A2685

An Act providing a phase-in of the sales and use tax rate for telecommunications services for newly relocated or expanded businesses in this State, supplementing P.L.1966, c.30 (C.54:32B-1 et seq.).

1. a. Notwithstanding the 6% rate of tax imposed pursuant to section 3 and section 6 of P.L.1966, c.30 (C.54:32B-3 and 54:32B-6), a new relocated business or an expanded business in this State, subject to certification pursuant to this section by the Director of the Division of Taxation in the Department of the Treasury, shall in lieu of that rate, be subject to the sales and use tax upon receipts from every purchase or use by the business, except for resale, of intrastate or interstate telecommunications charged to an address in this State, according to the following rate schedules for a certified business located within a qualified municipality as defined in subsection d. of this section and for a certified business located elsewhere in this State:

Business within a Qualified Municipality:
During year after certification	Rate of Tax
1st year	..................................0.6%
2nd year	..................................1.2%
3rd year	..................................1.8%
4th year	..................................2.4%
5th year	..................................3.0%
6th year	..................................3.6%
7th year	..................................4.2%
8th year	..................................4.8%
9th year	..................................5.4%
10th year and thereafter	..................................6.0%

Business not within a Qualified Municipality:
During year after certification	Rate of Tax
1st year	..................................... 1%
2nd year	.................................... 2%
3rd year	..................................... 3%
4th year	..................................... 4%
5th year	.................................... 5%
6th year and thereafter	..................................... 6%

b. In order to claim the reduced rates of tax set forth in subsection a. of this section a new relocated business or expanded business in this State shall apply to the director for a certificate that the business is a new relocated business or an expanded business, and if applicable, that the business is located in a qualified municipality. Copies of the certificate shall be filed by the business with any vendor of intrastate or interstate telecommunications, as may be appropriate, in order to establish the rate of tax which shall be imposed and collected by the vendor upon any purchase or use by the business, except for resale, made through the vendor, of intrastate or interstate telecommunications charged to an address in this State. Application shall be in a form, and shall include such information, as the director may prescribe.

c. A certificate obtained pursuant to subsection b. of this section shall first be applicable to purchases or use by the certified business made in the calendar month following the issuance of the certificate by the director and the annual rates applicable pursuant to subsection a. of this section shall be applicable to the respective 12 consecutive calendar month periods following the calendar month in which the certificate is issued. No business granted an expanded business certificate shall qualify for a subsequent certificate as an expanded business covering a new series of reduced rate periods until the expiration of all reduced rate periods covered by the current, valid certificate. A certificate holder shall annually file with the director such information as the director shall prescribe that demonstrates that the business continues to be actively engaged in the conduct of business at the location at which it qualified for the certificate and has an amount of annual compensation that is at least equal to the amount of compensation paid by the business in the year in which the certificate was granted. The director shall revoke the certificate of a new relocated business or an expanded business that does not comply with this annual requirement.

"Compensation" means wages, salaries, commissions or any other form of remuneration paid to employees residing and domiciled in this State for personal services performed substantially at the new relocated business or expanded business location in this State.

"Expanded business" means a business enterprise actively engaged in the conduct of business from a location within this State that during any calendar year commencing after the operative date of this act pays compensation at equal to at least 125% of the compensation paid during the previous calendar year in which the business was in operation at that location for at least 12 months, and does not reduce the number of employees of the business in this State during that calendar year.

"New relocated business" means a business enterprise actively engaged in the conduct of business from a location within this State that commences operation for the first time at any location within this State on or after the operative date of this act, that prior to that date maintained a business enterprise at a location outside this State which is moved into this State on or after the operative date of this act, and that during the calendar year in which it commences operation of business at that location pays compensation in excess of the compensation paid during the previous calendar year; and

"Qualified municipality" means any municipality which at the time of the certification of a new relocated business or expanded business located in the municipality was either eligible to receive aid under the "Special Municipal Aid Act," P.L.1987, c.75 (C.52:27D-118.24 et seq.) or was coextensive with a school district which qualified for designation as a "special needs district" pursuant to the "Quality Education Act of 1990," P.L.1990, c.52 (C.18A:7D-1 et seq.).

2. This act shall take effect immediately but section 1 shall remain inoperative until the first day of the second month after enactment.

This bill provides for a phase-in of the sales and use tax rate upon purchases of telecommunications services for business enterprises that relocate to or expand in New Jersey. Businesses that relocate their business operation for the first time to a location within this State by moving a business enterprise from a location outside this State, and businesses that expand their operations at a location in this State by increasing wages and other compensation paid to New Jersey workers at that location while maintaining their employment level can obtain reduced rates on their purchases of telecommunications services charged to an address in this State. If the expanded business or relocated business is located in a "qualified municipality" as defined in the "New Jersey Urban Redevelopment Act," P.L.1996, c.62 (C.55:19-20 et seq.), the current 6% percent sales and use tax rate will be phased-in over a 10 year period after the expansion or relocation. At any other business location in this State the phase-in to a 6% rate of tax will be over a 6 year period. These reduced tax rates will provide an incentive for increased business expansion and relocation in this State through cost savings on purchases of telecommunications services that are becoming an increasingly more important business expense in a growing information- and service-based economy.

Provides reduced sales and use tax rate on telecommunications services purchased by expanded or newly relocated businesses in New Jersey and provides phase-in to regular rate.