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These tickets are subject to the full applicable sales tax rate. Section 9(f)(2) of the New Jersey Sales and Use Tax Act provides that the exemption for qualifying non-profit organizations does not apply in the case of admissions to “carnivals, rodeos, or circuses in which any professional performer or operator participates for compensation.” Therefore, both the non-profits’ portion and the operators’ portion of the receipts are subject to sales tax. Since these sales involving non-profit organizations is unique, the Division will allow the admission charges to be sold “tax included.” The circus or carnival operator must make it clear to the non-profit organization that the tickets are tax included and that the tax portion must be remitted to the state. There also needs to be some effective means of notice to the public, whether it is a statement on the actual tickets or sale flyers or posting a sign where tickets are sold. (Notice, New Jersey Division of Taxation, July 2, 2008)

(10/08/2008)

A New Jersey Tax Court has agreed with the Division of Taxation’s position that a company who performed maintenance and repair work on commercial heating and cooling systems acted as a contractor performing services on real property, and is therefore required to pay sales or use tax on the purchases of parts used in performing the service contracts. Although New Jersey considers parts and materials used to perform services on tangible personal property sales for resale where tax is collected by the owner of the tangible personal property, parts and material purchased to perform services on real property qualify as sales to a contractor as the end user. Since the heating and cooling systems were undisputedly real property, the company should have paid sales or use tax at the time it purchased the parts and materials. Additionally, since the company charges a lump sum for the maintenance contracts, which includes labor and parts, the entire price of the contract is taxable. Further, the Tax Court upheld the Divison’s denial of penalty and interest abatement. (Touzour Energy Systems, Inc. v. Division of Taxation, New Jersey Tax Court, No. 007698-2004, April 3, 2007)

(10/08/2008)

The New Jersey Tax Court recently debated whether a claim made pursuant to the New Jersey Consumer Fraud Act may be maintained against a vendor who is alleged to have collected more sales tax than is required by the Sales and Use Tax Act. Specifically, a class action alleged that the plaintiff made several purchases from the defendants’ supermarkets from 2002 to 2005, and that the defendants overcharged sales tax that was due on the purchases. The overcharges are said to have resulted from the defendants’ computation of sales tax based on the regular price of the items purchased rather than on the reduced or discounted sales prices actually charged for the items, particularly in transactions where the plaintiff used store coupons or used a shopper’s club card issued by the supermarket. The alleged violations were dismissed because, once the money collected was remitted to the state, the sole remedy available to the taxpayers was a refund claim made to the Division of Taxation. (Kawa v. Wakefern Food Corporation, New Jersey Tax Court, No. 008717-2006, April 3, 2008)

(10/08/2008)

A notice was issued by the New Jersey Division of Taxation stating that given the difficulty of itemizing taxable services and items in multi-trade construction contracts, this requirement will be waived when the following services are involved: landscaping, installing carpeting or other flooring, and installing security systems, including burglar security and fire alarms. This notice can only be exercised when there is a subcontractor performing the capital improvement services as part of a multi-trade contract. (Notice to Construction Industry, New Jersey Division of Taxation, April 22, 2008)

(10/07/2008)

Section 308 of the Streamlined Sales and Use Tax Agreement (“SSUTA”) prohibits members from having multiple sales and use tax rates. Therefore, the Compliance Review and Interpretations Committee (“Committee”) conducted a hearing on July 17, 2008 to determine if New Jersey was out of compliance with the SSUTA for having a gross receipts use tax rate imposed on fur (6%) which differs from the sales and use tax rate (7%). Clothing, including fur clothing, is exempt from sales and use tax; however, in another section of New Jersey statutes, a gross receipts and gross receipts use tax on fur clothing is imposed at a rate of 6%. The sales and use tax and the gross receipts and gross receipts use tax are determined to be separate and distinct taxes. Since they are different tax types, the gross receipt tax is not governed by the SSUTA and, on July 17, 2008, the Committee concluded that the Governing Board should find New Jersey in substantial compliance with the SSUTA and not in violation of Section 308. (Streamlined Sales and Use Tax Agreement Compliance Review and Interpretation Committee, Compliance Determination 2008-02, New Jersey

(08/07/2008)

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