ASSEMBLY, No. 1095

 

STATE OF NEW JERSEY

 

Introduced Pending Technical Review by Legislative Counsel

 

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

 

 

By Assemblyman CORODEMUS

 

 

An Act revising the criteria for urban enterprise zone sales tax exemptions and disallowing such exemption for sales of lumber and millwork, amending P.L.1983, c.303.

 

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

 

    1. Section 3 of P.L.1983, c.303 (C.52:27H-62) is amended to read as follows:

    3. As used in this act:

    a. "Enterprise zone" or "zone" means an urban enterprise zone designated by the authority pursuant to this act;

    b. "Authority" means the New Jersey Urban Enterprise Zone Authority created by this act;

    c. "Qualified business" means any entity authorized to do business in the State of New Jersey which, at the time of designation as an enterprise zone, is engaged in the active conduct of a trade or business in that zone; or an entity which, after that designation but during the designation period, becomes newly engaged in the active conduct of a trade or business in that zone and has at least 25% of its full-time employees employed at a business location in the zone, meeting one or more of the following criteria:

    (1) Residents within the zone, within another zone or within a qualifying municipality; or

    (2) Unemployed for at least six months prior to being hired and residing in New Jersey, and recipients of New Jersey public assistance programs for at least six months prior to being hired, or either of the aforesaid; or

    (3) Determined to be economically disadvantaged pursuant to the Jobs Training Partnership Act, Pub.L.97-300 (29 U.S.C. 1501 et seq.);

    d. "Qualifying municipality" means any municipality in which there was, in the last full calendar year immediately preceding the year in which application for enterprise zone designation is submitted pursuant to section 14 of P.L.1983, c.303 (C.52:27H-73), an annual average of at least 2,000 unemployed persons, and in which the municipal average annual unemployment rate for that year exceeded the State average annual unemployment rate; except that any municipality which qualifies for State aid pursuant to P.L.1978, c.14 (C.52:27D-178 et seq.) shall qualify if its municipal average annual unemployment rate for that year exceeded the State average annual unemployment rate. The annual average of unemployed persons and the average annual unemployment rates shall be estimated for the relevant calendar year by the Office of Labor Statistics, Division of Planning and Research of the State Department of Labor. For purposes of P.L.1983, c.303 (C.52:27H-60 et seq.), the seven municipalities in which the six enterprise zones are to be designated pursuant to criteria according priority consideration for designation of these zones pursuant to section 7 of P.L.1983, c.303 (C.52:27H-66), shall be deemed qualifying municipalities;

    e. "Public assistance" means income maintenance funds administered by the Department of Human Services or by a county welfare agency;

    f. "Zone development corporation" means a nonprofit corporation or association created or designated by the governing body of a qualifying municipality to formulate and propose a preliminary zone development plan pursuant to section 9 of P.L.1983, c.303 (C.52:27H-68) and to prepare, monitor, administer and implement the zone development plan;

    g. "Zone development plan" means a plan adopted by the governing body of a qualifying municipality for the development of an enterprise zone therein, and for the direction and coordination of activities of the municipality, zone businesses and community organizations within the enterprise zone toward the economic betterment of the residents of the zone and the municipality;

    h. "Zone neighborhood association" means a corporation or association of persons who either are residents of, or have their principal place of employment in, a municipality in which an enterprise zone has been designated pursuant to this act; which is organized under the provisions of Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes; and which has for its principal purpose the encouragement and support of community activities within, or on behalf of, the zone so as to (1) stimulate economic activity, (2) increase or preserve residential amenities, or (3) otherwise encourage community cooperation in achieving the goals of the zone development plan; [and]

    i. "Enterprise zone assistance fund" or "assistance fund" means the fund created by section 29 of P.L.1983, c.303 (C.52:27H-88);

    j. "Lumber" means rough, dressed, and finished wood; and

    k. "Millwork" means wood or metal moldings, door frames and entrances, sash and window units, doors, staircases, or kitchen cabinets.

(cf: P.L.1993, c.367, s.1)

 

    2. Section 21 of P.L.1983, c.303 (C.52:27H-80) is amended to read as follows:

    21. Receipts of retail sales, except retail sales of motor vehicles, of alcoholic beverages as defined in the "Alcoholic Beverage Tax Law," R.S.54:41-1 et seq., cigarettes as defined in the "Cigarette Tax Act," P.L.1948, c.65 (C.54:40A-1 et seq.) [and], of manufacturing machinery, equipment or apparatus, and of lumber and millwork, made by a certified vendor from a place of business owned or leased and regularly operated by the vendor for the purpose of making retail sales, and located in a designated enterprise zone established pursuant to the "New Jersey Urban Enterprise Zones Act," P.L.1983, c.303 (C.52:27H-60 et al.), are exempt to the extent of 50% of the tax imposed under the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-1 et seq.). Only receipts from sales which originate and are completed by the purchaser in person at the vendor's place of business within an enterprise zone qualify for the reduced sales tax; provided however, that after a sale has been completed within an enterprise zone, the vendor may deliver the tangible personal property to the purchaser at a location outside the enterprise zone. The receipts from the sale of an item of tangible personal property qualifies for the reduced sales tax only if that item is regularly exhibited and offered for retail sale at the certified vendor's place of business in the designated enterprise zone. Any single retail sale in excess of $1,000, or any retail sale to a person, as defined pursuant to section 1 of P.L.1966, c.30 (C.54:32B-2), whose prior cumulative purchases during the calendar year from that certified vendor exceed $10,000, shall not qualify for the reduced sales tax.

