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STARTING AND OPERATING A BUSINESS IN NEW JERSEY Copyright © 2008, Michael D. Jenkins CHAPTER 18
CONTENTS OF THIS CHAPTER:
I. INTRODUCTION I. INTRODUCTION New Jersey has a fairly typical tax and legal structure under which businesses must operate. However, it stands out in the industrialized Northeast for its low personal income tax rates, and for the absence of various types of taxes imposed by most neighboring states, such as rental occupancy taxes, a separate franchise tax or corporate net worth or capital taxes, or any general taxes on gross business income or property taxes on intangible personal property. Like most states, New Jersey imposes an income tax (called a corporate business tax on net income) on corporations, an individual income tax (called the Gross Income Tax), a sales and use tax, various excise taxes, with property taxes generally imposed at the local level. The state has also adopted a limited liability company (LLC) law, and a limited liability partnership (LLP) law, so that businesses operating in New Jersey in LLC or LLP form may obtain the advantages of limited liability, without incorporating or becoming subject to corporate taxation, generally. Until recently, the state's economy was growing at a solid rate and had recovered from a long period of relatively high rates of unemployment. However, the economy has sharply turned down since the beginning of 2008. For example, in May, 2008, the state's unemployment rate was up sharply to 5.4%, well above the level of 4.3% a year earlier, but still down from levels as high as 6% in 2003. The New Jersey unemployment rate now is only slightly lower than the national unemployment rate, which was 5.5% in May, 2008. To view the latest federal Bureau of Labor Statistics unemployment rate data for New Jersey or any other state, visit the BLS website. While New Jersey has a well-developed and growing state economy, and is well-situated with respect to New York, Philadelphia, and other major population centers, some of the downsides of doing business in the state are the relatively high corporate income tax rate, at 9%, plus a new 4% surtax, and the fact that, like all other Northeastern states, it has no right-to-work law. Also, New Jersey is one of only a few states that makes health and accident (temporary disability) insurance and paid family leave for employees mandatory, although employees share part of the cost of such coverage with employers. It also recently became the third state, after California and Washington, to enact an insurance program for paid family leave for employees to care for family members' serious health conditions or emergencies. II. LEGAL ENTITIES -- FILING FEES AND REPORTING REQUIREMENTS. (a) In General. A business that operates in New Jersey can operate as a sole proprietorship, a general or limited partnership, a corporation, or a limited liability company. In addition, like the federal tax law, the state income tax law also recognizes S corporations for income tax purposes and generally allows the income or losses of an S corporation to "flow through" and be taxed or deducted at the shareholder level. However, unlike most other states, New Jersey also has imposed a tax at (at a much reduced tax rate) on the income of the S corporation as well. This S corporation tax was eliminated entirely for S corporations with income of $100,000 or less, for tax years starting on or after July 1, 2001, and was phased out entirely by July 1, 2007 for S corporations with over $100,000 of "regular" taxable income allocable to New Jersey. (Any S corporation income that is taxable for federal tax purposes, such as the tax on S corporation "built-in gains," is still taxed by New Jersey at 9%, plus a 4% surtax -- 9.36% in total.) New Jersey also provides for limited liability partnerships, in which no partner is liable for debts of the partnership, in general, as in the case of a corporation or LLC, but with fewer legal formalities than are required for either a corporation or an LLC. Each of the above entities is discussed below, along with the basic requirements for forming such an entity and any general ongoing (non-tax) reporting requirements that are applicable to it. The tax treatment of each form of legal entity is discussed in Section IV below. (b) Sole Proprietorships. In general, sole proprietorships in New Jersey can be established with no formalities. However, as discussed in Section IV(b), it will generally be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, as well. In addition, if you make any sales of tangible personal property at retail or provide certain types of services, you may be required to obtain a sales tax license and collect sales tax, as discussed in Section IV(d). No separate tax form filing is required, generally, for a sole proprietorship, under the New Jersey income tax law. Instead, as with the Schedule C on your federal Form 1040, you simply report the net income or loss from your sole proprietorship on your state personal income tax return. See Section IV(c) for information on the New Jersey income tax and filing requirements for individuals. Doing business as a sole proprietor in New Jersey is generally much simpler than operating as any other kind of business legal entity. As a sole proprietor, if you have no employees, you are not required to pay or withhold any unemployment taxes, withhold any federal or state income tax from wages, nor obtain workers' compensation coverage for yourself. However, if your sole proprietorship operates under an assumed or fictitious business name (trade name), you will be required to register the name with the county where you do business, as discussed in Section IV(g). (c) Partnerships. New Jersey's partnership laws allow creation of either a general partnership, in which all partners are liable for the debts of the business, or a limited partnership, in which only the general partners are liable for debts, while the liability of limited partners is limited to the amount they have invested, usually. State law also allows for the creation of a limited liability partnership, in which no partner has personal liability (subject to certain exceptions). As discussed in Section IV(b), it will generally be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, for any type of partnership, including general or limited partnerships, or limited liability partnerships. Partnerships, as entities, are not subject to state income tax in New Jersey. Instead, the income or losses of the partnership, as allocated among the partners, must be reported on the personal income tax returns of the individual partners (or on the corporate tax returns of any corporate partners). Information returns of partnerships are due on April 15th of the following year, for partnerships on a calendar year. However, most partnerships (or entities taxable as partnerships, such as LLC's) with more than two partners, except for certain small investment clubs, are required to pay an annual tax or fee of $150 per partner each year, up to a maximum annual fee of $250,000. The fee must be paid at the time the partnership tax return is filed, and the partnership must also prepay 50% of the next year's tax liability, based on the fee paid for the year just ended. For more on New Jersey partnership tax return filing requirements, see Section IV(c). A partnership agreement, for any type of partnership, should spell out in considerable detail such matters as the following:
As a rule, general partnerships in New Jersey can be formed with no formalities, although it is highly advisable to have a written partnership agreement. However, as discussed in Section IV(b), it will generally be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, as well. A general partnership may, if desired, file a Statement of Partnership Authority with the Business Services Office of the New Jersey Division of Revenue. The Statement of Partnership Authority may list the names of the partners authorized to execute an instrument transferring real property held in the name of the partnership. It may also state the authority, or limitations on the authority, of some or all of the partners to enter into other transactions on behalf of the partnership and any other specified matters. In addition, any partnership or other business that has employees will generally have to register for, and pay, state unemployment tax on wages paid, as discussed in Section V(b), withhold New Jersey Gross Income Tax (individual income tax) from the wages of employees, as discussed in Section V(a), and obtain workers' compensation insurance coverage for employees, as covered in Section V(c). A limited partnership, in which there is at least one general partner (who is liable for partnership debts) and at least one limited partner (who is not liable for partnership debts), may also be formed under New Jersey law. Unlike a general partnership, a limited partnership must generally have a written partnership agreement, and must file a certificate of limited partnership with the New Jersey Division of Revenue, part of the Department of Treasury, together with a filing fee of $125. Foreign limited partnerships must also register before being allowed to do business in New Jersey, and must also pay a registration fee of $125. Both domestic and foreign limited partnerships are also required to file an annual report and pay an annual fee of $50. For more information on limited partnership filing requirements, see the contact information for the Business Services Office of the New Jersey Division of Revenue, listed in Section VI(a). LIMITED LIABILITY PARTNERSHIPS Limited liability partnerships (LLP's) are a relatively new form of partnership permitted under the laws of New Jersey. Like an LLC, an LLP provides limited liability for its owners, while retaining the tax advantages of a partnership for federal and New Jersey state income tax purposes. However, unlike an LLC, an LLP typically operates like a regular partnership, and is not required to file articles of organization. Partners in a general partnership can obtain limited liability protection by simply registering the partnership with the state as an LLP. To form an LLP in New Jersey, you must file a registration form with and pay a filing fee of $125 to the Division of Revenue. Foreign LLP's, those created under the laws of another state, must register with the Business Services Office (formerly the Division of Commercial Recording) of the Division of Revenue, Department of Treasury, for a certificate of authority and pay a fee of $125. Every LLP doing business in New Jersey, including both domestic and foreign LLP's, must file an annual report and pay an annual fee of $50 to the Division of Revenue, Business Services Office. For more information on LLP registration and reporting requirements, see the contact information for the