A2757

An Act requiring the distribution of a portion of sales and use tax revenue to municipality in which a sale is sourced, supplementing P.L.1966, c.30.

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

1. a. From the revenue derived from the tax imposed pursuant to the “Sales and Use Tax Act,” P.L.1966, c.30 (C.54:32B-1 et seq.), an amount equal to the revenue derived from a one percent tax rate on each taxed retail sale shall be credited to the Property Tax Relief Fund. The amount credited shall be inclusive of, not in addition to, the amount required to be credited pursuant to subparagraph b. of Article VIII, Section I, paragraph 7 of the New Jersey Constitution.

b. The Director of the Division of Taxation shall determine and certify to the State Treasurer on a monthly basis the amount of revenue derived from retail sales sourced to each municipality. A retail sale shall be sourced to a municipality in accordance with sections 26, 28, and 29 of P.L.2005, c.126 (C.54:32B-3.1, C.54:32B-3.3, and C.54:32B-3.4) and in accordance with all other provisions of the “Sales and Use Tax Act” P.L.1966, c.30 (C.54:32B-1 et seq.). The director is authorized to require sellers to provide information necessary for the director to determine where a sale should be sourced.

c. The Legislature shall annually appropriate and the State Treasurer shall pay from the Property Tax Relief Fund to the municipality in which a retail sale is sourced an amount equal to the revenue derived from a one percent tax rate on each taxed retail sale sourced to the municipality. The payments shall be made at intervals determined by the State Treasurer, in consultation with the Director of the Division of Local Government Services in the Department of Community Affairs, but shall be made no less than annually.

d. Any amount paid to a municipality pursuant to this section shall be used exclusively for the purpose of reducing the amount the municipality is required to raise by local property tax levy for municipal purposes.

2. This act shall take effect at the start of the fifth calendar quarter that begins following enactment.

STATEMENT

This bill requires the Legislature to annually appropriate to the municipality in which a taxed sale is sourced an amount equal to the revenue that would be derived from a one percent tax rate on the sale.

Sales are sourced in accordance with the requirements of the multi-state Streamlined Sales and Use Tax Agreement, which New Jersey is a part of pursuant to statute. For example, if a product is received by a purchaser at a business location of the seller, then the sale is sourced to that business location. If a product is not received by a purchaser at a business location of the seller, then the sale is sourced to the location where receipt by the purchaser occurs.

Currently, the sales tax rate is 6.625 percent of the purchase price, or 6.625 cents for every dollar of the purchase price. This bill requires one cent of every 6.625 cents, or the amount collected from a one percent rate, to be distributed to the municipality in which the sale is sourced. Based on the executive certified revenue estimate for sales tax for fiscal year 2020, a one percent rate would yield about $1.7 billion.

New Jersey’s constitution already requires an amount equal to the revenue from a rate of half of one percent to be placed in the Property Tax Relief Fund (PTRF). Money in the PTRF may only be used to offset property taxes. Aid to municipalities is a form of offsetting property taxes because the aid allows municipalities to avoid increasing property tax rates. Pursuant to this bill, an amount equal to the revenue from a full one percent rate will be placed in the PTRF and will be distributed to municipalities based on where sales are sourced.