Estate Sales in Nj

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New Jersey State Tax                                                                                       Volume 35, Number 2
                                                                                                                 Summer 2006




A Quarterly Newsletter                             ISSN 1073-6808




inside                                             FY 2007 Budget
                                                   Legislation
                                                                                              luxury tax increased from
                                                                                              12% to 13%.

budget legislation .................... 1          The following is a list of several re-   • Businesses in Wildwood, North
                                                   cently enacted tax laws related to the     Wildwood, and Wildwood Crest
nj estate tax return preparation 3                 fiscal year 2007 budget. For a com-        that are subject to the tourism
interest rate 10.00% ............... 4             plete list of budget-related legisla-      sales tax must collect 9% tax on
                                                   tion visit the Division’s Web site at:     tourism-related sales (2% tourism
PAMS:   building the future ........ 4
                                                   www.state.nj.us/treasury/taxation/         tax and 7% sales tax). This is in
tax assessor certificates.............. 5          statebudgetbills.shtml                     addition to the 1.85% tourism as-
tax assessors’ calendar .............. 5                                                      sessment and the 3.15%
                                                   Sales and Use Tax
                                                                                              State occupancy fee on hotel
streamlined sales tax ................ 6           P.L. 2006, c.44, increased the New
                                                                                              occupancies.
                                                   Jersey sales and use tax rate from
criminal enforcement ............... 6             6% to 7%. The rate change affects        The new sales tax rate schedules ef-
enforcement summary stats ........ 7               all retail sales of taxable merchan-     fective July 15, 2006, are available
                                                   dise or services that take place on      on the Division’s Web site at:
tax briefs ................................... 9   and after July 15, 2006. View the        www.state.nj.us/treasury/taxation/
current amnesty programs ......... 9               law at: www.njleg.state.nj.us/2006/      salestaxrates.shtml
                                                   Bills/AL06/44_.PDF
in our courts ........................... 11                                                For more information on the rate
                                                   Additional provisions effective Oc-      increase visit: www.state.nj.us/
tax calendar ........................... 14
                                                   tober 1, 2006, extend the sales and      treasury/taxation/vendors.shtml
important phone numbers ...... 14                  use tax to new services, limit some
                                                                                            Effective October 1, 2006
                                                   existing exclusions and exemptions,
                                                                                            The law extends sales and use tax
                                                   and encompass product categories
                                                                                            to charges for the following property
                                                   that have come into being with new
                                                                                            and services, including the new cat-
                                                   technologies.
                                                                                            egory “digital property”:
                                                   Effective July 15, 2006                  • Magazines and periodicals, ex-
                                                   • The New Jersey sales and use tax          cept those sold by subscription
                                                     rate increased to 7%.                     and membership periodicals;
                                                   • Businesses in Urban Enterprise         • Space for storage (For more in-
                                                      Zones and Salem county busi-             formation visit: www.state.nj.us/
                                                      nesses that are authorized to            treasury/taxation/spstorage.shtml);
                                                      charge the 50% reduced rate are       • Tanning services;
                                                      required to charge and collect        • Massage services, unless pre-
                                                      sales tax at the rate of 3.5% on         scribed by a doctor;
                                                      all qualified taxable sales.
                                                                                            • Tattooing, including permanent
                                                   • The combined rate for sales sub-          body art and permanent cosmetic
                                                      ject to both the New Jersey sales        makeup;
                                                      and use tax and the Atlantic City
                                                                                                             continued on page 2
 2                                                                                                       Summer 2006




                                                                                    news
     budget legislation - from page 1   • Laundering. The sales tax
                                          exemption for laundering, dry            New Jersey State Tax
• Investigation and security services
                                          cleaning, tailoring, weaving, and
  (For more information visit:            pressing is limited specifically to
  www.state.nj.us/treasury/taxation/
                                          providing those services to
  investsecserv.shtml);
                                          clothing. The exemption does not
• Information services;                                                          is published quarterly by the:
                                          apply to items such as drapery,
• Limousine services originating in       carpets, blankets, slipcovers, and     New Jersey Division of Taxation
  this State, except as provided in       bed or hospital linens.                Technical Services
  connection with funeral services;                                              Information & Publications Branch
                                        • Floor Covering Installation            PO Box 281
• Membership fees (For more in-
                                          Services. The exemption for the        Trenton, NJ 08695-0281
  formation visit: www.state.nj.us/
                                          installation of floor covering that
  treasury/taxation/                                                             The State Tax News is published on the
                                          resulted in capital improvement
  membership.shtml);                                                             Division of Taxation’s Web site at:
                                          to real property is eliminated.
• Parking, storing, or garaging a         Thus, the labor charge to install      www.state.nj.us/treasury/taxation/
  motor vehicle (other than                                                      publnews.shtml
                                          floor covering (e.g., carpeting, li-
  residential parking, certain            noleum, tile, and padding) is now      Subscribe to NJ Tax E-News on our Web
  employee parking, municipal me-         taxable. For more information,         site to be notified when new issues become
  tered parking, and parking subject                                             available.
                                          visit: www.state.nj.us/treasury/
  to municipal parking taxes.); and       taxation/floorservices.shtml
                                                                                 This publication is designed to keep
                                                                                 taxpayers, tax practitioners, and the general
• “Digital property,” which means                                                public informed of developments, problems,
  electronically delivered music,       • Landscaping Services. The ex-
                                                                                 questions, and matters of general interest
  ring tones, movies, books, audio        emption for landscaping services       concerning New Jersey tax law, policy, and
  and video works, and similar            that resulted in a capital improve-    procedure. The articles in this newsletter are
  products where the customer is          ment to land is eliminated. Labor      not designed to address complex issues in
                                          charges for landscaping services,      detail, and they are not a substitute for
  granted a right or license to use,                                             New Jersey tax laws and/or regulations.
  retain, or make a copy of such          such as seeding, sodding or grass
  items.                                  plugging of new lawns; planting        Division of Taxation
                                          trees, shrubs, hedges, plants; and     Acting Director:
The law changes the taxability of         clearing and filling land are now                 Dr. Carol O’Cleireacain
certain property and services as          taxable. For more information          Acting Deputy Director:
follows:                                  visit: www.state.nj.us/treasury/                          Maureen Adams
                                          taxation/landscape.shtml               News Coordinators for This Issue:
• Software. The current exemption
  for prewritten software delivered     For more information on changes          Compliance                 Marita Sciarrotta
  electronically is limited to elec-    effective October 1, 2006, visit the     Crim. Investigation         Richard Mawer
  tronically delivered software that    Division’s Web site at:                  Property Admin.              Holly Reinson
  is used directly and exclusively      www.state.nj.us/treasury/taxation/       Technical Services          Beth Chambers
  in the conduct of the purchaser’s     salestaxbase.shtml                       Legislation                 Geoffrey Marsh
  business, trade, or occupation.                                                Contributors: Carol E. Bell, Beth A.
                                        Urban Enterprise Zones                   Berniker, William G. Bittner, Toni Bushelli,
• Delivery Charges. The law modi-       P.L. 2006, c.34, amends the Urban        Barry Fulmer, Denise M. Lambert, Dana
  fies the exemption for delivery       Enterprise Zones Act which pro-          Max, Suzanne Miller, Patrick J. Ryan,
  charges that are separately stated    vides an exemption for certain sales     Carol M. Trovato, and Fred M. Wagner.
  from the purchase price of an item    made to a qualified urban enterprise     Staff: J. Donald Byrnes, Lauren D. Higgins,
  on the invoice, bill, or similar      zone business. The purchase exemp-       Maria E. Likakis, Terry A. McWilliams,
  document given to the purchaser.      tion remains effective; however,         Sara E. Murphey, Kelly J. Warboys.
  Delivery charges on taxable items     procedural amendments to the law         Editor:               Sheri B. Silverstein
  are now taxable, and delivery         now require the sales tax to be
  charges on nontaxable items like
  clothing are exempt.                                   continued on page 3
Summer 2006                                                                                                        3