Business Services Office of the Division of Revenue, part of the New Jersey Department of Treasury, listed in Section VI(a). Note that one potential drawback of LLP's, if you will do business in other states besides New Jersey, is that some states, namely California and New York, only recognize certain types of professional partnerships as LLP's. If yours is not a professional partnership, such other states may simply treat your LLP like an ordinary general partnership, with no limitation of liability. (d) Corporations. To form a corporation in New Jersey, you must file articles of incorporation with the Business Services Office and pay a fee of $125. A foreign corporation (one formed under the laws of another state or a foreign country), must obtain a certificate of authority before it may legally conduct business in New Jersey, by filing an application for a certificate of authority and paying a filing fee of $125. For more information on filing articles of incorporation or applying for a certificate of authority to do business in New Jersey, see the contact information for the Business Services Office of the Division of Revenue, listed in Section VI(a). In addition, once your corporation is formed, it will be required to file annual reports and a filing fee of $50 with the Division of Revenue, Business Services Office, each year. Failure to file this report on a timely basis could result in suspension or revocation of your corporation's charter. In addition to paying federal income taxes on its income, a corporation that does business in New Jersey must also file Corporation Business Tax (income tax) returns with the state. See Section IV(c) for a discussion of New Jersey corporate income tax rates and tax return filing requirements. Professional corporations that have more than two licensed professionals are required to pay an annual filing fee of $150 for each licensed professional employed by the company, with a maximum fee of $250,000, in addition to any corporate income tax. In addition, when paying the above fee, a professional corporation must also make a prepayment for the next year, equal to 50% of the current year filing fee. For tax forms and more information on corporate income taxes in New Jersey, see the contact information for the offices of the Division of Taxation, Department of Treasury, listed in Section VI(a). (e) S Corporations. An S corporation is simply a regular corporation that has elected, for federal or state income tax purposes, or for both, to be taxed somewhat like a partnership, with its income, losses and tax credits flowing through to its owners, who report such income, losses, or credits on their individual tax returns. New Jersey recognizes S corporations for income tax purposes, and treats them in a manner similar to the federal tax treatment, except that the S corporation itself also pays income tax, at a greatly reduced rate, on its taxable income. This S corporation tax was eliminated entirely for S corporations with an income of $100,000 or less, for tax years starting on or after July 1, 2001. It has been phased out over several years for S corporations with over $100,000 of "regular" taxable income, being reduced from the prior 2% rate to 1.33% for the period from July 1, 2001 to June 30, 2006, and to 0.67% for the following 12 months. The tax on the income of S corporations is eliminated entirely, on and after July 1, 2007. A separate state election on Form CBT-2553 is required if a corporation wishes to be treated as an S corporation for state purposes in New Jersey. The election form must be filed within 3 1/2 months of the beginning of the corporation's fiscal (tax) year, to be effective for that tax year. Otherwise, a corporation will be treated as fully taxable under the Corporation Business Tax Act. For example, if you incorporate your business and the corporation's first taxable year begins on July 1, 2008 (ending December 31st), you would need to make the S corporation election for the initial (short) tax year by October 15th, 2008, in order for the S corporation election to be effective in for New Jersey tax purposes for that first taxable year. (f) Limited Liability Companies. New Jersey, like every other state in the U.S., has adopted a limited liability company (LLC) law. Thus, in addition to the traditional choices of a sole proprietorship, partnership, or corporation, a business that operates in New Jersey may also choose to operate in the form of an LLC. In most states, including New Jersey, LLC's are very attractive entities for many small businesses, in that they offer the same protection as a corporation from creditors for debts of the business, while offering much of the flexibility plus the flow-through tax treatment of a partnership for federal and state income tax purposes. See Section IV(c) for a discussion of the income tax treatment of LLC's under New Jersey tax laws. To form an LLC under the laws of New Jersey, you must file articles of organization with the Office of Business Services of the New Jersey Division of Revenue, which must be accompanied by filing fees of $125. New Jersey state law now permits the formation of one-member LLC's and will ignore the existence of such a one-member LLC for tax purposes, like a sole proprietorship, as under the federal tax regulations. Foreign LLC's, those formed under the laws of another state, must obtain a certificate of authority to do business in New Jersey, by filing an application for a certificate of authority with the Department of Revenue, Business Services Office, and paying a filing fee of $125. Like corporations, LLP's, and limited partnerships, LLC's are required to file annual reports with the state, and pay an annual fee of $50. For more information on filing articles of organization for an LLC, see the contact information for the Business Services Office of the Division of Revenue, listed in Section VI(a). III. BUSINESS ACQUISITIONS (a) In General. When acquiring an existing business, there are a number of state legal and tax issues and other matters that you, or, for some items, your business attorney or CPA, should attend to before closing the purchase, to help prevent later, unpleasant surprises. These include matters such as:
Depending upon the state (or states) in which the seller's assets are located, you may also have to comply with state bulk sale or bulk transfer laws. You should also obtain tax releases from various state taxing agencies, as discussed below. (b) Bulk Sale Laws. Typical bulk sale laws require either publication of legal notices to all creditors in advance of the sale and recording of such notices in some cases, or maintenance of detailed lists of the property to be transferred, for inspection by the public. New Jersey is one of the business-friendly states that has repealed its bulk sale laws, so you no longer have to be concerned with this requirement when buying a business in New Jersey. However, notice of a bulk sale must be given to the Division of Taxation at least 10 days in advance of a bulk transfer, as discussed in Section III(c), regarding tax releases when a business or its assets are sold. (c) Tax Releases. When you acquire an existing business, you will want to make sure that you do not unwittingly become liable for any unpaid taxes owed by the seller. Typically, to protect yourself, you will need to receive a tax release or releases from various state taxing agencies, for such taxes as sales and use tax, income tax withholding, and state unemployment taxes, in each state in which the seller does business. If you fail to obtain such a release or written statement from the tax agency that the seller is not delinquent on any unemployment tax payments, you will be held responsible for such tax if it is not withheld from the purchase price proceeds and paid to the state at the time the sale of the business occur. In New Jersey, you should obtain tax releases for sales and use tax that may be owed by the seller. You must give notice of the planned purchase to the Division of Taxation, at least 10 days in advance, of Form C-9600, Notification of Sales Transfer, or else you may be liable for unpaid taxes of the seller. (d) Unemployment Tax Rating of Seller. In addition to obtaining tax releases, you may find it advantageous to succeed to the seller's unemployment tax experience rating, if the seller has a tax rate lower than you would otherwise obtain as a new business. In New Jersey, if you acquire all or substantially all of the seller's business, the seller's experience rating, which may be unfavorable, will be transferred to you, unless you object within 4 months after the purchase of the seller's business. For more information, contact the New Jersey Department of Labor and Workforce Development, Employer Status Section. Where only a part (not all or substantially all) of an other business and its payroll are acquired, you and the seller may jointly request that the experience rating of the acquired portion of the business be transferred to you as a successor employer. Note that if the seller and the successor employer are under common ownership, management, or control, the transfer of experience is mandatory and cannot be appealed. On the other hand, if a buyer is not an employer at the time of the acquisition and if the Department of Labor and Workforce Development determines that the primary reason for the acquisition was to acquire the seller's low tax rate, the experience transfer will not be allowed. PLANNING POINT: EXAMPLE: (e) Withholding State Taxes on Real Estate Purchases. If you acquire business real estate as part of the purchase of a business or otherwise, and if the seller is a nonresident and is an individual, estate or trust, you need to make sure by or at the time of the closing that the seller pays the estimated New Jersey Gross Income Tax on his or her gain on the sale of the property. The amount of the estimated tax payment is computed on the seller's gain at the highest gross income tax rate and, at a minimum, the seller must pay in at least 2% of the sales price, even if he or she has no taxable gain (or has a loss) on the sale. The estimated tax payment is made directly to the county recording office, which collects the tax on behalf of the state Division of Taxation. No estimated tax payment is required if the property you are purchasing was used as the principal residence of the seller. While New Jersey does not, technically, require you (the buyer) to withhold the tax, it is important that you see to it that the nonresident seller pays the tax (or certifies that the tax payment is not required, if the property was his or her principal residence). Otherwise, the county recording office will not register your deed to the property, unless the tax is remitted or the seller certifies that the property was a principal residence. IV. NEW JERSEY TAXES AND OTHER GENERAL REQUIREMENTS. (a) In General.