    Any vendor, which is a qualified business having a place of business located in a designated enterprise zone, may apply to the Director of the Division of Taxation in the Department of the Treasury for certification pursuant to this section. The director shall certify a vendor if he shall find that the vendor owns or leases and regularly operates a place of business located in the designated enterprise zone for the purpose of making retail sales, that items are regularly exhibited and offered for retail sale at that location, and that the place of business is not utilized primarily for the purpose of catalogue sales, [or] mail order sales, or any other method of sales or course of conduct of business which does not entail sales which originate and are completed by the purchaser in person at the vendor's place of business located in the enterprise zone. The certification under this section shall remain in effect [during the time the business retains its status as a qualified business meeting] for a period not to exceed one year. The Director shall renew a certification upon application of the vendor if the vendor continues to meet the eligibility criteria of section 27 of P.L.1983, c.303 (C.52:27H-86) and the certification requirements of this section. However, the director may at any time revoke a certification granted pursuant to this section if he shall determine that the vendor no longer complies with the provisions of this section.

    Notwithstanding the provisions of this act to the contrary, except as may otherwise be provided by section 7 of P.L.1983, c.303 (C.52:27H-66), the authority may, in its discretion, determine whether or not the provisions of this section shall apply to any enterprise zone designated after the effective date of P.L.1985, c.142 (C.52:27H-66 et al.); provided, however, that the authority may make such a determination only where the authority finds that the award of an exemption of 50 percent of the tax imposed under the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-1 et seq.) will not have any adverse economic impact upon any other urban enterprise zone.

     Notwithstanding any other provisions of law to the contrary, after first depositing 10 percent of the gross amount of all revenues received from the taxation of retail sales made by certified vendors from business locations in designated enterprise zones to which this exemption shall apply into the account created in the name of the authority in the enterprise zone assistance fund pursuant to section 29 of P.L.1983, c.303 (C.52:27H-88), the remaining 90 percent shall be deposited immediately upon collection by the Department of the Treasury, as follows:

    a. In the first five year period during which the State shall have collected reduced rate revenues within an enterprise zone, all such revenues shall be deposited in the enterprise zone assistance fund created pursuant to section 29 of P.L.1983, c.303 (C.52:27H-88);

    b. In the second five year period during which the State shall have collected reduced rate revenues within an enterprise zone, 66 2/3% of all those revenues shall be deposited in the enterprise zone assistance fund, and 33 1/3% shall be deposited in the General Fund;

    c. In the third five year period during which the State shall have collected reduced rate revenues within an enterprise zone, 33 1/3% of all those revenues shall be deposited in the enterprise zone assistance fund, and 66 2/3% shall be deposited in the General Fund;

    d. In the final five year period during which the State shall have collected reduced rate revenues within an enterprise zone, but not to exceed the life of the enterprise zone, all those revenues shall be deposited in the General Fund.

    Commencing on the effective date of P.L.1993, c.144, all revenues in any enterprise zone to which the provisions of this section have been extended prior to the enactment of P.L.1993, c.144 shall be deposited into the enterprise zone assistance fund until there shall have been deposited all revenues into that fund for a total of five full years, as set forth in subsection a. of this section. The State Treasurer then shall proceed to deposit funds into the enterprise zone assistance fund according to the schedule set forth in subsections b. through d. of this section, beginning at the point where the enterprise zone was located on that schedule on the effective date of P.L.1993, c.144. No enterprise zone shall receive the deposit benefit granted by any one subsection of this section for more than five cumulative years.

    The revenues required to be deposited in the enterprise zone assistance fund under this section shall be used for the purposes of that fund and for the uses prescribed in section 29 of P.L.1983, c.303 (C.52:27H-88), subject to annual appropriations being made for those purposes and uses.

(cf: P.L.1993, c.367, s.6)

 

    3. This act shall take effect immediately, but remain inoperative until the first day of the second month following enactment.

 

 

STATEMENT

 

    This bill revises the criteria under which vendors in urban enterprise zones are permitted to charge a reduced rate of sales tax. The purpose of the reduced sales tax rate is to encourage economic activity in the urban enterprise zone in fair competition with business operating outside the zones. To ensure that the reduced rate actually creates economic activity in the zones, this bill clarifies existing language that sales must be made from the place of business in the zone and that business must not consist of "mail order or catalogue sales." To ensure that the economic activity created is in fair competition with business outside the enterprise zones, the bill mandates that only receipts from items regularly exhibited for sale within the enterprise zone can receive the reduced sales tax rate. Additionally, any single retail sale valued over $1000, or any combination of retail sales from a single vendor in a given calendar year valued over $10,000 are ineligible for the reduced sales tax rate.

    To reduce the possibility that vendors operating within an urban enterprise zone can gain an unfair advantage, this bill limits the duration of certification for vendors to make reduced rate sales. Under this bill, certification would be valid for a year, after which vendors must reapply and certify that they continue to meet the requirements to make sales at the reduced rate. This annual review would improve the oversight of vendor sales, promote fair competition and ensure that only vendors meeting the qualifications be permitted to make sales at the reduced rate.

    Current law excludes items such as cigarettes, alcohol, automobiles and manufacturing machinery from the reduced sales tax rate because it would provide enterprise zone vendors with an unfair advantage. To prevent this unfair competition, these price sensitive items are specifically excluded from the reduced rate. At present, lumber and millwork vendors located outside urban enterprise zones are placed at a similar competitive disadvantage due to the differential tax rates charged by enterprise zone vendors. Therefore, this legislation adds lumber and millwork products to the list of products which are excluded from the reduced sales tax rate in Urban Enterprise Zones.

 

 

 

Revises criteria for urban enterprise zone sales tax exemption and disallows exemption for sales of lumber and millwork.