budget legislation - from page 2         Corporation Business Tax
                                         P.L. 2006, c.38, imposes a 4% sur-        in the receipts subject to sales
collected on sales made to qualified
                                         tax in addition to the annual corpo-      tax liability. View the law at:
businesses on and after July 15,
                                         ration franchise tax. For privilege       www.njleg.state.nj.us/2006/Bills/
2006, unless the business is a “quali-
                                         periods ending on or after July 1,        AL06/42_.PDF
fied small business” (annual gross
                                         2006, but before July 1, 2009, each
receipts less than $1 million in the                                               Fur Clothing Retail Gross
                                         taxpayer shall be assessed and must
prior annual tax period). For this
                                         pay a surtax equal to 4% of the           Receipts Tax and Use Tax
purpose, a business may use its gross
                                         amount of tax liability remaining         P.L. 2006, c.41, enacted July 8,
receipts from sales as reported for
                                         after applying credits against liabil-    2006, and effective July 15, 2006,
sales tax in the prior year. A quali-
                                         ity, other than credits for installment   imposes a gross receipts tax at the
fied business other than a small
                                         payments, estimated payments made         rate of 6% on the retail sale of fur
qualified business must pay the tax
                                         with a request for extension to file a    clothing in this State and a use tax
and apply for a refund. For more
                                         return, or overpayments from a prior      on the use of certain fur clothing in
information visit the Division’s Web
                                         privilege period. Payments of the         this State for which a tax has not
site at: www.state.nj.us/treasury/
                                         surtax are to be made annually as         been paid. For more information
taxation/uez.shtml. To view the law
                                         required under N.J.S.A. 54:10A-15.        visit the Division’s Web site at:
visit: www.njleg.state.nj.us/2006/                                                 www.state.nj.us/treasury/taxation/
                                         No credits shall be allowed against
Bills/AL06/34_.PDF
                                         the surtax liability except for credits   pdf/furclothingusetax.pdf.
Tobacco Taxes                            for installment payments, estimated       To view the law visit:
                                         payments made with a request for          www.njleg.state.nj.us/2006/Bills/
Cigarette Tax. P.L. 2006, c.37, in-
                                         an extension of time for filing a re-     AL06/41_.PDF
creased the cigarette tax, effective
July 15, 2006. The rate increase is      turn, or overpayments from prior
                                                                                   Realty Transfer Fee
$0.175 cents per pack for a total of     privilege periods.
                                                                                   P.L. 2006, c.33, enacted July 8,
$2.575 per pack of 20 cigarettes. Pre-   The law also makes adjustments to         2006, and effective August 1, 2006,
viously, the tax was $2.40 per pack.     the New Jersey minimum tax under          and applying to transfers of property
Tobacco Products Wholesale Sales         the Corporation Business Tax Act.         on or after that date, imposes a 1%
Tax. P.L. 2006, c.37, was also           For calendar years beginning in           fee, or 1% tax, on certain purchas-
amended to impose a separate tax,        2006 and thereafter. View the law         ers of certain commercial property
effective August 1, 2006, upon the       at: www.njleg.state.nj.us/2006/Bills/     for over $1 million. For more infor-
sale, use, or distribution of moist      AL06/38_.PDF                              mation visit the Division’s Web site
snuff at the rate of $0.75 per ounce                                               at: www.state.nj.us/treasury/taxa-
                                         Domestic Security Fee                     tion/pdf/granteefeenotice.pdf.
on the net weight, as listed by the
                                         P.L. 2006, c.42, amends P.L. 2003,        To view the law visit:
manufacturer of the moist snuff, and
                                         c.34, by providing for an increase        www.njleg.state.nj.us/2006/Bills/
a proportionate rate on all fractional
                                         in the daily rental fee imposed on        AL06/33_.PDF !
parts of an ounce of the net weight
                                         motor vehicle rental companies from
of moist snuff.
                                         $2 to $5 for each day or part thereof
The $0.75 per ounce tax on the net       that a motor vehicle is rented under      INHERITANCE/ESTATE TAX
                                         rental agreements of not more than
weight of moist tobacco is to be paid
and collected in a manner similar to     28 days. The increased fee must be
                                                                                   NJ Estate Tax
the 30% tobacco products wholesale       separately stated on the agreement        Return Preparation
tax on other tobacco products and        and applies with respect to certain       On July 1, 2002, the New Jersey es-
is simply a change in amount of tax      motor vehicle rental agreements in        tate tax was decoupled from the
assessed from a tax based on price       New Jersey entered into on or after       Federal estate tax. The revised stat-
to a tax based on weight. View the       July 8, 2006. The fee is separate         ute provides that the New Jersey es-
law at: www.njleg.state.nj.us/2006/      from, and in addition to, any sales       tate tax is either the amount of the
Bills/AL06/37_.PDF                       tax imposed on the cost of the rental     maximum credit for state death taxes
                                         transaction and is not to be included
                                                                                                    continued on page 4
  4                                                                                                 Summer 2006


