January 1, 2015, tax preparers who file corporation business tax returns must e-file such returns and (if instructed by the taxpayer) must also e-file all payments of corporation business tax, including estimated payments. For tax years beginning on or after January 1, 2016, taxpayers that are subject to the corporation business tax and submit their own returns must e-file such returns. Payments of corporation business tax liabilities, including estimated payments, must be made electronically whether remitted directly by the taxpayer or by the tax preparer as instructed by the taxpayer. N.J.A.C. 18:7-11.19, New Jersey Division of Taxation, effective January 20, 2015.

NJ – Taxability of breast radiation treatment catheters, other matters discussed

The New Jersey Division of Taxation quarterly newsletter provides guidance regarding various sales and use tax issues. Specifically, it provides that sales of breast radiation treatment catheter devices to hospitals and physicians are exempt from sales tax as sales of a prosthetic device. The breast radiation treatment catheter device is considered to be an exempt prosthetic device because it is worn in the body and is part of the radiation treatment used to correct a physical deformity or malfunction.

In addition, the charge for activation of a new cellular phone is subject to sales and use tax. Because activation of the phone is necessary to complete the sale of the phone, it is taxable as part of the sales price of the phone. Also, the charge to troubleshoot and resolve issues associated with the phone is taxable as the servicing of tangible personal property. However, charges to assist customers in changing a phone number and to transfer data from one phone to another are not subject to tax.

Further, postage charged to a customer as part of the sales price for printed advertising material and processing services where the material is delivered to a location in New Jersey is subject to sales and use tax. The postage expense is part of the taxable sales price whether or not separately stated to the customer. However, postage charged to a customer as part of the sales price for printed advertising material and processing services where the material is delivered out-of-state is not taxable. Delivery charges only refer to charges made by the seller of goods and services. The purchase of postage directly from the USPS is not taxable. Starting with the premise that the charges for the printed advertising material are taxable, the prepayment deposit is taxable because the taxpayer is purchasing the postage and the postage expense is part of the sales price of the printed advertising material and processing services. The charge for the customer using its own postal permit is not taxable since the postage is purchased directly from the USPS. The charge for the customer using its own postal permit and allowing the USPS to direct-debit the cost of the postage from the customer’s account is not taxable because the customer makes payment directly to the USPS. State Tax News, New Jersey Division of Taxation, Vol. 43, No. 3, December 31, 2014