Sponsored by:
Senator VIN GOPAL
District 11 (Monmouth)
SYNOPSIS
Excludes discounts for services rendered from gross income.
CURRENT VERSION OF TEXT
As introduced.
An Act excluding discounts for services rendered from gross income, supplementing Title 54A of the New Jersey Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Gross income shall not include the amount of a qualified employee discount.
As used in this section:
“Qualified employee discount” shall have the same meaning as defined in subsection (c) of section 132 of the Internal Revenue Code (26 U.S.C. s.132).
2. This act shall take effect immediately and apply to taxable years beginning on or after January 1 next following the date of enactment.
STATEMENT
This bill provides an exclusion from the gross income tax for discounts that an employee receives from an employer.
Currently, discounts to employees on employer sales to employees are subject to tax because the discount is a form of pay for the performance of services. For example, if an employer sells a $50 item to an employee for $45 because the employer provides a 10 percent discount to employees, the $5 discounted amount would be considered income for employment and would be subject to income tax.
Under this bill, discounted amounts provided to employees will not be subject to income tax if the federal tax code’s definitional requirements for qualified employee discounts are met. Significantly, the discount cannot exceed: in the case of property, the gross profit percentage of the price at which the property is being offered by the employer to customers, or in the case of services, 20 percent of the price at which the services are being offered by the employer to customers.