      estate tax return - from page 3   lawyer acting for another would         LOCAL PROPERTY TAX
allowable under the provisions of
                                        constitute the unauthorized practice
                                        of law. The New Jersey Supreme
                                                                                PAMS: Building the
the Internal Revenue Code in effect     Court opinion In the Matter of the      Future
on December 31, 2001, or an amount      Application of the New Jersey Soci-     The PAMS (Property Assessment
determined pursuant to a simplified     ety of Certified Public Accountants,    Management System) project re-
tax system prescribed by the            102 N.J. 231 (1986), modified Opin-     cently completed a series of presen-
Director.                               ion No. 10 to permit the preparation    tations to county tax boards, the
Estate representatives may, at their    and filing of New Jersey inheritance    League of Municipalities, and tax
election, use either the Form 706       tax returns by qualified certified      collector and assessor associations.
method or the Simplified Form           public accountants licensed in New      Representatives from Property Ad-
method to determine an estate’s New     Jersey.                                 ministration and the Division of
Jersey estate tax liability. The Form                                           Local Government Services dis-
                                        Under the provisions of prior law the   cussed the status of the PAMS
706 method is based on the provi-       Division permitted the preparation
sions of the Internal Revenue Code                                              project, gave a preview of what to
                                        of New Jersey estate tax returns by     expect with the new system, and
in effect on December 31, 2001. The     individuals who were not licensed
Simplified Form method is based on                                              answered questions.
                                        New Jersey attorneys or certified
the net estate as determined for New    public accountants. The rationale       The presentations were made to
Jersey inheritance tax purposes with    behind this policy was that the         counties throughout the State, in-
certain changes.                        preparation of the New Jersey estate    cluding the early implementation
The New Jersey Supreme Court’s          tax return did not involve the prac-    counties of Salem, Camden, and
Committee on the Unauthorized           tice of law as the tax was a sponge     Hunterdon, from January through
Practice of Law concluded in Opin-      tax based solely upon the credit for    April. Stephen Sylvester, Assistant
ion No. 10 that the preparation of a    state death taxes allowable in the      Director of Property Administration,
New Jersey inheritance tax return       Federal estate tax proceeding. The      was pleased with the participation.
requires the application of a gamut     preparation of the New Jersey estate    “We are very encouraged to see the
of technical legal principles and       tax return involved nothing more        interaction occurring between the
therefore its preparation by a non-     than copying numbers from the Fed-      State, county, and local government
                                        eral estate tax return filed with the   in the development of PAMS, and
                                        Internal Revenue Service to the New     we are further encouraged by the
                                                                                dialogue these presentations gener-
      Interest 10.00%                   Jersey estate tax return.
                                                                                ate. This makes us very confident
The interest rate assessed on amounts   Since the New Jersey estate tax is      that we will end up with a state-of-
due for the period January 1, 2006 –    no longer dependent upon a Federal      the-art system that meets the needs
December 31, 2006, will be 10.00%.      determination and is now a stand-       of all stakeholders,” said Sylvester.
                                        alone tax, the preparation of the es-
The assessed interest rate history is   tate tax return requires knowledge      Another round of presentations is
listed below.                           of technical legal principles similar   being planned for fall of 2006. In
      Effective        Interest         to that referenced in Opinion No. 10.   addition, the PAMS information
        Date             Rate           Therefore, the Division requires that   booth will be on display at confer-
      10/1/01            9.00%          the New Jersey estate tax return be     ences to be held by the Tax Collec-
       1/1/02            8.00%          prepared and filed either by the es-    tors and Treasurers Association of
                                        tate representative or his/her New      New Jersey, the Association of Mu-
       1/1/03            7.25%
                                        Jersey licensed attorney or certified   nicipal Assessors of New Jersey, and
       1/1/04            7.00%          public accountant. !                    the New Jersey Association of
       1/1/05            8.00%                                                  County Tax Boards this spring and
      10/1/05            9.50%                                                  summer.
       1/1/06           10.00%
                                                                                                 continued on page 5
Summer 2006                                                                                                     5


PAMS: building the future - from page 4   Union County: Deborah S.                  to claim continuance of
                                          Bringuier, Union Township.                Farmland Assessment.
This article appears in the most
recent edition of the PAMS news-          Commonwealth of                         2nd Tuesday in July–
letter. To see the entire issue, visit    Pennsylvania: Irvin M. Sibert,          • State Equalization        Table
the Division’s Web site at:               Washington County, West Finley            prepared.
www.state.nj.us/treasury/taxation/        Township.
pamsvol/infolinks.shtml !                                                         August 1–
                                          The certification examination is of-    • Owners of farmland must file
                                          fered twice a year, in March and          Application for Farmland Assess-
LOCAL PROPERTY TAX                        September. The next examination is        ment (Form FA-1) with the asses-
                                          scheduled for September 30, 2006.         sor to have land assessed under
Tax Assessor                              The deadline to file applications for     Farmland Assessment Act for tax
Certificates                              this exam was August 31, 2006. The        year 2007.
The Tax Assessor Examination is           filing fee is $10. If you have any
                                          questions regarding this exam,          August 5–
held in accordance with the Asses-
                                                                                  • All SR-1A forms showing in-
sor Certification and Tenure Act, re-     please contact Mary Ann Miller at
                                          609-292-7813 or write to Property         formation to be used in compil-
quiring anyone taking office as a tax
                                          Administration, PO Box 251, Tren-         ing 2006 Table of Equalized
assessor after July 1, 1971, to hold
                                          ton, NJ 08695-0251. !                     Valuations for State School Aid
a tax assessor certificate.
                                                                                    to be received by Property
Nineteen persons passed the                                                         Administration.
March 25, 2006, C.T.A. exam. Four-        LOCAL PROPERTY TAX                      August 15–
teen persons received Tax Assessor
Certificates dated July 1, 2006. They     Tax Assessors’                          • County Board of Taxation Presi-
                                                                                    dents to annually file a report
are:                                      Calendar                                  (Form TAS) that contains appeal
                                          July 1–                                   information and statistics to the
Burlington County: Ruth A.
                                          • Where County Board of Taxation          Director, Division of Taxation.
Benz, Cinnaminson Township;
                                            cannot hear and determine all
Barbara A. Manzi, Springfield
                                            appeals within the prescribed         August 25–
Township; Anthony D. Porto II,
                                            time, Board may apply to Direc-       • Completion of State Equalization
Hainesport Township.
                                            tor, Division of Taxation for ex-       Table by Director, Division of
Camden County: Melissa                      tension of time within which            Taxation.
Mallory, Camden City; Joseph P.             appeals may be heard and
                                                                                  September 1–
Pizzoli, Lindenwold Borough.                determined.
                                                                                  • Extension to file Application for
Monmouth County: Renee                    • Disallowed property tax deduc-          Farmland Assessment (Form
Frotton, Atlantic Highlands                 tion recipients, granted an exten-      FA-1) where assessor has deter-
Borough; Andrew Gambardella II,             sion, required to pay deduction         mined failure to file by August 1
Marlboro Township; James F.                 previously granted. If unpaid, be-      was due to illness of the owner
Ryan, Howell Township.                      come real property liens.               or death of the owner or a mem-
                                                                                    ber of the owner’s immediate
Morris County: Joanna C. Aceto,           • MOD IV Master file sent to Prop-        family.
Morris Township.                            erty Administration via appropri-
                                            ate medium.                           • Local exchange telephone, tele-
Passaic County: Michael P.                                                          graph, and messenger system
Soccol, Clifton City.                     • Assessor to mail Application for        companies file tangible business
                                            Farmland Assessment (Form               personal property returns (Form
Somerset County: William A.                 FA-1) for tax year 2007 together
Radano, Bridgewater Township;                                                       PT-10) with respect to tax year
                                            with a notice that the completed        2007 with the assessor for taxing
Margaret C. Wilson, Somerville              form must be filed with the as-
Borough.                                    sessor by August 1, 2006, in order                    continued on page 6
 6                                                                                                  Summer 2006


