ASSEMBLY, No. 2888

STATE OF NEW JERSEY

208th LEGISLATURE

INTRODUCED FEBRUARY 18, 1999

Sponsored by:

Assemblyman NICHOLAS ASSELTA

District 1 (Cape May, Atlantic and Cumberland)

Assemblyman NICHOLAS R. FELICE

District 40 (Bergen and Passaic)

Co-Sponsored by:

Assemblymen Chatzidakis, LeFevre and Arnone

SYNOPSIS

Provides full or partial reimbursement to new veteran-owned small businesses of sales and use tax paid.

CURRENT VERSION OF TEXT

As introduced.

(Sponsorship Updated As Of: 3/12/1999)

An Act providing for reimbursement to newly-formed veteran-owned small businesses of sales and use tax, supplementing P.L.1966, c.30 (C.54:32B-1 et seq.).

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

1. a. For the purposes of this section:

"Small business" means a corporation, partnership, S corporation, sole proprietorship, or other business that does not maintain a regular place of business outside of this State other than a statutory office, that commenced operations in this State on or after the effective date of P.L. , c. (now pending before the Legislature as this bill), and that has, during the calendar year, an annual payroll of not more than $1,000,000 and annual gross receipts of not more than $2,000,000; provided that for any calendar year commencing on or after January 1 of the second calendar year next following the effective date of P.L. , c. , the director shall prescribe the amount of annual payroll and annual gross receipts that will apply hereunder by increasing each such amount by an annual inflation adjustment factor, determined as prescribed in connection with the increases in corresponding amounts under the definition of "small business taxpayer" set forth under section 2 of P.L.1993, c.170 (C.54:10A-5.5), and by rounding the increased amounts in the same manner as prescribed under that section with respect to those corresponding amounts. The annual payroll of a business hereunder shall include the employees of its domestic and foreign affiliates, whether employed on a full-time, part-time, temporary, or other basis, during the preceding 12 months. If a business has not been in existence for 12 months, the annual payroll of the business for the calendar year shall be the payroll of the business for the period of operation during that calendar year divided by the number of weeks, including fractions of a week, that it has been in business, and the result multiplied by 52. That amount shall then be added to the 12 month payrolls of its domestic and foreign affiliates to determine the annual payroll of the taxpayer for purposes of this definition. The annual gross receipts of a business shall include the annual gross receipts of its foreign and domestic affiliates. For purposes of this definition, the gross receipts of the business includes receipts from sales of tangible personal property and services, interests, rents, royalties, fees, commissions and receipts from any other source, but less returns and allowances, sales of fixed assets, interaffiliated transactions between a business and its domestic and foreign affiliates, and taxes collected for remittance to a third party, as shown on its books for federal income tax purposes. If a business has not been in existence for 12 months, the annual gross receipts of the business for the calendar year shall be the gross receipts of the business for the period of operation during that calendar year divided by the number of weeks, including fractions of a week, that it has been in business, and the result multiplied by 52. "Affiliate" includes all business entities organized for profit that are affiliates of each other when either directly or indirectly one such entity controls the other, or a third party or parties control both. In determining whether business entities are independently owned and operated and whether or not affiliation exists, the director shall consider all appropriate factors, including common ownership, common management and contractual relationships. No business shall qualify as a small business under this subsection if the operations of that business consist in substantial part of the continued operations of a business in existence more than four years earlier, or of a business in existence prior to the effective date of P.L. , c. .

"Veteran" means any citizen and resident of this State who has rendered active service in time of war, as defined by section 1 of P.L.1963, c.171 (C.54:4-8.10), and been honorably discharged or released under honorable circumstances from the Armed Forces of the United States.

"Veteran-owned small business" means a small business, the management and daily business operations of which are conducted by one or more veterans who hold 100% of the ownership interest in the business, provided that for the purpose of establishing eligibility of the business as a veteran-owned small business hereunder, any ownership interest in the business held by a veteran who, during the preceding 10 years, shall have held an ownership interest in another business allowed a reimbursement under this section shall not be considered.

b. Except as to motor vehicles, any veteran-owned small business shall be entitled to a reimbursement of all or part of the sales and use tax imposed under P.L.1966, c.30 (C.54:32B-1 et seq.) that the business shall have paid during its first 48 months of operation in connection with the sale of goods or the rendering of services to the business for business purposes, as follows:

(1) With respect to sales made or services rendered to the business during the business's first 24 months of operation, the business shall be allowed reimbursement of 100% of the sales and use tax paid; and

(2) With respect to sales made or services rendered to the business during the 25th through the 48th month of the business's operation, the business shall be allowed reimbursement of 50% of the sales and use tax paid.

A veteran-owned small business may apply for reimbursement hereunder of tax paid during a calendar year by making application therefor after December 31 of that calendar year to the director on such form as the director shall by regulation prescribe, accompanying that application with proof of eligibility of the business for the

reimbursement, and of payment of the tax for which reimbursement is claimed.

2. This act shall take effect immediately.

STATEMENT

This bill provides a tax incentive to newly-formed veteran-owned small businesses by allowing such a business to be reimbursed for all or part of any sales and use tax paid in connection with business-related expenditures for goods or services during the business's first four years of operation.

Eligibility for the reimbursement would be limited to businesses wholly owned and operated by veterans that are established after the bill's enactment into law and have an annual payroll of no more than $1 million and annual gross receipts of no more than $2 million. (The amount of these dollar caps would be adjusted annually for inflation.) The bill provides that a qualified business could, following the close of the calendar year, apply for reimbursement of sales and use tax paid in connection with eligible expenses during that year. With respect to expenses occurring during the first 24 months of the business's operations, the entire amount of the tax paid would be reimbursable to the business; with respect to expenses occurring during the 25th through the 48th month of operations, 50% of the tax paid would be reimbursable.