New Jersey Business Tax: Three-Month Voluntary “Click-Through” Nexus Disclosure Program

The New Jersey Division of Taxation (DOT) announced the state will offer a three-month voluntary disclosure program for remote sellers that have customer referral agreements with the state. The program runs from August 21 to November 21, 2017 and offers many benefits over traditional disclosure programs, including a complete waiver of all penalties. The DOT will also consider periods of 2017 closed for remote sellers participating in the program and complying with its terms.

Referral agreements, also known as “click-through” agreements, became law in New Jersey in 2014. The law presumes a remote seller of tangible personal property, taxable services or specified digital products possess nexus with New Jersey if the seller has an agreement with a representative or independent contractor with physical presence within the state. The contractor or representative must also directly or indirectly refer potential clients to the seller. This law applies to sales made, services rendered and uses on or after July 1, 2014.

Eligible remote sellers cannot have been contacted by the DOT regarding New Jersey sales and use tax compliance. The program allows for remote sellers to enter an agreement with the DOT to comply with New Jersey sales and use tax reporting and registration requirements. Participating remote sellers who file any required returns for the first two calendar quarters of 2017 will have all prior periods closed and penalties waived by the DOT.

Within 45 days of the execution of an agreement with the DOT, taxpayers must register with the Division of Revenue and Enterprise Services using New Jersey Business Code “O/S SELLER 5000.” Remote sellers must electronically file quarterly sales and use tax returns (ST-50) and pay tax due. Taxpayers must pay statutory interest within 30 days of filing the sales and use tax returns. Interest will be assessed at the prime rate plus 3% for each applicable period.

IMPACT

Remote sellers with agreements with New Jersey parties to refer customers, and are not currently collecting sales tax, should consider the limited voluntary disclosure. Remote sellers who are unsure if they qualify under a “click-through” arrangement should speak to a Caroprese tax expert for guidance. Contact Caroprese & Company for more information on this program and other tax opportunities for businesses in New Jersey.

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