     assessors’ calendar - from page 5     manufacture petroleum products       Criminal
                                           from crude oil.
  district in which the said property                                           Enforcement
  is located.                            September 13–                          Criminal Enforcement over the past
                                         • County Tax Board transmits           several months included:
• Petroleum refineries file tangible
                                           Table of Aggregates to County
  business personal property               Treasurer who then transmits to      • On December 29, 2005, in
  returns (Form PT-10.1) with              Taxation and Local Government          Middletown Twp. Municipal
  assessor for tax year 2007, for          Services Directors, State Auditor,     Court, the Office of Criminal In-
  machinery, apparatus, or                 Municipal Clerks, and Clerk of         vestigation (OCI) charged Kasot,
  equiptment directly used to              Board of Freeholders. !                Inc., t/a Atlantic Highlands
                                                                                  Nursing Home, with recklessly or
                                                                                  negligently failing to pay the New
                                                                                  Jersey cigarette tax due on 5,618
         Streamlined Sales and Use Tax                                            cartons of untaxed cigarettes that
                                                                                  the nursing home administration
              Legislative Changes                                                 had purchased over the Internet
     P.L. 2005, c.126, effective October 1, 2005, conformed the New               for distribution to the residents of
     Jersey Sales and Use Tax Act to the Streamlined Sales and Use                the facility. This case was the re-
     Tax Agreement. The legislation affects the administration of New             sult of a referral from the
     Jersey’s sales and use tax in a number of areas. More information            Division’s Field Audit Branch,
     is available at:                                                             which had uncovered the viola-
                                                                                  tions in the course of a routine
     Streamlined Sales and Use Tax Agreement Uniform Exemption
                                                                                  audit.
        Certificate and Instructions
     Notice: NJ Sales Tax Exemption for Drugs and Medical                       • On January 4, 2006, in Jersey
        Equipment                                                                 City, Lan Fan Zhang, 42, and Min
     Streamlined Sales and Use Tax Law: Motor Vehicle                             Liang Yu, 20, both of New York
        Leasing Issues                                                            City, were indicted by a Hudson
     Notice: Rental of Equipment With An Operator                                 County Grand Jury on charges of
     Summary of Changes in Tax Base for Motor Vehicle Lease                       possession of untaxed cigarettes,
        Transactions                                                              possession of items bearing a
     Notice: Sales And Use Tax Exemption for Clothing                             counterfeit trademark, engaging
     Notice: New Jersey Enacts Streamlined Sales and Use Tax                      in conduct without a required li-
        Agreement Legislation                                                     cense with intent to evade tax,
     Notice: Changes in the Sales and Use Tax Act Affecting the                   failing to file returns with intent
        Sales of Food and Food Products                                           to evade tax, failing to pay tax
     Notice on Leases and Rentals of Tangible Personal Property                   with intent to evade, and failing
     Notice to the Direct Mail Industry                                           to maintain required books and
     Notice to Retailers of Fur Clothing                                          records with intent to evade tax.
     SSTA DRAFT Proposed New Rules: N.J.A.C. 18:XX                                The indictment is the result of the
     Certificate of Mailing and Service                                           arrest of Zhang and Yu by OCI
     Streamlined Sales and Use Tax Agreement Response Letter                      on April 7, 2004, in possession
     Streamlined Sales Tax Petition                                               of 14,757 cartons of untaxed ciga-
     Streamlined Sales and Use Tax Registration, Amnesty, and                     rettes in counterfeit Newport
        Program Information                                                       packaging, with a retail value of
     If you have questions concerning the streamlined sales and use               $856,053, which they were
     tax legislation, e-mail us at: nj.streamlined@treas.state.nj.us              loading into a van from a storage


                                                                                                 continued on page 7
Summer 2006                                                                                                       7


criminal enforcement - from page 6        to misapplication of a total of           then executed on Prall’s
                                          $4,848,815 in taxes between 1999          house and two cars result-
  container at the U-Store-It self-       and 2004 ($2,014,386 in sales and         ing in the seizure of an additional
  storage facility in Jersey City.        use tax, $106,012 in gross income         140 cartons of untaxed cigarettes,
  This seizure averted a loss of          tax, $654,055 in unemployment             $3,300 in cash, several hundred
  $353,881 in cigarette tax and           and disability contributions, and         DVDs, CDs, video games, com-
  sales and use tax. The case was         $2,074,362 in Federal with-               puter hard drives, CD/DVD burn-
  presented to the grand jury by the      holdings) at 20 Mr. Good Lubes            ers, a large quantity of blank CDs
  Hudson County Prosecutor’s              and Country Sudser Car Washes             and DVDs, and a 1995 Lexus.
  Office.                                 in Monmouth, Ocean, Middlesex,            Prall was also charged with fail-
• On January 6, 2006, in Camden,          Union, Essex, and Morris                  ure to maintain records with in-
  OCI, assisted by Camden Police,         counties. He has paid the Division        tent to evade tax, failure to pay
  arrested Jun Pan, 35, of Camden,        restitution of $2,120,398 in taxes        cigarette tax, failure to file ciga-
  in possession of 64 cartons of un-      and must pay $772,120 in penal-           rette tax returns, possession of
  taxed cigarettes shipped via U.S.       ties and interest within three years.     100 or more cartons of untaxed
  mail from an Indian reservation.        He was also ordered to surrender          cigarettes, and possession of
  The investigation is continuing.        his license to practice law and his       sound/video recordings with
                                          CPA license. This was a joint in-         fraudulent manufacturer/per-
• On January 6, 2006, in Pine Hill        vestigation by OCI, the New Jer-          former names with intent to sell.
  Municipal Court, Joseph Fried-          sey Division of Criminal Justice,         Prall was held at the Mercer
  man and Sons of NJ, Inc., a ciga-       and the New Jersey Department             County Correction Center in lieu
  rette wholesaler in Pennsauken,         of Labor and Workforce Develop-           of $75,000 bail. This was a joint
  was charged with offering and           ment, and was prosecuted by the           investigation by OCI and the
  giving rebates in connection with       State Office of the Attorney              Mercer County Prosecutor’s Of-
  the sale of cigarettes between          General.                                  fice, with assistance from the
  January 1 and June 30, 2005.                                                      Trenton Police Department,
                                        • On January 26, 2006, in Trenton,          begun by OCI in response to nu-
• On January 20, 2006, in Supe-           Tormu E. Prall, 33, of Trenton,           merous complaints from the
  rior Court – Monmouth County,           was arrested by OCI on a warrant          Trenton Downtown Association
  Michael J. Buonopane, 45, of            which charged him with posses-            concerning sale of untaxed
  Rumson, was sentenced to four           sion and sale of 70 cartons of un-        cigarettes on street corners and at
  years’ imprisonment. He was im-         taxed cigarettes on September 2,          bus stops.
  mediately taken into custody for        2005. At the time of his arrest,
  transfer to State prison. This is       Prall was in possession of an ad-       • On February 8, 2006, in Vine-
  the largest criminal tax case ever      ditional 37 cartons of untaxed            land, OCI disrupted the distribu-
  prosecuted in State history. He         cigarettes. Search warrants were          tion network of a counterfeit
  had pled guilty on June 3, 2005,                                                                 continued on page 8