New Jersey has one of the most inviting, pro-business environments
of any major Northeastern state, offering low personal income
taxes, no bulk sale law requirements on purchase of a business,
no tax on the capital of corporations, no business gross income
taxes or unincorporated business taxes, and no commercial
occupancy or rental taxes. In addition, there is no property
tax on intangible property or on business inventories. However,
for corporations, other than S corporations, New Jersey imposes
a corporate business tax at a top rate of 9%, plus a temporary
surcharge, from July 1, 2006 until June 30, 2009, of 4% of the
regular tax liability. The sales tax was also recently raised
(effective July 15, 2006) to 7%, one of the highest state sales
tax rates in the nation, and extended (effective October 1,
2006) to cover a number of previously exempt types of services.
However, until recently, New Jersey did not permit any local
sales taxes, and even now only allows them in certain "sports
and entertainment districts" (such as around ballparks) in
some cities.
S corporations were formerly subject to a tax on their
income at a very low rate, but this tax was fully phased out
as of July 1, 2007.
The state government of New Jersey has developed a wide range
of government services to attract and promote both large and
small businesses in the state. In addition to having an Office
of Economic Growth to assist businesses get through government
red tape, the state provides numerous seminars and consulting
services to help businesses comply with the laws and improve
their business operations.
For state tax forms and tax information, see the contact
information for the New Jersey Division of Taxation, Department
of Treasury, in Section VI(a).
(b) State and Local Licensing.
Nearly any business, operated anywhere in the United States, will
have to have at least one government license of some kind. In most
cases, this will be a local license, issued by your city or county.
Before you open your business, contact your local city or county
hall and find out if your particular business needs one or more
local licenses. Most kinds of local business licenses are granted
upon payment of a fee, with no further requirements, except
possibly for annual or other periodic renewal fees.
However, if you are engaging in any kind of food business,
you will usually need to also obtain a health department
permit and show that you are in compliance with health
department food-handling requirements. In addition, be
sure to check with an attorney or local government zoning
or planning department officials to determine if your
business will be in compliance with all local zoning and
planning restrictions. If you own or rent any type of
facility, you will generally need fire department permits,
showing that you meet fire safety codes and any construction
or improvements to an existing structure will usually
require a building permit. If you intend to simply operate
your business from your home, you may be in violation of
local zoning requirements, but this is less likely to be a
concern if you don't have clients, customers, suppliers,
or employees coming to your house on business on a regular
basis.
State governments have traditionally required special
licenses for many kinds of professionals, such as physicians,
dentists, lawyers, and accountants. To further protect
consumers, New Jersey has expanded the list of occupations
that must be licensed by the state to include many other
occupations. Most state licenses not only require payment
of fees, but are only issued for a given profession or
occupation upon showing that you have completed certain
educational or experience requirements, or passed certain
tests, or some combination of the foregoing.
In New Jersey, all businesses must register with the state
for tax and employer purposes, on Form NJ-REG, Business
Registration. With an Internet connection, you may
also register on-line, on the web site of the Department of
Treasury, Division of Revenue's Business Gateway Registry
web page. See the Web links at Section VI(c)
and the contact information for the New Jersey Commerce and
Economic Growth & Tourism Commission, at
Section VI(a).
For assistance with state licensing and business
registration requirements in New Jersey, see the contact
information for the offices of the New Jersey Office of
Economic Growth, listed in Section VI(a).
(c) Income and Franchise Taxes.
New Jersey has both an individual income tax and a corporate
income tax (called the corporate business tax) on corporations,
but, unlike many states, does not impose a separate franchise
tax on the net worth or capital of corporations.
TAXATION OF SOLE PROPRIETORS AND PARTNERSHIPS
The New Jersey individual income tax has been reduced
several times in recent years, and, until recently, was
imposed at a maximum tax rate of 6.37%, on income over
$75,000 (or over $150,000 for married couples filing
jointly), for most taxpayers. However, on June 28, 2004,
the governor signed into law a "millionaire's tax" bill
that created a new 8.97% tax bracket on taxable income
in excess of $500,000, both for joint and single filing
status returns.
The new tax bracket was retroactive in effect to January 1,
2004, and was enacted in order to increase the amount of
property tax rebates to certain eligible homeowners.
Individual taxpayers generally pay state income tax on
their business earnings from a sole proprietorship, or on
their share of the earnings of a pass-through entity, such as
a partnership, S corporation, or LLC. The New Jersey personal
income tax return is Form NJ-1040, which must
be filed with the Division of Taxation of the New Jersey
Department of Treasury, by April 15th of the following year.
The New Jersey individual income tax is referred to as the
"Gross Income Tax," as it is not based on federal taxable
income. Instead, the amount subject to tax is based on most
types of gross income (including net business income), with
certain exclusions, reduced by only a few deductions, such
as for alimony paid, medical expenses in excess of 2% of
income, property taxes, and a few other items. No deductions
are allowed, generally, for mortgage or other interest,
other taxes, or charitable contributions. Thus, for a taxpayer
with a large mortgage or who makes large charitable donations,
the New Jersey tax rates, while seemingly fairly low on
incomes of under $500,000, can effectively be somewhat higher,
in the absence of many of the deductions allowed on federal
tax returns or in most other states.
New Jersey and Pennsylvania have a reciprocal tax agreement
under which the two states have agreed that compensation
income earned in one state by residents of the other will
only be subject to state income tax in the state of residence.
This agreement applies to wages, salaries, tips, commissions,
and bonuses, but does not apply to self-employed income earned
from businesses or rendering of professional services. Thus,
for example, a commuter who lives in New Jersey but works in
Philadelphia is not subject to Pennsylvania income tax on
his or her salary or wages.
Partnerships, or entities taxable as partnerships, such
as LLC's, are not subject to New Jersey state income taxation,
but must file an information return with the Division of
Taxation each year, showing each partner's share of taxable
income, losses, and credits, on Form NJ-1065.
Returns must be filed by any partnership or LLC that has one
or more New Jersey partners or members or which have any
New Jersey sourced income.
