07/14/2006
More than seven days after the constitutional deadline, Gov. Jon Corzine signed New Jersey's $30.8 billion dollar budget for fiscal year 2007 after a marathon legislative session ending at 5:30 a.m. Saturday morning. The vote came after a bitter feud between leadership and Gov. Corzine over the increase in New Jersey's sales tax, which ultimately shut down most state government services.
The budget includes a 1 percent increase in the state sales tax effective July 15; and, effective Oct. 1, expands the sales tax to cover additional goods and services.
The Legislature voted to increase the sales tax effective July 15, with half of the increase going toward property tax relief. Members are encouraged to make necessary operational changes to reflect the sales tax increase from 6 percent to 7 percent. The reconfigured sales tax in qualified businesses within an Urban Enterprise Zone (UEZ) will be 3.5 percent. The new tax rate schedule can found on the Division of Taxation's Web site.
In addition to the sales tax increase, the Legislature voted to expand the sales tax base effective Oct. 1 to include the following goods and services:
- Storage space
- Tanning services
- Massage services, exempting medically prescribed services
- Tattooing and permanent cosmetics
- Investigation and security services
- Information services
- Limousine services originating in New Jersey, except as provided for funerals
- Initiation fees, membership fees or dues for access or use of the property or facilities of a health and fitness, athletic, sporting or shopping club or organization, except for membership in a club or organization whose members are predominately age 18 or under
- Parking, storing or garaging a motor vehicle (other than employee parking)
- Digital property: Electronically delivered music, ringtones, movies, books, audio and video works and similar products where the customer is granted a right or license to use, retain or make a copy of such item.
- Seller delivery charges on taxable items
- Laundering, dry cleaning, tailoring, weaving and pressing of non-clothing items such as drapes and carpets. Clothing remains exempt.
- Landscaping, including capital improvement
- Installation of carpeting and other flooring
Other legislation passed as part of the budget package includes the following:
- Four percent surcharge on Corporate Business Tax (CBT) liability. This new tax is effective immediately and will sunset in three years.
- Minimum tax under the CBT has been increased from $500 to $1,000.
- Tax on HMO premiums doubled to 2 percent.
- The Transitional Energy Facilities Assessment (TEFA) extended for two years.
- Cigarette tax rate raised to 17.5 cents per pack and changes tobacco products sales tax on moist snuff to a weight-based tax. This tax increase was effective July 15.
- One time supplemental titling fee on new luxury and fuel inefficient passenger automobiles. Luxury cars are defined as those that have a sale or lease price of $45,000 or more, or an Environmental Protection Administration (EPA) average fuel efficiency rating of less than 19 miles per gallon.
- Surcharge on motor vehicle rentals from $2 to $5 per day.
- Six percent gross receipts tax on the retail sale of fur clothing and a 6 percent use tax on the use of fur clothing in New Jersey for which the gross receipts tax has not been paid.
- One percent fee on the purchaser of commercial real estate in excess of $1 million for the recording of the deed. This is separate from the realty transfer fee imposed on the seller. This bill also imposes a parallel tax on the purchaser in a non-deed transfer of a controlling interest in an entity that owns Class 4A commercial properties if the total consideration of the transfer is in excess of $1 million. This applies to deed and non-deed transfers occurring on and after Aug. 1; however, special provisions exist for transactions that were under contract before July 1.
- Procedures for the administration of the UEZ program changed. As of July 15, qualified businesses must obtain sales tax exemptions in rebate form, rather than exempting the sales tax at the point of sale.
NFIB/New Jersey Director Laurie Ehlbeck was at the State House 'round the clock during the budget negotiations in an effort to kill the increase in taxes and to promote the interests of the NFIB membership. Due to the tireless efforts of NFIB/New Jersey and the business community, the budget does reflect some favorable tax changes including:
- Businesses can continue to deduct all net operating losses.
- Hospital bed tax was eliminated.
- Water tax omitted.
- Alternative Minimum Assessment portion of the of the Corporation Business Tax was expired.
- No Unemployment Insurance Trust Fund diversions for the first time in 13 years.
- As of July 1, 2007, S-Corp tax burden lowered.
- The proposed hike in the personal income tax was killed.
- A last-minute veto by Gov. Corzine stopped the $50 million dollar raid on the Temporary Disability Fund that was passed by the Legislature.
NFIB/New Jersey has been working closely with the Division of Taxation since the passage of the budget package to identify potential issues implementing the new tax and interpreting member inquiries pertaining the provisions of the new law. Any NFIB/New Jersey member with questions or concerns about how the new laws will affect your business are encouraged to contact the New Jersey office.
Laurie Ehlbeck
State director, NFIB/New Jersey
(609) 989-8777
Laurie.ehlbeck@nfib.org