                             Enforcement Summary Statistics
                                            First Quarter 2006
              Following is a summary of enforcement actions for the quarter ending March 31, 2006.
   • Certificates of Debt:                               • Jeopardy Seizures                                    0
       Total Number                          3,329       • Seizures                                            82
       Total Amount                    $31,172,205       • Auctions                                             8
   • Jeopardy Assessments                      169       • Referrals to the Attorney General’s Office       1,036
                          For more detailed enforcement information, visit our Web site at:
                                www.state.nj.us/treasury/taxation/jdgdiscl.shtml
 8                                                                                                 Summer 2006


     criminal enforcement - from pg. 7     sell on the street. Seized were        resulting in the arrest of Abel
                                           22.8 cartons of Newport ciga-          Concepcion, 33, of Miami,
  cigarette tax stamp operation by         rettes with no tax stamps, a 2000      Florida, and seizure of 48,000
  arresting Loan Nguyen, 56, of            Land Rover registered to Howlen        cartons of stolen, untaxed ciga-
  Falls Church, Virginia, in posses-       and used to transport the ciga-        rettes which he was transporting
  sion of 81.8 cartons of cigarettes       rettes, numerous bootleg DVDs          in a tractor-trailer. The street
  bearing counterfeit New Jersey           Howlen was attempting to sell,         value of the seized cigarettes is
  cigarette tax stamps that she was        and $507 cash. Howlen was              $2,986,560. This seizure averted
  attempting to sell. Nguyen was           charged with sale of untaxed           a cigarette tax and sales and use
  charged with sale of untaxed             cigarettes, possession of untaxed      tax loss of $1,320,960. Concep-
  cigarettes, possession of untaxed        cigarettes, and transportation of      cion was charged with failure to
  cigarettes, possession of 10 or          untaxed cigarettes. Additional         maintain records with intent to
  more cartons of cigarettes with          charges are pending.                   evade, possession of 100 or more
  counterfeit tax stamps, transpor-                                               cartons of untaxed cigarettes,
  tation of untaxed cigarettes, fail-    • On March 7, 2006, in Dover             dealing with unlicensed persons,
  ure to file returns with intent to       Township, OCI and Dover Town-          engaging in conduct requiring
  evade, failure to pay tax with in-       ship Police arrested Richard           registration or licensure without
  tent to evade, and engaging in           Carroll, 49, of Brick, New Jersey,     same, and transportation of un-
  conduct without required regis-          at his sole proprietorship, Towne      taxed cigarettes. He was subse-
  tration or license with intent to        Stationery, after an investigation     quently turned over to ATF and
  evade. A 2005 Chrysler Town              and inspection established that        charged with Federal offenses
  and Country van was also seized.         Carroll was engaged in the sale        relating to possession and trans-
  Nguyen was held in lieu of               of untaxed cigarettes. Seized          portation of the cigarettes, which
  $25,000 bail.                            were 39.1 cartons of untaxed           had been stolen in-transit in North
                                           cigarettes found in a locked, hid-     Carolina.
• On February 23, 2006, in
                                           den compartment under the store
  Pennsville, OCI and the                  counter and secreted in a wall of    • On March 15, 2006, a Monmouth
  Pennsville Police arrested               the store’s bathroom, and $1,221       County Grand Jury returned a
  Sukhdev S. Jaswal, 46, of Salem,         currency, including $1,150 found       five-count indictment against
  New Jersey, at his sole propri-          in the hidden compartment with         Joan and Richard Orlando, Do-
  etorship, Rachel’s Market, fol-          the untaxed cigarettes. Carroll        ver Twp., charging them with
  lowing undercover purchases of           was charged with sale of untaxed       conspiracy, failure to pay New
  untaxed cigarettes and inspec-           cigarettes and possession of un-       Jersey gross income tax, and
  tions of the market and a Riggins        taxed cigarettes. Carroll was          theft-related crimes. Joan Or-
  gas station he owns in Quinton           awaiting sentencing on previous        lando, 60, had been the book-
  Township. Seized were 19.2 car-          charges of sale of untaxed ciga-       keeper of St. Benedict’s Church
  tons of untaxed cigarettes and           rettes and failure to maintain         in Holmdel since 1998. The alle-
  about 500 untaxed cigars. Jaswal         books and records with intent to       gations are that Ms. Orlando sub-
  was charged with sale of untaxed         evade payment of $12,342.60 in         mitted grossly inflated salary
  cigarettes, failure to pay cigarette     sales tax, and has a record of two     figures for herself to Automatic
  tax, failure to maintain books and       earlier tax offenses.                  Data Processing, Inc. (ADP), a
  records, and possession of                                                      payroll processing company,
  untaxed goods.                         • On March 7, 2006, beginning in         from 2001 to June 2005. Through
                                           Carney’s Point, OCI, New Jersey        this scheme Orlando received
• On March 3, 2006, in Trenton,
                                           State Police, and the U.S. Bureau      over $800,000 in excess salary.
  OCI agents, assisted by the
                                           of Alcohol, Tobacco, Firearms          To conceal the theft Ms. Orlando
  Trenton Police, arrested Willie
                                           and Explosives (ATF) conducted         altered tax records that ADP for-
  Howlen, 35, of Morrisville, Penn-
                                           a continuous 22-hour joint inves-      warded to St. Benedict’s. Ms.
  sylvania, in possession of untaxed
                                           tigation and mobile surveillance       Orlando was charged by the
  cigarettes he was attempting to
                                                                                                 continued on page 9
Summer 2006                                                                                                       9


criminal enforcement - from page 8        Tax Briefs                             Gross Income Tax
                                          Corporation Business Tax               Credit for Taxes Paid to
  grand jury with theft by decep-
                                          IRC §1033 Involuntary Conversion       Other Jurisdictions Clarified —
  tion and two counts of failure to
                                          of Business Assets — The term “en-     Taxpayers are often confused about
  pay tax with intent to evade. Ri-
                                          tire net income” refers to the         how to calculate the credit for taxes
  chard Orlando, also 60, received
                                          corporation’s total net income from    paid to other jurisdictions in situa-
  nearly $300,000 in cash and
                                          all sources, whether inside or out-    tions where there is income reported
  checks from his wife’s bank ac-
                                          side New Jersey and includes any       to another jurisdiction (e.g., a state)
  count between January 2003 and
                                          gain derived from the employment       and its political subdivision (e.g., a
  June 2005. These payments of
                                          of capital and/or labor and profit     city). Detailed information and ex-
  monies misappropriated by Joan
                                          gained through the sale or con-        amples illustrating the calculation of
  Orlando are the basis for the
                                          version of capital assets. A           the credit are provided in N.J.A.C.
  second-degree conspiracy and
                                          corporation’s Federal taxable in-      18:35-4.1(a)11, Tax Topic Bulletins
  receiving stolen property charges.
                                          come, before net operating losses      GIT-3W and GIT-3B, and Jenkins v.
  This investigation was jointly
                                          and other special deductions and       Director, 4 N.J. Tax 127 (1982).
  conducted by OCI, the Mon-
  mouth County Prosecutor’s Of-           subject to certain modifications, is   N.J.A.C. 18:35-4.1(a)11 states, “A
  fice, and the Holmdel and Dover         deemed to be, prima facie, the         New Jersey resident taxpayer in de-
  Township Police Departments.            taxpayer’s entire net income for       termining the resident credit al-
                                          corporation business tax purposes.     lowed, as defined in this section,
• One hundred twenty-six (126)            N.J.S.A. 54:10-4(k); N.J.A.C. 18:7-    shall not combine in the numerator
  complaints alleging tax evasion         5.1(a); N.J.A.C. 18:7-5.2.             (Schedule A, Line 1, N.J. 1040) the
  were evaluated from January
                                          Items reported above Line 28 on        same income subject to tax by the
  through March 2006, in the Of-
                                          Schedule A of Form CBT-100 must        jurisdiction and/or political subdi-
  fice of Criminal Investigation.
                                          be the same as those reported to the   vision. The amount of income or
• During the same period, one hun-        IRS for Federal income tax pur-        wage tax during the tax year shown
  dred eight (108) charges were           poses. There is no adjustment re-      on Schedule A, Box B, N.J. 1040 for
  filed in court and fourteen (14)        quired by New Jersey for IRC           the taxpayer paying both a tax to
  arrests were made in twenty-five        Section 1033 involuntary conver-       another state and to a political sub-
  (25) cases involving violations of      sion of business assets. Therefore,    division of such state would be the
  the Cigarette Tax Act. Seized           to the extent that a gain resulting    total amount of state income tax and
  were 48,546.2 cartons of untaxed        from an IRC Section 1033 involun-      income tax or wage tax paid to the
  cigarettes, having a total value of     tary conversion is recognized for      other state and political subdivision
  $3,020,544.56 and including             Federal purposes, such a gain will     of such state where the same amount
  156.4 cartons bearing counterfeit       be recognized for New Jersey           of income is subject to tax in both
  New Jersey tax revenue stamps.          purposes.                              the other state and political subdi-
  !                                                                              vision of such state.”
                                                                                 If the income taxed by the political
             Current Amnesty Programs                                            subdivision is more than the income
                                                                                 taxed by the other state, then a sepa-
 Rhode Island is conducting a tax amnesty program. During the desig-
                                                                                 rate Schedule A must be completed
 nated amnesty period, taxpayers have a chance to pay back taxes with
                                                                                 to calculate the additional credit for
 reduced (or eliminated) penalty and/or interest. For more information,
                                                                                 taxes paid to the political subdivi-
 including eligibility requirements, or to obtain an application, visit the
                                                                                 sion. For example, a taxpayer earned
 Web site listed below.
                                                                                 $95,000 of wages in City A located
 RI         Jul 15 – Sep 30          http://www.tax.ri.gov/amnesty/              in State B. If State B taxed $90,000,
                                                                                 and City A imposed tax on $95,000,