The partnership tax information return is due by April 15 of
the following year, in the case of a calendar year partnership.
While a partnership is not subject to income tax, any partnership
with New Jersey income and more than two partners must pay an
annual filing fee at the time it files its tax return, in the
amount of $150 per partner (limited to $250,000 in total). The
filing fee is to be remitted with Form PART-100,
Partnership Voucher.
The $150 per partner fee is not imposed on a partnership that
has no New Jersey-source income or expenses.
Partnerships that have nonresident partners are
required to make quarterly New Jersey income tax payments
on behalf of such partners, based on the nonresident's
share of the partnership's New Jersey-source income, at the
applicable tax rate (depending on whether the partner is
an individual or a business entity). Payments are due in
installments each quarter, on the 15th day of the 4th, 6th,
and 9th day of the taxable year, and by the 15th day of the
first month of the following year. All such installment
payments must be made electronically.
Individual taxpayers doing business as sole proprietors
(or who are partners in partnerships, members of LLC's, or
shareholders in S corporations), who have taxable income from
the business, will generally be required to make advance
payments of estimated New Jersey individual income taxes,
on Form NJ-1040-ES, if their net tax liability
(not covered by withholding) exceeds $400. Estimated tax
payments are due in four installments, on the 15th day of
the 4th, 6th, and 9th months of the taxable year, and the
15th day of the first month of the following year.
Estimated tax penalties will apply if the amount of
estimated tax paid in is less than 80% of the current year's
tax, or 100% of the prior year's tax (110% of the prior
year's tax, in the case of taxpayers with taxable gross
income exceeding $150,000, or $75,000 if married, filing
separate return).
The New Jersey corporate franchise (income) tax rate, on
corporations other than S corporations, is imposed at a rate
of 9%. For small corporations that have $100,000 or less of
"entire net income," a reduced tax rate of 7.5% applies, and a
6.5% rate applies to corporations with $50,000 or less of entire
net income. Under 2006 legislation, the total corporate tax
liability (after any tax credits) is increased by a 4% surcharge,
for privilege periods (tax years) ending after July 1, 2006 and
before July 1, 2009.
Since 2002, a $500 minimum tax (adjusted every fifth
year for inflation) has applied, and beginning in 2006 the
minimum tax is increased for corporations with $100,000 or
more of New Jersey gross receipts, as follows:
The $2,000 minimum tax also applies to any controlled
group of corporations with total payroll of over $5 million.
Professional corporations that have more than two licensed
professionals are required to pay an annual filing fee of $150
for each licensed professional employed by the company, with a
maximum fee of $250,000, in addition to any corporate income
tax. In addition, when paying the above fee, a professional
corporation must also make a prepayment for the next year,
equal to 50% of the current year filing fee.
The state corporation income tax return is Form
CBT-100, which must be filed with the Division of
Taxation by the 15th day of the fourth month following the
end of the taxable year, or by April 15th in the case of a
corporation whose taxable year is the calendar year.
Corporations are required to make estimated tax payments
of their state corporate income tax in advance, if their tax
liability for the year equals or exceeds $500. Estimated
tax payments are due in advance, in four equal installments,
on the 15th day of the 4th, 6th, 9th, and 12th months of
the taxable year. The total estimated tax that must be
paid in is usually equal to 90% of the actual tax liability
for the year. However, if the tax paid is equal to or exceeds
the amount of the tax that would have been owed for the
preceding year, computed at the current year's tax rates but
based on the preceding year's facts, the current year payments
will not be considered an underpayment of estimated tax.
Penalties are imposed for failure to make the required
estimated tax payments on a timely basis.
S corporations are generally treated the same under New
Jersey tax laws as under federal, but a small tax applied
to the income of certain larger S corporations, for tax
years beginning before July 1, 2007. Certain small S
corporations whose entire net income is $100,000 or less
have been entirely exempted from this tax.
The tax on the income of S corporations with more than
$100,000 of entire net income, formerly imposed at the rate
of 2%, has been phased out. The rate was 1.33% from July 1,
2001 until June 30, 2006, and then was reduced to 0.67% for
the period from July 1, 2006 until June 30, 2007, but is
repealed entirely on and after July 1, 2007.
S corporations file annual tax returns on Form
CBT-100S.
Any S corporation income that is subject to federal
tax, or all of the income of a corporation that does not
separately elect to also become an S corporation for New
Jersey tax purposes is taxed by New Jersey at the same
rate as a regular corporation ("C corporation"), 9% at
present, plus the temporary 4% surcharge.
A corporation that wishes to elect to be a New Jersey
S corporation must complete and file a New Jersey S
Corporation Election, Form CBT-2553, with the Division
of Taxation. The filing due date for Form CBT-2553
is one month after the time to file a federal S corporation
election. In other words, since the federal S corporation election
must be made within 2 1/2 months after the start of the taxable
year, the New Jersey S corporation election must be made within
3 1/2 months after the start of the taxable year.
Once a corporation has become a New Jersey S corporation,
it may not revoke its S corporation election after its first
taxable year, unless it also revokes its federal S corporation
election.
Like partnerships and LLC's, an S corporation must withhold
tax with respect to nonresident owners (shareholders), unless
the nonresident is participating in a composite return
(Form NJ-1080C) filed on behalf of all the
nonresident shareholders of the corporation or has consented
to filing New Jersey nonresident income tax returns and
paying any tax owed.
TAXATION OF LIMITED LIABILITY COMPANIES
In New Jersey, a limited liability company (LLC) will
be taxed in the same manner as a partnership (unless it
is taxed as a corporation for federal tax purposes), thereby
avoiding the possible double taxation of income that can
occur with a corporation. Under IRS tax regulations, an LLC
is now able to elect to be treated as a partnership if it
has more than one owner, or as a sole proprietorship if it
does not, for federal tax purposes. New Jersey law now
recognizes the validity of a one-owner LLC, and follows
the federal tax treatment.
Note that it is not always entirely clear whether an LLC is
a "single-member LLC" or not, where the "single owner" is a
married couple who hold the entire ownership of the LLC in some
form of co-tenancy, such as joint tenants with right of survivorship,
tenants by the entirety, or as tenants in common. The federal Internal
Revenue Service (IRS) has taken a very lenient position in Rev.
Proc. 2002-69, where a couple hold the LLC interest as community
property, ruling that the IRS will accept whatever choice the couple
make, either to disregard the LLC as an entity (treating it as a
"single-member LLC") or to treat it as a partnership between the
husband and wife.
However, New Jersey is not a community property state, so where
the LLC is owned by a husband and wife in some form of co-tenancy,
it is unclear whether the IRS treatment would be as lenient as
for community property owners, since the IRS has not issued any
published rulings on whether an LLC can be a disregarded entity
if held in one of the various forms of co-tenancy by a married
couple, rather than being held as community property. Thus, it
is also unclear, where an LLC is owned by a husband and wife as
co-tenants, whether New Jersey would treat the LLC as a single-member
LLC or as a partnership.
While not taxable entities when electing partnership
treatment, any partnership or entity that is taxed as a
partnership (such as an LLC) and which has more than two
partners or members must pay an annual fee of $150 per
partner or member, with a maximum annual amount payable
of $250,000.
In addition, any partnership (or LLC treated as a partnership)
must remit tax payments on each nonresident partner's share
of the partnership's New Jersey income; such payment is
credited against the nonresident partner's New Jersey
income tax liability, like an estimated tax payment, as
of the date the Division of Taxation receives the tax
from the partnership.
