New Jersey-2014-A4296-Introduced

An Act exempting sales of certain products from sales and use tax, and providing credits against corporation business and gross income taxes for certain small businesses that use New Jersey goods or agricultural produce, supplementing P.L.1966, c.30 (C.54:32B-1 et seq.), P.L.1945, c.162 (C.54:10A-1 et seq.), and chapter 4 of Title 54A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. Receipts from the retail sale of tangible personal property or a specified digital product, the manufacturer or distributor of which has its headquarters in the State, are exempt to the extent of 65% of the tax imposed under the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-1 et seq.). As used herein, "headquarters" means the single location that serves as the national or international administrative center of the business at which the primary office of the chief officer or management official, as well as those responsible for key business-wide functions such as finance, legal, marketing, and human resources are located.

b. Notwithstanding the provisions of subsection a. of this section, the seller of tangible personal property or a specified digital product shall charge and collect the tax from the purchaser on such sales at the rate then in effect, and 65% of the tax shall be refunded to the purchaser of such tangible personal property or a specified digital product, the manufacturer or distributor of which has its headquarters in the State, by the filing of a claim, within three years of the date of payment of the tax, with the New Jersey Division of Taxation for a partial refund of sales or use tax paid. Proof of claim for refund shall be demonstrated by a copy of the sales receipt issued to the purchaser and by any additional information as the director may require, including but not limited to proof of tax paid.

c. Notwithstanding the provisions of subsection a. of this section, receipts from the retail sale of tangible personal property or a specified digital product exempt from the tax imposed under the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-1 et seq.) pursuant to the provisions of P.L.1993, c.373 (C.54:32B-8.45) or P.L.1983, c.303 (C.52:27H-60 et al.), shall not qualify for the exemption provided in this section.

2. a. For privilege periods beginning on or after January 1, 2016, a small business taxpayer shall be allowed a credit against the tax due pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period in an amount equal to 5 percent of the aggregate expenditures in the privilege period for goods manufactured in New Jersey or New Jersey agricultural produce when used by the small business taxpayer as an input, raw material, or component, in the production of the final good or service offered by the small business taxpayer in the regular course of its business.

b. The order of priority of the application of the credit allowed pursuant to this section and any other credits against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period shall be as prescribed by the director.

The amount of the credit applied pursuant to this section, added together with any other credit allowed against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), shall not reduce a taxpayer's tax liability to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162 (C.54:10A-5). Unused credit resulting from the limitations of this subsection may be carried forward, if necessary, for use in the three privilege periods following the privilege period for which the credit is allowed.

c. As used in this section:

"New Jersey agricultural produce" means fruits, vegetables, horticultural products, dairy, eggs, livestock, poultry, fish and other seafood grown, produced or processed in the State.

"Goods manufactured in New Jersey" means, in the case of assembled articles, material or supplies, components, subcomponents, parts, and equipment used in manufacturing, final assembly, processing, packaging, testing or other process that adds value, quality or reliability occurs in the State.

"Small business taxpayer" means a taxpayer that has its principal place of business in this State and has not more than 50 employees.

3. a. For taxable years beginning on or after January 1, 2016, a small business taxpayer shall be allowed a credit against the New Jersey gross income tax due pursuant to N.J.S.54A:1-1 et seq. in an amount equal to 5 percent of the aggregate expenditures in the taxable year for goods manufactured in New Jersey or New Jersey agricultural produce when used by the small business taxpayer as an input, raw material, or component, in the production of the final good or service offered by the small business taxpayer in the regular course of its business.

b. The order of priority of the application of the credit allowed pursuant to this section and any other credits allowed against the New Jersey gross income tax due pursuant to N.J.S.54A:1-1 et seq. for a taxable year shall be as prescribed by the director. If the credit allowed pursuant to this section exceeds the amount of tax otherwise due, the amount of any credit that cannot be applied for the taxable year may be carried forward to the three taxable years following the taxable year for which the credit is allowed.

c. A business entity that is classified as a partnership for federal income tax purposes shall not be allowed a credit directly, but the amount of credit of a taxpayer in respect of a distributive
share of entity income, shall be determined by allocating to the taxpayer that proportion of the credit acquired by the entity that is equal to the taxpayer's share, whether or not distributed, of the total distributive income or gain of the entity for its taxable year ending within or with the taxpayer's taxable year.

A New Jersey S Corporation shall not be allowed a credit directly under the gross income tax, but the amount of credit of a taxpayer in respect of a pro rata share of S Corporation income, shall be determined by allocating to the taxpayer that proportion of the credit acquired by the New Jersey S Corporation that is equal to the taxpayer's share, whether or not distributed, of the total pro rata share of S Corporation income of the New Jersey S Corporation for its privilege period ending within or with the taxpayer's taxable year.

d. As used in this section:

"New Jersey agricultural produce" means fruits, vegetables, horticultural products, dairy, eggs, livestock, poultry, fish and other seafood grown, produced or processed in the State.

"Small business taxpayer" means a taxpayer that has its principal place of business in this State and has not more than 50 employees.

4. This act shall take effect immediately, and section 1 of this act shall apply to sales made on or after January 1, 2016.

STATEMENT

The bill exempts the sales of certain taxable goods from 65% of the sales and use tax, effectively reducing the tax on those goods to 4.5 percent from the current State rate of 7 percent. The exemption applies to sales of tangible personal property and certain digital products that are manufactured or distributed by a business that maintains its headquarters in the State. The exemption applies to sales made on or after January 1, 2016. "Headquarters" is defined as the single location that serves as the national or international administrative center of the business at which the primary office of the chief officer or management official, as well as those responsible for key business-wide functions such as finance, legal, marketing, and human resources are located. In order to benefit from the exemption, purchasers will file a claim with the New Jersey Division of Taxation for a refund of 65% of the sales or use tax paid, within three years of the date of payment of the tax with all required receipts. The exemption does not apply to retails sales that are exempt from the sales and use tax pursuant to P.L.1983, c.303 (C.52:27H-60 et al.), or P.L.1993, c.373 (C.54:32B-8.45).

The purpose of this bill is to assist those companies that are currently headquartered in the State, and incentivize other companies to move their headquarters to the State, by making products manufactured or distributed by such companies less costly to New Jersey's consumers.

The bill also provides certain small businesses with a credit against corporation business tax or gross income tax liability for the purchase of goods manufactured in the State or agricultural produce grown, produced, or processed in the State, when such goods or produce are used as inputs, raw materials, or components of the final product or service offered by the small business. The credit is in the amount of 5 percent of the aggregate expenditures in the taxable year or privilege period for such products or produce. Small business taxpayer is defined as a taxpayer that has its principal place of business in the State and has 50 employees or less. If the amount of the credit exceeds a small business taxpayer's tax liability for the given taxable year or privilege period, the remaining credit may be carried forward to the three following taxable years or privilege periods. The purpose of these provisions is to assist small businesses and to encourage the use in the supply chain of products made and produce grown in the State.