                                                                                                  continued on page 10
 10                                                                                                    Summer 2006


      tax briefs - from page 9            receive the senior citizen’s partial     to that date, the lessor (not the les-
                                          exemption from the realty transfer       see) was legally obligated to pay the
the taxpayer may claim an additional      fee upon the recording of the deed       tax on a lease transaction, and les-
credit based on the $5,000 of income      for the conveyance of the property.      sors were not permitted to charge the
that was taxed by City A but not by                                                lessee “sales tax.” The lessor pro-
State B.                                  This question has been resolved by       vided the lessee with a completed
                                          the New Jersey Tax Court. In Terrell     Form ST-40, affirming that the tax
Please keep in mind when calculat-        v. Director, Division of Taxation, 22
ing the potential credit for taxes paid                                            would be paid directly to the Divi-
                                          N.J. Tax 297 (Tax Ct. 2005), the         sion of Taxation, or that an exemp-
to another state and its political sub-   Court said:
division that the limitations of a                                                 tion was claimed. If the lessor did
credit for taxes paid to another ju-      “The statute [N.J.S.A. 46:15-            not pay the tax, the lessee could not
risdiction as noted in N.J.S.A.           10.1a(1)] specifically defines a ‘se-    be held responsible for the tax as
54A:4-1 and N.J.A.C. 18:35-4.1 still      nior citizen’ as ‘any resident of this   long as the lessee had been given a
apply. That is to say, the total income   State of the age of 62 years or over.’   completed Form ST-40. Under the
from all jurisdictions in which the       N.J.S.A. 46:15-5(f). A trust, not be-    provisions of the Streamlined Sales
taxpayer may be seeking a credit          ing a natural person, cannot be a        and Use Tax legislation (P.L. 2005,
may not be in excess of the income        senior citizen, and so it cannot claim   c.126) that took effect on October 1,
taxed by New Jersey. For detailed         the partial exemption from the re-       2005, the lessor is no longer the tax-
examples of how to calculate the          alty transfer fee that is accorded to    payer but, rather, must collect sales
credit when the same income is            property owned, occupied, and sold       tax from the lessee on both leases
taxed by more than one jurisdiction       by a senior citizen. In administering    and rentals. Therefore, the ST-40 is
outside New Jersey, refer to Tax          a transactional tax, the clerk has no    no longer applicable.
Topic Bulletins GIT-3W, Credit for        duty to look beyond the grantor          Additional information on leases
Taxes Paid to Other Jurisdictions         named in the deed. The taxpayer          and rentals is available at:
(Wage Income), and GIT-3B, Credit         cannot later recharacterize the form     www.state.nj.us/treasury/taxation/
for Taxes Paid to Other Jurisdic-         in which they elected to hold the        pdf/ssutlease.pdf
tions (Business/Nonwage Income).          property. See Zimmerer v. Clayton,
                                          7 N.J. Tax 15, 22 (Tax Ct. 1984).”       Nonalcoholic Mixers — An inquiry
LLC Electing Disregarded Entity                                                    was received regarding the taxabil-
Status — New Jersey filing require-       Accordingly the claim of partial ex-     ity of nonalcoholic drink mixes.
ments for a limited liability com-        emption is not permitted in the situ-    Pursuant to the changes enacted in
pany (LLC) depend on Federal tax          ation described.                         the Streamlined Sales and Use Tax
treatment. The entity is treated the                                               legislation (P.L. 2005, c.126) that
same for State purposes as it is for      Sales and Use Tax
                                                                                   took effect October 1, 2005, liquid
Federal purposes. If a single-mem-        Artificial Fireplace Logs — Natu-
                                                                                   nonalcoholic drink mixes that are
ber LLC elects “disregarded entity        ral and artificial logs are treated as
                                                                                   sold for use in creating mixed drinks
status,” the LLC is treated as a sole     “fuel delivered to consumers…in
                                                                                   generally fall within the definition
proprietorship rather than as a cor-      bulk” within the meaning of
                                                                                   of taxable “soft drinks” as they con-
poration, and income from the LLC         N.J.S.A. 54:32B-8.7 and are exempt
                                                                                   tain natural or artificial sweeteners.
must be reported on Form NJ-1040.         from sales tax. This provision was
                                                                                   However, if they contain milk or
                                          not changed by the Streamlined
                                                                                   milk products (including soy, rice,
Realty Transfer Fee                       Sales and Use Tax legislation,
                                                                                   or similar milk substitutes) or more
Senior Citizen Partial Exemption          P.L. 2005, c.126, which took effect
                                                                                   than 50% vegetable or fruit juice by
— An inquiry was received regard-         October 1, 2005.
                                                                                   volume, they are excluded from the
ing whether a senior citizen occu-
                                          Lessor Certification (Form ST-40)        taxable soft drink definition and are
pying a home to which she had
                                          — As of October 1, 2005, Form            considered exempt “food in-
conveyed title from herself as an
                                          ST-40 is no longer used for leases       gredients.” N.J.S.A. 54:32B-8.2.
individual to a trust in her name, can
                                          beginning on or after that date. Prior   Powdered nonalcoholic drink mixes
now, when selling the property,
                                                                                                    continued on page 11
Summer 2006                                                                                                        11