In lieu of such payments, the LLC or other pass-through
entity may file a composite tax return on behalf of all of its
nonresident individual owners, on Form NJ-1080C,
or individual owners may sign consent agreements, consenting
to the filing of New Jersey nonresident income tax returns.
(d) Sales and Use Tax.
New Jersey imposes a general sales tax on retail sales of
tangible personal property and certain types of services at
the statewide rate of 7%. Additional local taxes are permitted
on room rentals and sales of alcoholic beverages in Atlantic
City, at varying rates. On July 1, 2004, the state occupancy
fee (tax) on rentals of hotel or motel rooms was reduced from
7% to 5%. However, municipalities were allowed to impose a
local occupancy tax at a rate of up to 3% (formerly 1%).
Until recently, New Jersey did not permit local governments
to impose general sales taxes. However, effective January 26,
2007, eligible municipalities were authorized to establish one
sports and entertainment district within a municipality and
to impose, for no more than 30 years, an additional 2% sales
tax on any or all sales of tangible personal property and
food and drink within the district. Cities may also impose
a 2% tax on hotel rooms occupied and admissions charges to
places of amusement within the sports and entertainment
district.
The 2006 budget legislation that increased the state sales
tax rate from 6% to 7% also extended the sales tax to a number
of services and types of intangible property that previously
were not taxable. Services that are now taxable under the 2006
legislation, beginning October 1, 2006, include:
More recently, under 2007 tax legislation, the sales taxes
on certain municipal parking services were repealed, effective
July 1, 2007, but the sales tax on privately-owned parking
facility services remains in effect.
In addition to adding new taxable services, the new sales
tax law makes all delivery charges for goods taxable. Under
prior law, sales tax did not apply if delivery charges were
separately stated. Also, sales or leases of "digital property"
are now generally taxable, including sales or leases of
electronically delivered music, ringtones, movies, books,
audio and video works and similar products. This means that
downloaded music, downloaded books and movies will now be
subject to sales tax in the same way that records, movie
DVDs, and books purchased in a store have been taxed in the
past.
There are numerous exemptions from the sales tax, the most
important of which is the resale exemption. If you are a
wholesaler or retailer who purchases goods that you will
resell, your purchase of such goods may qualify as an exempt
sale for resale. Similarly, if you sell goods to wholesalers
or retailers for resale by them, your sale may also qualify
as an exempt sale for resale. In any such transaction, the
exemption is ordinarily available only if the purchaser gives
the seller a valid resale certificate, certifying that the
items are being purchased for resale, and not for use or
consumption by the buyer.
New Jersey's sales and use taxes generally apply to
sales or use of pre-written computer software, but not to
custom software. However, in a technical bulletin issued
by the Division of Taxation in 2007, it was expressly
stated that software delivered electronically is not
considered to be "pre-written software" and its sale
is thus not subject to sales tax.
The new sales tax legislation makes this rule law,
but also provides that the exemption for pre-written
software that is electronically delivered is allowable
only if the software is used directly and exclusively
in the purchaser's business. The new law also specifies
that no exemption is allowed for delivery of pre-written
software by a "load and leave" delivery method.
A shadow tax, the use tax, is also imposed at the same
rate as the sales tax. It is primarily intended to tax
property that is acquired from sources outside of the state,
in transactions not subject to sales tax, when such property
is used or consumed within New Jersey. Use tax may also apply
to items purchased on an exempt basis, such as for resale,
if such items end up being used or consumed, instead of
being resold.
Before making any taxable sales, you will need to register
with the New Jersey Division of Taxation on Form NJ-REG,
Business Registration form. If you indicate on the
Business Registration form that you will be
collecting sales tax, paying use tax, or using New Jersey
Exemption Certificates, the Division will send you a New
Jersey Certificate of Authority for sales tax.
This Certificate of Authority is your permit to collect
sales tax, and to issue and receive exemption certificates.
The certificate must be displayed at your place of business.
For more information on New Jersey sales and use tax
registration and compliance, see contact information for
the offices of the Division of Taxation, listed in
Section VI(a).
(e) Real and Personal Property Taxes.
In New Jersey, as in every other state, any business real estate
you own will be subject to real property taxes. In general,
there is little that you must do, unless you wish to challenge
your assessed valuation, since the assessor will bill you for
each year's property taxes as they come due.
New Jersey also imposes personal property taxes on tangible
personal property. ("Personal property" is any kind of property
that is not real estate.) However, certain business personal
property, such as business inventories, are exempt from
personal property tax in New Jersey.
While New Jersey generally taxes tangible personal property,
it does not impose a property tax on intangible personal
property, such as stocks, bonds, promissory notes, and
other such paper assets.
A Massachusetts Taxpayers Foundation study of state taxes
in 2004 (based on 2002 data) found that New Jersey had the second
highest property taxes in the nation, in relation to residents'
income, at $48 of tax per $1,000 of income. (Alabama had the
lowest property taxes, at $13 per $1,000 of income, in comparison,
while Maine had the highest property taxes, at $55 per $1,000 of
income.) However, these rates were before New Jersey's recent
sales tax increase that is intended to allow a significant
reduction of property taxes.
(f) Other Business Taxes.
New Jersey imposes a number of excise and other miscellaneous
taxes on businesses, including:
It is important to note that the state "reactivated"
administrative regulations regarding the realty transfer
tax on September 5, 2006, which had expired on July 21,
2003. Included in these provisions is a regulation that
provides that even transfers of realty between legal
entities that have common ownership are subject to the
realty transfer tax. The regulation provides that the
amount of the consideration for such transfers is the
value of stock issued or the contribution to capital
by the grantor, such as where realty is contributed
to a controlled corporation.
However, another provision of the regulations
appears to contradict the above provision, by
indicating that in such cases the amount of the
"consideration" on which the tax is based is
limited to the amount of any mortgages on the
property, which seems to indicate that there
would be no transfer tax on a transfer of
unencumbered property that involves no
monetary payment.
(g) Trade Names.
A trade name, also known as a fictitious or assumed name, is
any name used in the course of business that does not include
the actual legal names of all the owners of the business.
Thus, if an unincorporated business goes by any name other
than the owners' real name or names, it is operating under a
trade name. The same is true of a corporation, if it operates
under a name other than its legal name. A trade name might
also be one that suggests the existence of additional owners,
by using such words as "company," "associates," or "group."
In most states where you do business, it will be necessary
to register a trade, fictitious, or assumed name, so that
people who do business with you can find out who the actual
owners of your business are. You may also want to register
any such trade name, as a means of protecting against other
companies usurping that particular trade name.
In New Jersey, sole proprietorships and partnerships that
do business under a trade or fictitious name must file a
a fictitious name certificate in duplicate with the county
clerk in the county where they do business, along with a
$5 fee for the county and a $5 fee for the New Jersey Division
of Revenue, Office of Business Services, to whom the county
clerk will forward the duplicate registration certificate.
A limited liability partnership (LLP) is exempted from
filing a fictitious name certificate with the county, but
must instead file an "alternate name" registration with
the Office of Business Services, along with a $50 fee.
Corporations using an assumed name are also exempted from
filing with the county clerk, but can register an "alternate
name" with the Office of Business Services, with a $50 fee.
LLC's and limited partnerships are also permitted, for a
$50 fee, to file an "alternate name" certificate with the
Office of Business Services, if using an assumed name.
