ASSEMBLY APPROPRIATIONS COMMITTEE
SENATE, No. 1988
STATE OF NEW JERSEY
DATED: DECEMBER 1, 2011
The Assembly Appropriations Committee reports favorably Senate Bill No.1988 (1R).
This bill phases out the cosmetic medical procedure gross receipts tax over three steps beginning on the first day of the first calendar quarter starting after the date of enactment.
The bill reduces the 6% tax rate currently imposed on the gross receipts from cosmetic medical procedures: (1) to 4% rate with the first calendar quarter beginning after the date of enactment; (2) to 2% from July 1, 2012 until July 1, 2013, and (3) to 0% on and after July 1, 2013, effectively ending the imposition of the tax.
The cosmetic medical procedures gross receipts tax is a State tax imposed on the purchase of cosmetic medical procedures. The tax applies to amounts paid for services and for any property or occupancy required for, or associated with, the performance of a cosmetic medical procedure, and is paid by the subject of the procedure and collected by persons responsible for billing the services. The tax is reported and paid to the Director of the Division of Taxation on a quarterly basis.
A taxed “cosmetic medical procedure” is any medical procedure performed on an individual which is directed at improving the procedure subject’s appearance and which does not meaningfully promote the proper function of the body or prevent or treat illness or disease. Examples of taxable procedures include cosmetic surgery, hair transplants, cosmetic injections, cosmetic soft tissue fillers, dermabrasion and chemical peel, laser hair removal, laser skin resurfacing, laser treatment of leg veins, sclerotherapy, and cosmetic dentistry.
The phase-out provided by the bill will gradually alleviate the financial and administrative burdens associated with the tax. Since the gross receipts tax was imposed in 2004, the tax has increased overall costs for recipients of cosmetic medical procedures, and imposed an administrative burden on the medical offices billing the procedures and the State agencies charged with the administration and enforcement of the tax.
As reported by the committee, this bill is identical to Assembly Bill No. 3646 as amended and reported by the committee.
The Office of Legislative Services (OLS) notes that the cosmetic medical procedure gross receipts tax collections account recorded under the New Jersey Centralized Financial System for Fiscal Year 2011 shows that the accounting system recorded $10.8 million from the tax for that past fiscal year. Presuming that annual revenue collections are otherwise stable, and the reduction date starts on January 1, 2012, the initial rate reduction will produce a revenue loss of about $1.8 million during Fiscal Year 2012; the second rate reduction combined with the first rate reduction will produce a cumulative revenue loss of $7.2 million during Fiscal Year 2013; and the elimination of the imposition of the tax during Fiscal Year 2014 will result in total annual forgone revenue of $10.8 million. This tax revenue has been annually considered in the State budget as unanticipated revenue and is deposited in the off-budget Health Care Subsidy Fund.