tax briefs - from page 10                at a marine terminal facility. Thus,    liabilities regarding tax
                                         storage services provided for trucks    years 1996 and prior. Be-
are exempt as “food and food             and trailers are subject to tax, re-    tween October 1996 and July 1997
ingredients.”                            gardless of where the storage occurs.   there was correspondence between
Storage of Cargo Containers and          However, an exemption applies to        the Division and Mr. Giacomo
Truck Chassis — The Division re-         sales of commercial trucks, tractors,   Duva, the attorney for Phaneromeni,
ceived an inquiry concerning the         semi-trailers, and vehicles used in     regarding payment of the liabilities.
taxability of the storage of cargo       combination with a gross vehicle        On July 7, 1997, Mr. Duva notified
containers and truck chassis at off-     weight rating in excess of 26,000       the Division that Phaneromeni had
pier depots.                             pounds, or those engaged exclu-         “contracted to sell the business, as-
                                         sively in interstate commerce.          sets, liquor license, and real prop-
Sales tax is generally imposed on        N.J.S.A. 54:32B-8.43. !                 erty to a bona fide buyer who
storage services; however, there is                                              presently has a loan commitment.”
a specific exemption for certain stor-                                           The letter also stated that the buyer’s
age services for the marine terminal
industry. Sales of commercial ships,
                                         In Our Courts                           lender had set a July 17, 1997, clos-
                                         Sales and Use Tax                       ing date, but that date could not be
barges, and other 50-ton-burden ves-                                             guaranteed. This letter did not dis-
sels, including cargo containers and     Bulk Sale Notice – GABGEO v. Di-
                                                                                 close the identity of the buyer, a sales
repairs to such, and machinery and       vision of Taxation, Division of Al-
                                                                                 price, firm closing date, or if the pur-
equipment for use at a marine ter-       coholic Beverage Control, and
                                                                                 chaser would assume Phaneromeni’s
minal facility in loading, unloading,    Township of Colts Neck, decided
                                                                                 tax liabilities.
and handling cargo, as well as stor-     April 21, 2006; Tax Court Nos.
age and other services rendered with     007640-2004 and 007676-2004.            Plaintiff (GABGEO) purchased the
respect to such loading, unloading,                                              assets and liquor license of Phaner-
                                         George Mavrookas was the owner/
and handling of cargo at a marine                                                omeni on July 18, 1997, for an un-
                                         chief executive of P. Phaneromeni
terminal facility, are exempt. Thus,                                             stated amount of money. GABGEO
                                         Corp. (Phaneromeni), which owned
storage services for cargo contain-                                              was incorporated on June 27, 1997,
                                         and operated a restaurant in Colts
ers that are provided at a marine ter-                                           listing Peter Mavrookas (son of
                                         Neck, New Jersey. The Division had
minal facility are exempt. There is                                              George Mavrookas of Phaneromeni)
                                         filed numerous judgments in the
no provision that would exempt the                                               as the sole shareholder of GABGEO
                                         form of certificates of debt against
storage of cargo containers at a lo-                                             and Mr. Giacomo Duva as the reg-
                                         Phaneromeni for deficient and/or
cation other than a marine terminal                                              istered agent. Although the purchase
                                         delinquent taxes. On September 17,
facility.                                                                        included the real property in which
                                         1996, the Division notified Phaner-
                                                                                 the business was located, the real
Trucks, tractors, trailers, and semi-    omeni that the Division had obtained
                                                                                 estate was deeded in a separately re-
trailers are not included within the     a judgment against Phaneromeni,
                                                                                 corded transaction on July 18, 1997,
exemption for the marine terminal        George Mavrookas, and fellow
                                                                                 from George Mavrookas and his
industry described above, since they     officers and partners for approxi-
                                                                                 wife to Peter Mavrookas and his
are not machinery or equipment           mately $195,356 of sales and use tax
                                                                                 wife for $1,800,000.
used to load, unload, or handle cargo    and corporation business tax
                                                                                 On September 2, 1997, Mr. Duva
                                                                                 sent an attorney trust account check
New Jersey tax forms at your fingertips!                                         to the Division to pay off most of
From your fax machine’s phone, dial
                                                                                 Phaneromeni’s tax liabilities and

609-826-4500                                                                     indicated that GABGEO would as-
                                                                                 sume responsibility for the remain-
                                                                                 ing approximately $20,000. The
NJ TaxFax                                                                        Division notified Phaneromeni that
NJ Tax Forms & Publications                                                      the judgments were satisfied and
24 Hours – 7 Days a Week
                                                                                                  continued on page 12
 12                                                                                                       Summer 2006


      in our courts - from page 11       In a letter dated October 18, 1999,         with N.J.S.A. 54:32B-22(c). Mr.
                                         the Division issued a notice to Phan-       Duva sent the notice on behalf of the
warrants for satisfaction would be       eromeni that it owed $417,187 in            seller, not the purchaser, the pur-
prepared and forwarded to the Su-        sales tax and interest for tax years        chaser was not named, and the noti-
perior Court.                            1995 through 1997. On May 15,               fication was not the form of notice
Mr. Duva, acting as the attorney for     2003, the Division notified                 required by the statute. The letter did
GABGEO, delivered a Bulk Sale            GABGEO of their additional trans-           not inform the Division whether the
Notice to the Division on Septem-        feree liability of $429,790 as a re-        seller informed the purchaser of the
ber 11, 1997, almost 60 days after       sult of the audit of Phaneromeni.           outstanding taxes or that the pur-
the closing. Thereafter, the Division                                                chaser would assume liability of any
                                         At issue is whether GABGEO is re-           taxes owed. As to the September 11,
issued a conditional tax clearance       sponsible for the taxes, interest, and/
certificate that allowed Phaner-                                                     1997, notice, the Court found that it
                                         or penalties of Phaneromeni as a re-        was a proper notice but was un-
omeni to transfer the liquor license     sult of the 1999 audit. In essence,
to GABGEO, and issued a Notice                                                       timely to put the Division on notice
                                         N.J.S.A. 54:32B-22(c) requires that         as it was not provided at least 10
and Demand of Payment From               a purchaser in bulk of the business
Transferee to GABGEO in the                                                          days before the July 18, 1997, sale
                                         or business assets must notify the          as required by the statute. Therefore,
amount of $34,969. In the follow-        Division by registered mail at least
ing months, Mr. Duva corresponded                                                    the Division could not perform a
                                         10 days prior to the sale or posses-        quick bulk sales audit, address po-
with the Division inquiring about the    sion and include the price, terms,
status of the clearance of the trans-                                                tential liabilities after an audit, and
                                         and conditions as well as acknowl-          prescribe an escrow until after the
fer of the liquor license. In a letter   edge that the seller has informed the
dated April 1, 1998, the Division                                                    sale closed.
                                         purchaser that the seller owes taxes
informed Mr. Duva that GABGEO            or the purchaser will be personally         The Court also questioned whether
did not timely file its Bulk Sale No-    liable for any taxes determined to be       the transaction was a bona fide sale
tice and therefore the Division could    due from the seller.                        because the same attorney repre-
not inform the purchaser of the                                                      sented both the seller, whose prin-
requirements to obtain a tax clear-      The Court determined that the               cipal was the father, and the
ance certificate and did not perform     July 7, 1997, notification to the Di-
an analysis of Phaneromeni’s food        vision did not substantially comply
                                                                                                       continued on page 13
and liquor purchases and gross re-
ceipts. Nonetheless, the letter stated
that the Division would relinquish
the escrow requirement and issue a
                                             Pay NJ Taxes Electronically
conditional clearance certificate to
allow the transfer of the liquor li-
                                         Electronic Check (E-Check)
cense with the caveat that upon          www.state.nj.us/treasury/taxation
completion of the current audit per-
taining to Phaneromeni the Division
would pursue collection activities                                             Make a payment directly
against Phaneromeni and/or                                                     from your bank account
GABGEO.
In 1999, the Division issued a clear-
ance certificate for the renewal of
                                         Credit Card*
the liquor license indicating that            1-800-2PAYTAX                   www.officialpayments.com
there were no outstanding liabilities
for sales through September 1997.
Thereafter, the Division issued a tax
clearance certificate for the transfer                         * Fee of 2.5% of tax payment applies.
of the liquor license to GABGEO.
Summer 2006                                                                                                            13