V. EMPLOYER REQUIREMENTS IF YOU HAVE EMPLOYEES (a) Employer Registration and Withholding. A business that has any employees will already be withholding federal income tax and FICA taxes from their wages. Since New Jersey imposes a state income tax on the income of individuals, employers must also withhold New Jersey income tax (called the New Jersey "Gross Income Tax") from the wages of employees. Before beginning to pay wages, a business must register as an employer with the Division of Revenue on Form NJ-REG, Business Registration, which also serves as registration for sales and use tax and various other state taxes. Under a new "one-stop" service plan initiative implemented by former Governor Whitman, employers now only need to file one form to register with the Division of Revenue and to also become registered with Division of Employer Accounts of the New Jersey Department of Labor and Workforce Development, for state unemployment taxes and temporary disability insurance tax. Thus, the state Department of Labor and Workforce Development no longer requires a separate New Jersey employer registration number for unemployment and disability insurance purposes. Instead, the Federal Employer Identification Number has become the basic identifier for both the Division of Taxation and the Division of Employer Accounts of the Department of Labor and Workforce Development. Reporting requirements for the Division of Taxation's "Quarterly Return of Gross Income Tax Withheld" (Form NJ-941 and Form NJ-941W) and the Division of Employer Accounts' "Quarterly Contribution Report" (Form UC-27) have been consolidated into one new form, "Employer's Quarterly Report" (Form NJ-927), and employers can now submit one form and one check to satisfy their reporting requirements with both agencies. UPDATE NOTE: For more information on New Jersey income tax withholding and registration requirements for employers, see the contact information for the offices of Division of Taxation of the New Jersey Department of Treasury, listed in Section VI(a). (b) Unemployment and Other State Payroll Taxes. If your business employs one or more individuals in each of 20 weeks during any calendar year or if your payroll amounts to $1,000 in any calendar quarter, you, as an employer, will be required to pay state unemployment tax based on the amount of such wages paid. Employers subject to the New Jersey unemployment tax were formerly required to register with the Employer Status Section of the New Jersey Department of Labor to obtain a state employer identification number for unemployment tax purposes. However, under the new "one-stop" reorganization described in Section V(a), registration with the Division of Revenue for withholding and other taxes now also covers your registration as an employer with the Department of Labor and Workforce Development, and no separate identification number is issued for unemployment tax purposes. New employers are required to pay tax at a rate of 2.8% from July 1, 2007 to June 30, 2008, on the first $27,700 (in 2007) of wages paid to each employee. This includes the Workforce Development/Supplemental Workforce Funds tax, and Health Care Subsidy Fund. In addition, employers must also pay a 0.5% temporary disability tax on the taxable wages (of up to $27,700 also) of each employee, as discussed below and in Section V(c). After you have had employees for a while, you will develop an unemployment tax experience rating. This rating is based on the number of employees you terminate who then claim unemployment benefits and the amount of such benefits paid to those former employees, under complex formulas. The state will inform you when they have assigned you an individual tax rate based on your firm's experience rating. That rate may be higher or, if you have had relatively few benefit claims charged to your account, lower than the standard new employer tax rate you initially were paying. The above unemployment and temporary disability insurance taxes must be paid by you, as the employer. However, your employees must also pay in a small portion of their wages, 0.425%, from January 1, 2007 through June 30, 2008, on the wage base amount, which you must withhold from their paychecks and pay over to the state along with the employer contributions. In addition to unemployment taxes, New Jersey is one of just a few states that require employers to provide temporary disability insurance for employees (TDI). TDI benefits are funded by a small tax on the employer and a tax on the employee, which the employer must withhold from wages. The TDI program has recently (2008) been extended to include paid family leave for exigencies such as illness of a family member. For a description of the temporary disability tax and current rates, see the discussion in Section V(c). For more information on your New Jersey unemployment tax and TDI obligations as an employer, see the contact information for the offices of the Department of Labor and Workforce Development, Division of Employer Accounts, listed in Section VI(a). (c) Workers' Compensation and Other Mandated Employee Insurance Coverage. New Jersey law requires employers to pay for workers' compensation insurance for employees (or else have an approved self-insurance plan), in order to provide wage continuation or other benefits to employees injured on the job. Employers (and employees) must also pay a tax to help finance temporary disability insurance (TDI) for employees who become temporarily unable to work due to illnesses or injury not caused by their job, or, under new (2008) legislation, employees will pay a tax to fund paid family leave benefits for various reasons, such as where an employee needs time off to care for a seriously ill family member. (1) Workers' Compensation Law. Workers' compensation insurance is a state-mandated insurance requirement for most employers, in almost every state. In New Jersey, virtually all businesses with one or more employees are required by law to have workers' compensation insurance, except those able to self-insure. Note that a sole proprietor, a partner in a partnership, or a member of a limited liability company is generally not considered an employee, and is not required to be covered for workers' compensation purposes, but may elect coverage if actively performing services on behalf of the business. However, unlike most states, New Jersey law generally treats officers of a corporation as employees who must be covered by workers' compensation, even if the officer is the sole owner of the corporation. In addition, under the New Jersey workers' compensation law, there are no exemptions for employees who are family members, unlike the laws in many other states. Workers' compensation provides wage loss and medical benefits to employees injured on the job and it protects you, as an employer, from legal action for damages for injuries or job-related illnesses suffered by your employees. In effect, it is a "no-fault" insurance system for work-related injuries or illnesses. CAUTION: As an employer, you must notify injured employees of their benefits and post a notice in the workplace informing your employees of their workers' compensation coverage. You must also immediately notify your workers' compensation insurance carrier if an employee is injured on the job, so that a First Report of Injury form can be filed by the carrier with the Division of Workers' Compensation. For more detailed information regarding your obligations as an employer under the New Jersey workers' compensation laws, contact your insurance carrier or see the contact information for the offices of the Division of Workers' Compensation of the New Jersey Department of Labor and Workforce Development, listed in Section VI(a). (2) Temporary Disability Benefits Law. New Jersey is one of only a few states that makes health and accident insurance for employees mandatory. This law provides for payment of cash benefits to a worker who cannot work because of an injury or illness that is not caused by his or her job. (On-the-job injuries or illnesses are covered by workers' compensation insurance, which is also mandatory for employers to provide in New Jersey.) Employers are required to pay a disability insurance tax on behalf of their employees, and employees also pay part of their wages to help pay for such benefits. In 2008, an employer must pay 0.5% of the wages paid to an employee, up to the wage base (currently $27,700), and must also withhold 0.5% of such wages from amounts paid to the employee, for state temporary disability insurance (TDI). Both the employer tax and the withheld employee TDI tax are remitted along with New Jersey unemployment taxes. Thus, for each employee, the total of the employee portion of unemployment tax and TDI that must be withheld is 0.925% of the wages paid, up to the amount of the wage base. UPDATE NOTE: (d) State Wage and Hour Laws. Some employees of certain small firms not engaged in interstate commerce are not covered by the federal minimum wage and overtime laws. However, even if few or none of your employees are covered by the federal wage-hour laws, if, for example, because your firm does less than $500,000 a year in gross sales and the employees in question are not deemed to "...engage in (interstate) commerce...," they will still generally be subject to the New Jersey wage-hour laws, which provide for a state minimum hourly wage that was $6.15 an hour, since October 1, 2005, but increased again to $7.15 an hour on October 1, 2006 and will increase to $7.25 on July 24, 2009. Note that, as under federal wage-hour laws, outside salespersons are exempted from the New Jersey wage-hour rules. Also exempted are motor vehicle salespersons. New Jersey, like the federal law, requires payment of overtime, at time-and-a-half, for hours worked in excess of 40 hours a week, but as under the federal wage-hour laws, certain classes of executive, administrative, and professional employees, as well as outside salespersons, are exempted from the New Jersey overtime pay rules. Motor vehicle salespersons are also exempted from the overtime pay requirements. Besides the federal wage-hour posters that you must display in the workplace, you must also display a state wage-hour poster, which you can obtain from the New Jersey Department of Labor and Workforce Development. See the contact information for that state agency in Section VI(a). In addition to wage-hour laws, most businesses are subject to federal child labor laws, which put numerous restrictions on the working hours and kinds of work in which minors under the age of 18 may engage. Your business must also be cognizant of similar state child labor laws, in New Jersey. The New Jersey child labor laws provide numerous restrictions on the type and hours of work that may be performed by minors under age 18, and even more restrictions on hiring minors under the age of 16. Employment certificates must generally be obtained from the local school district before a minor under age 18 is allowed to work. Minors under age 18 may not work more than 6 days in a week or more than 40 hours in a week, or more than 8 hours in one day. Minors who are 16 or 17 may not work before 6:00 a.m. or, if the next day is a regularly scheduled school day, they may not work after 11:00 p.m. and if not a school day, may only work past 11:00 p.m. (generally) with written permission of their parents, stating the hours that they may work. Minors under age 16 may not work before 7:00 a.m. or after 7:00 p.m., except that minors who are 14 or 15 may work until 9:00 p.m. during summer vacation at a restaurant, supermarket, or other retail establishment or occupation not prohibited by state regulations, with written permission of the child's parent or legal guardian. Minors under the age of 16 may not work in factories or in numerous other occupations, but may work in theatrical productions or, in the case of children who are 11 or older, residential delivery of newspapers. Children under age 16, except those with a special theatrical employment permit , may not work in any occupation during hours when school is in session, or more than 3 hours on any school day, nor, when school is in session, may they work more than the maximum number of hours allowed per week under the federal child labor laws (18 hours). Minors under age 16 may not work near or around power-driven machinery, generally, except that 15-year-olds may work as baggers or cashiers near supermarket conveyor belts at checkout counters. Children under age 18 are generally prohibited from working in any kind of hazardous employment. Children under the age of 14 are prohibited from working in any kind of street trade, other than as newspaper carriers, and no child under age 12 may be employed in agricultural pursuits. All minors under the age of 18 must be given a lunch break of at least 30 minutes after working continuously for five hours without a 30-minute break. Employers who hire minors under the age of 18 (other than in agriculture or as newspaperboys) are required to post a state child labor law poster in the workplace that sets forth the restrictions on hours that may be worked for each day of the week and for the week in total, including the name of each such minor and the beginning and ending hours for each day for each such minor, plus the time that the daily meal period begins and ends. For posters and more information on New Jersey's child labor laws, contact the New Jersey Department of Labor and Workforce Development at the address listed for that state agency in Section VI(a). (e) State Occupational Safety and Health Laws. Employers in New Jersey must comply with state and federal job safety laws designed to prevent injuries resulting from unsafe or unhealthy conditions in the workplace. While New Jersey primarily relies on federal OSHA to enforce job health and safety in the state in private industry, and does not have a full-fledged OSHA law or enforcement agency of its own, the state has enacted laws for the protection of laws and citizens in connection with certain types of hazardous industries and activities, in addition to enforcing health and safety rules in public sector (government) employment. The Office of Safety Compliance of the New Jersey Department of Labor and Workforce Development enforces health and safety standards issued under the laws of New Jersey. Note that while you may obtain a free safety consultation from federal OSHA experts, they must and will cite you for any violations they discover at your workplace. This is not the case with state safety inspections. If you request a safety consultation from the state Department of Labor and Workforce Development and they detect violations, they will not cite you if you promptly correct the unsafe conditions. Consultations are voluntary, but can be helpful to you in identifying possible safety problems. For information on your job safety and health obligations as an employer, required posters, and possible on-site safety consultations, see the contact information for the New Jersey Department of Labor and Workforce Development, listed in Section VI(a). (f) Other Miscellaneous State Labor Laws. Other New Jersey labor laws you need to know about, as an employer, include the following: (1) Wage payments to employees. An employer must pay wages at least twice monthly, in general, except that less frequent payments may be made to certain executive and supervisory employees. If a regularly scheduled payday falls on a nonwork day, when the employer is not open for business, wages must be paid on the immediately preceding work day. In the event an employee is discharged from employment or quits, or when an employee is suspended during a labor dispute, all wages due the employee must be paid no later than the next regularly scheduled payday. An extra 10 days is granted, in the case of a labor dispute that also involves those employees who are involved in preparing the payrolls. Payment may be made by mail, if requested by the employee. It is a criminal offense for an employer to wrongfully discharge an employee because the employee's wages have been garnished. (2) Right-to-work laws. About half the states have enacted "right-to-work" laws, which guarantee that no person may be denied employment for refusing to join a union or for not paying union dues, thus banning either "union shop" or "agency shop" agreements, or both. In a union shop, an employee not belonging to a union may be hired but then must join the union, usually within 30 days. In an agency shop, an employee need not join the union but, to remain employed, must pay union dues. New Jersey does not have such a right-to-work law and allows union shop or agency shop contracts between an employer and a union. To contrary, New Jersey makes it illegal for an employer to enter into a contract or agreement under which an employee or prospective employee agrees not to remain or become a member of a labor union. (3) State anti-discrimination laws. In addition to complying with federal anti-discrimination laws, employers must also be aware of and comply with state civil rights laws in New Jersey and display a poster informing employees of their rights. You can obtain this poster from the Division of Civil Rights of the New Jersey Department of Law and Public Safety (Office of the Attorney General), at the address listed in Section VI(a). The New Jersey Law Against Discrimination makes it unlawful to discriminate in the employment relationship on the basis of:
In addition, the Law Against Discrimination prohibits harassment based on protected characteristics, such as sex, race, or nationality. Unlike the federal anti-discrimination laws, there is no exemption for small employers under the New Jersey Law Against Discrimination. (4) Reporting new hires. Under the federal welfare reform laws, employers in all states are now required to report newly-hired (or rehired) employees to a designated state agency (the New Jersey New Hire Reporting Directory for New Jersey employers) within 20 days after the date of hire. Employers who file electronically must file reports twice a month (if there are any hires to report), filing such reports between 12 and 16 days apart. See the contact information in Section VI(a) for the New Jersey New Hire Reporting Directory or see the web link in Section VI(c). (5) Family leave laws. New Jersey has a family leave law that is very similar to the federal Family and Medical Leave Act (FMLA). Like the FMLA, it provides that an employer must grant up to 12 weeks of unpaid leave in a specified period to an employee in the case of a birth, the placement a child with the employee in connection with an adoption, or to care for a seriously ill child, parent, spouse, or civil union partner. Under the New Jersey family leave law, like the federal FMLA, covered employers are those with 50 or more employees each working day during each of 20 or more calendar workweeks in the current or immediately preceding calendar year. While generally similar to the FMLA, the New Jersey family leave law differs in several ways, so that a New Jersey employer that is subject to both the federal and state acts must be keenly aware of the differing provisions of the New Jersey law. Some of the significant differences include:
Family leave granted under the New Jersey family leave law is in addition to any rights granted under the "Temporary Disability Benefits Law" (TDI law) discussed in Section V(c). Note, however, that on and after January 1, 2009, the TDI law is extended to provide for paid family leave of up to 6 weeks, funded by an additional payroll tax on the employee. (6) Lie Detector Tests Prohibited. Under New Jersey law, an employer may not require or demand, as a condition of employment, prospective employment, or continued employment, that an individual submit to or take a lie detector or similar test. An exception, similar to one of the exceptions under the federal Employee Polygraph Protection Act, is made if the employer is authorized to manufacture, distribute or dispense controlled dangerous substances and the employee or prospective employee is or will be directly involved in the manufacture, distribution, or dispensing of, or has or will have access to, such controlled substances. Any employee or prospective employee who is required to take a lie detector test as a precondition of employment or continued employment has the right to be represented by legal counsel. The period of time covered by the test may be no greater than 5 years preceding the test. A copy of the report containing the results of a lie detector test must be in writing and must be provided, upon request, to the individual who has taken the test. Information obtained from the test may not be released to any other employer or person. In addition, the employee or prospective employee must be informed of his right to present to the employer the results of an independently administered second lie detector examination prior to any personnel decision being made in his behalf by the employer. (7) Workforce Reductions. On December 20, 2007, New Jersey enacted a mass layoff notification law, similar to the federal "WARN" Act. It applies, generally, when a business lays off 500 or more full-time employees, or 50 or more such employees which constitute one-third or more of the full-time employees at an establishment (a single work site, or contiguous group of buildings or facilities), in a period of 30 days or less. The new law also applies to a termination or transfer of operations at an establishment which results in a termination of employment of 50 or more full-time employees. In case of either a mass layoff or termination/transfer of operations, an employer must:
VI. STATE SOURCES OF HELP AND INFORMATION (a) Key State Agencies Contact Information. New Jersey, as many states have done in recent years, has set up a "one-stop" center to help your new or existing businesses to obtain all necessary state licenses and permits from a single office, without your having to go from agency to agency to meet all the legal and regulatory licensing requirements. To obtain information and assistance with regard to starting or relocating your business in New Jersey, or help in dealing with the regulatory process, contact: New Jersey Commerce and Economic Growth & Tourism Commission To register your business for New Jersey taxes and as an employer, see BUSINESS REGISTRATION below. Also, the New Jersey Office of Small Business offers a variety of resources to promote and assist in the start-up, growth and expansion of firms that range in size from one to 100 employees. Among other assistance it provides, the Office of Small Business:
Contact the Office of Economic Growth at the following address, regarding assistance they provide and for information about the New Jersey set-aside program for small businesses in the letting of state government contracts: New Jersey Office of Economic Growth Addresses and other contact information for other key state and federal government agencies in New Jersey, mentioned in preceding sections of this book, are listed below for your convenience. OFFICE OF BUSINESS SERVICES (FORMERLY COMMERCIAL RECORDING). This office, a branch of the Division of Revenue, part of the New Jersey Department of Treasury, fulfills the function typically served by the secretary of state's office in most states. Contact this state office for information on:
New Jersey Division of Revenue TAXES. Obtain state income, sales and use tax, and other miscellaneous business tax forms, instructions and information from the New Jersey Department of Treasury, Division of Taxation, which is the main tax collection agency in New Jersey. Be sure to also request their brochure, "Starting a Business in New Jersey." State of New Jersey BUSINESS REGISTRATION. Register your business as an employer with the Division of Revenue, Business Services Office, a separate division of the Department of Treasury, for state income tax withholding and unemployment tax purposes, and for sales tax purposes, if you are required to collect sales tax. You can register your business for tax/employer purposes on-line via the Internet, or you can obtain and file Form NJ-REG, the New Jersey business registration form. Contact Client Registration (formerly Taxpayer Registration at the Division of Taxation) at the Division of Revenue at the following address: New Jersey Division of Revenue STATE LABOR LAWS. Contact the following agency about your obligations as an employer under various state labor laws, including:
New Jersey Department of Labor and Workforce Development STATE LICENSES. For information on New Jersey state licensing requirements for various occupations and professions, contact the New Jersey Office of Economic Growth, at the address listed for that office above. To register your business with the state for tax purposes, contact the New Jersey Division of Revenue at the address listed above for that agency. STATE SALES TAX. Obtain your sales and use tax Certificate of Authority (license) and information on the New Jersey sales and use tax law from the New Jersey Division of Taxation, at the address listed above for that agency. STATE UNEMPLOYMENT TAX AND DISABILITY INSURANCE. Contact the following state agency to determine whether you are an employer subject to payment of state unemployment taxes, and for registration as an employer if you are subject to unemployment and mandatory employee disability insurance fees (taxes). Contact the New Jersey Department of Labor and Workforce Development, Division of Employer Accounts, at the address listed above for that agency, for unemployment tax information. WORKERS' COMPENSATION INSURANCE. If you employ workers for whom you must obtain workers' compensation coverage, contact the main office of the New Jersey Department of Labor and Workforce Development, at the address listed above for that agency, for further information. STATE OSHA PROGRAM. For information on the New Jersey occupational safety and health laws that affect you as an employer in New Jersey, contact the main office of the New Jersey Department of Labor and Workforce Development listed above for further information. However, since New Jersey relies primarily on federal OSHA for job safety and health enforcement in the state, you may want to also contact the federal OSHA office at: U.S. Department of Labor/OSHA Area Office NEW HIRE REPORTING. New Jersey employers must report any newly hired (or rehired) employees within 20 days of the date of hire, or file new hire reports twice a month if reporting by electronic means. Report new hires on the reporting form, to: New Jersey New Hire Reporting Directory STATE ANTI-DISCRIMINATION LAWS. Contact the following state agency for more detailed information on New Jersey civil rights laws that may apply to your business, and to obtain anti-discrimination notices you are required to post in the workplace: Division of Civil Rights (b) Small Business Development Centers. A number of Small Business Development Centers (SBDCs) are located throughout New Jersey to assist you. These centers, usually located on college campuses, provide a wealth of start-up information and sponsor frequent business-oriented seminars. Contact the lead office below for information, or for the location of other SBDCs nearer to you. Any New Jersey SBDC can provide you with a free copy of their Doing Business in New Jersey Guide. New Jersey Small Business Development Center (c) Internet Sites. For anyone with access to the Internet, there is a wealth of state and even local business information provided by state and local governments. All states now have a state government Web page, and almost all major New Jersey state agencies also have sites on the Internet where you can obtain useful small business information on matters such as state taxes, financing sources, or the addresses and phone numbers (or e-mail addresses) of various state and federal agencies' offices in New Jersey. Since new sites are appearing frequently, you might also want to search for other New Jersey government Web sites by using one of the popular Internet search engines, such as Google or Yahoo. To start your Internet search for New Jersey government information, you may want to begin with the following Internet sites: State of New Jersey home page: New Jersey Business Information page (provides links to various state agencies and other sites of interest to New Jersey businesses): State of New Jersey departments and agencies listing: Division of Revenue, Business Gateway Services (fees, other information regarding corporate, LLC, LLP, and limited partnership filings, One-Stop Business Filing and Registration): New Jersey Department of Treasury, Division of Taxation (tax information and to download state tax forms): Division of Taxation Business Registration site (where you can register your business in New Jersey, on-line, including application for a Federal Employer Identification Number, which you will also use for New Jersey tax filing purposes): New Hire Reporting Directory (new hire reporting information or online reporting): Division of Civil Rights (Department of Law and Public Safety -- Attorney General's office -- information and posters on New Jersey equal employment laws): (d) Financing Sources. For information and help on locating financing for your small business, contact the nearest U.S. Small Business Administration office in New Jersey, or contact the following state agency: New Jersey Economic Development Authority The address of the main SBA Office in New Jersey is: U.S. Small Business Administration |
Copyright © 2008 Michael D. Jenkins
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