in our courts - from page 12              door railroad train. Customers paid         opined that a sign was
                                          an admission charge for entrance            posted during the entire au-
purchaser, whose principal was the        and received an admission ticket.           dit period. The Auditor’s testimony
son; the sales price of the business      The ticket stated only the admission        was discounted because the Division
assets was miniscule in comparison        price and did not provide the amount        did not produce any evidence such
to the separate price paid for the real   of sales tax.                               as a photograph in support of its po-
estate; and there was no proof of the                                                 sition. Furthermore, the Auditor’s
true values of the real estate and the    The Division’s auditor (Auditor)            testimony was found to be due pos-
business.                                 found that the gross receipts used to       sibly to faulty recollection or a fail-
                                          calculate sales tax plus 6% of that         ure to observe the sign.
In addressing whether the Division        amount equaled plaintiff’s gross re-
should be equitably estopped from         ceipts as recorded in a notebook by         N.J.S.A. 54:32B-12(a) provides as
collecting the liabilities of Phaner-     plaintiff’s principal for the fourth        follows:
omeni from GABGEO because of              quarter of 1997. Dividing the gross
the months of negotiations prior to       receipts by 1.06 produced taxable             Every person required to col-
the sale between Mr. Duva and the         gross receipts. Plaintiff’s accountant        lect the tax shall collect the tax
Division regarding the amount of          described this method of determin-            from the customer when col-
monies owed to secure transfer of         ing sales tax from the gross receipts         lecting the price, service
the liquor license, the Court decided     as backing into the sales tax. The            charge, amusement charge or
that the Division could only be es-       Auditor disagreed and determined              rent to which it applies. If the
topped in this case if the bulk sales     that the entire admission price was           customer is given any sales
notification provisions were com-         taxable because the admission tick-           slip, invoice, receipt or other
plied with or pursuant to a closing       ets did not separately state the tax          statement or memorandum of
agreement. The Court found that the       as required by N.J.S.A. 54:32B-               the price, service charge,
Division’s April 1, 1998, letter was      12(a) and the interpretive regulation.        amusement charge or rent paid
fair warning to GABGEO that an            In other words, hypothetically, if the        or payable, the tax shall be
audit was in process and the Divi-        admission ticket price was $10.60,            stated, charged and shown
sion reserved the right to collect        plaintiff contends that $10 is the            separately on the first of such
against Phaneromeni and/or                gross receipt and $0.60 is the sales          documents given to him. The
GABGEO.                                   tax. On the other hand, the auditor           tax shall be paid to the person
                                          claims that the entire $10.60 is the          required to collect it as trustee
In affirming the Division’s assess-                                                     for and on account of the State.
ment and holding GABGEO respon-           gross receipt and therefore subject
sible for the tax liabilities of          to the 6% sales tax of $0.636.              The Court determined that
Phaneromeni, the Court reiterated         At trial, plaintiff’s principal testified   plaintiff’s sign “satisfied the pur-
that GABGEO did not comply                that the 6% sales tax was included          pose if not the letter of the statutory
strictly or substantially with the bulk   in the admission price and that signs       requirement” of N.J.S.A. 54:32B-
sale notice provisions, GABGEO            were posted indicating such for the         12(a) even though sales tax was not
was on notice that it would be held       four-year period at issue. On the           separately shown on the admission
responsible for Phaneromeni’s audit       other hand, the Auditor as well as          tickets as required by the statute.
liabilities, and there was no evidence    an assistant testified that they did not    The Court reasoned that the “pur-
presented at trial disputing the          see any posted signs relating to the        pose” of N.J.S.A. 54:32B-12(a) was
amount of the assessment.                 sales tax.                                  to notify the customer of the amount
                                                                                      of sales tax collected as well as to
Tax Separately Stated – Great             In evaluating the testimony, the            provide a basis for a sales tax refund
American Railway Co. v. Division          Court noted that this was not a case        where appropriate. Furthermore, the
of Taxation, decided March 3, 2006;       of concealment, plaintiff maintained        Court stated that additional sales tax
Tax Court No. 005006-2004.                adequate books and records, taxes           was not retained by the plaintiff and
Plaintiff operates a museum contain-      were consistently reported and paid         that the Division sought to effec-
ing a doll collection, pipe organ,        timely, and plaintiff’s principal was       tively impose additional sales tax on
model railroads, as well as an out-       a credible witness. The Court then                           continued on page 14
 14                                                                                                         Summer 2006


      in our courts - from page 13       Tax Calendar
the sales tax reported and remitted.     The following three calendars pro-                          important
Alternatively, the Court opined that     vide listings of filing and payment
                                         dates for tax year 2005 (January 1,
                                                                                                        phone
even if a sign was not posted, that
additional sales tax was not due. “No    2005 – December 31, 2005) and tax                            numbers
provision of the sales tax statutes or   year 2006 (January 1, 2006 –
regulations states that a failure to     December 31, 2006) for businesses       Customer Service Ctr .. 609-292-6400
                                         and individuals:                        Automated Tax Info 1-800-323-4400
disclose separately the amount of                                                 ...................................... 609-826-4400
sales tax being collected will auto-     • Chronological List of Filing          FAIR Rebate
matically result in liability for pay-     Deadlines — This calendar is for          Hotline ................. 1-888-238-1233
ment of tax on the portion of the          use by both businesses and indi-
                                                                                 Property Tax Reimbursement
admission charge used to pay sales                                                   Hotline ................. 1-800-882-6597
                                           viduals. If you are responsible for   Earned Income Tax Credit
tax.” !                                    a return that is not listed in this       Information ............. 609-292-6400
                                           calendar, please refer to the         NJ TaxFax .................... 609-826-4500
                                                                                 Business Paperless Telefiling
                                           instructions that accompanied the         System .................. 1-877-829-2866
                                           return, or contact the Customer       Speaker Programs ....... 609-984-4101
                                           Service Center at 609-292-6400        Alcoholic Bev. Tax ....... 609-984-4123
                                           for the appropriate filing            Corp. Liens, Mergers, Withdrawals
                                           deadline.                                 & Dissolutions ......... 609-292-5323
                                                                                 Director’s Office .......... 609-292-5185
                                                 2005        2006                InheritanceTax ............. 609-292-5033
                                                                                 Local Property Tax ..... 609-292-7221
                                         • Alphabetical Summary of Due           Motor Fuels Tax
                                           Dates by Tax Type                         Refunds .................... 609-292-7018
                                                                                 Public Utility Tax ........ 609-633-2576
                                                2005      2006
                                         • Payment Dates for Weekly
                                           Payers — An employer or other
                                           withholder of New Jersey gross
                                           income tax is designated a
                                           “weekly payer” if the amount of
                                           tax they withheld during the pre-
                                           vious tax year was $10,000 or
                                           more.
                                                 2005      2006 !

				
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