ASSEMBLY, No. 2745
STATE OF NEW JERSEY
INTRODUCED FEBRUARY 27, 1997
By Assemblywoman BUONO and Assemblyman BARNES
An Act eliminating the sales and use tax on repair and maintenance services, amending P.L.1966, c.30.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 3 of P.L.1966, c.30 (C54:32B-3) is amended to read as follows:
3. There is imposed and there shall be paid a tax of 6% upon:
(a) The receipts from every retail sale of tangible personal property, except as otherwise provided in this act. If the lessor of tangible personal property purchased for lease elects to pay tax on the amount of the sales price as provided in paragraph (2) of subsection (bb) of section 2 of P.L.1966, c.30 (C.54:32B-2), any and each subsequent lease or rental is a retail sale, and a subsequent sale of such property is a retail sale.
(b) The receipts from every sale, except for resale, of the following services:
(1) Producing, fabricating, processing, printing or imprinting tangible personal property, performed for a person who directly or indirectly furnishes the tangible personal property, not purchased by him for resale, upon which such services are performed.
(2) [Installing tangible personal property, or maintaining, servicing, repairing tangible personal property not held for sale in the regular course of business, whether or not the services are performed directly or by means of coin-operated equipment or by any other means, and whether or not any tangible personal property is transferred in conjunction therewith, except (i) such services rendered by an individual who is engaged directly by a private homeowner or lessee in or about his residence and who is not in a regular trade or business offering his services to the public, (ii) such services rendered with respect to personal property exempt from taxation hereunder pursuant to section 13 of P.L.1980, c.105 (C.54:32B-8.1), (iii) (Deleted by amendment, P.L.1990, c.40), (iv) any receipts from laundering, dry cleaning, tailoring, weaving, pressing, shoe repairing and shoeshining and (v) services rendered in installing property which, when installed, will constitute an addition or capital improvement to real property, property or land] (Deleted by amendment, P.L. , c. (now pending before the Legislature as this bill)).
(3) Storing all tangible personal property not held for sale in the regular course of business and the rental of safe deposit boxes or similar space.
(4) [Maintaining, servicing or repairing real property, other than a residential heating system unit serving not more than three families living independently of each other and doing their cooking on the premises, whether the services are performed in or outside of a building, as distinguished from adding to or improving such real property by a capital improvement, but excluding services rendered by an individual who is not in a regular trade or business offering his services to the public, and excluding garbage removal and sewer services performed on a regular contractual basis for a term not less than 30 days] (Deleted by amendment, P.L. , c. (now pending before the Legislature as this bill)).
(5) Advertising services, except advertising services for use directly and primarily for publication in newspapers and magazines and except for direct-mail advertising processing services in connection with distribution to out-of-State recipients.
(6) (Deleted by amendment, P.L.1995, c.184).
Wages, salaries and other compensation paid by an employer to an employee for performing as an employee the services described in this subsection are not receipts subject to the taxes imposed under this subsection (b).
Services otherwise taxable under paragraph (1) or (2) of this subsection (b) are not subject to the taxes imposed under this subsection, where the tangible personal property upon which the services were performed is delivered to the purchaser outside this State for use outside this State.
(c) Receipts from the sale of food and drink in or by restaurants, taverns, vending machines or other establishments in this State, or by caterers, including in the amount of such receipts any cover, minimum, entertainment or other charge made to patrons or customers:
(1) In all instances where the sale is for consumption on the premises where sold;
(2) In those instances where the vendor or any person whose services are arranged for by the vendor, after the delivery of the food or drink by or on behalf of the vendor for consumption off the premises of the vendor, serves or assists in serving, cooks, heats or provides other services with respect to the food or drink, except for meals especially prepared for and delivered to homebound elderly, age 60 or older, and to disabled persons, or meals prepared and served at a group-sitting at a location outside of the home to otherwise homebound elderly persons, age 60 or older, and otherwise homebound disabled persons, as all or part of any food service project funded in whole or in part by government or as part of a private, nonprofit food service project available to all such elderly or disabled persons residing within an area of service designated by the private nonprofit organization;
(3) In those instances where the sale is for consumption off the premises of the vendor, and consists of a meal, or food prepared and ready to be eaten, of a kind obtainable in restaurants as the main course of a meal, including a sandwich, except where food other than sandwiches is sold in an unheated state and is of a type commonly sold in the same form and condition in food stores other than those which are principally engaged in selling prepared foods; and
(4) Sales of food and beverages sold through coin-operated vending machines, at the wholesale price of such sale, which shall be defined as 70% of the retail vending machine selling price, except sales of milk, which shall not be taxed. Nothing herein contained shall affect other sales through coin-operated vending machines taxable pursuant to subsection (a) above or the exemption thereto provided by section 21 of P.L.1980, c.105 (C.54:32B-8.9).
The tax imposed by this subsection (c) shall not apply to food or drink which is sold to an airline for consumption while in flight.
(d) The rent for every occupancy of a room or rooms in a hotel in this State, except that the tax shall not be imposed upon (1) a permanent resident, or (2) where the rent is not more than at the rate of $2.00 per day.
(e) (1) Any admission charge, where such admission charge is in excess of $0.75 to or for the use of any place of amusement in the State, including charges for admission to race tracks, baseball, football, basketball or exhibitions, dramatic or musical arts performances, motion picture theatres, except charges for admission to boxing, wrestling, kick boxing or combative sports exhibitions, events, performances or contests which charges are taxed under any other law of this State or under section 20 of P.L.1985, c.83 (C.5:2A-20), and, except charges to a patron for admission to, or use of, facilities for sporting activities in which such patron is to be a participant, such as bowling alleys and swimming pools. For any person having the permanent use or possession of a box or seat or lease or a license, other than a season ticket, for the use of a box or seat at a place of amusement, the tax shall be upon the amount for which a similar box or seat is sold for each performance or exhibition at which the box or seat is used or reserved by the holder, licensee or lessee, and shall be paid by the holder, licensee or lessee.
(2) The amount paid as charge of a roof garden, cabaret or other similar place in this State, to the extent that a tax upon such charges has not been paid pursuant to subsection (c) hereof.
(f) The receipts from every sale, except for resale, of intrastate or interstate telecommunications charged to an address in this State, regardless of where the services are billed or paid.
(cf: P.L.1995, c.184, s.2)
2. Section 5 of P.L.1966, c.30 (C.54:32B-5) is amended to read as follows:
5. Transitional provisions. a. (1) Except as otherwise provided in this act, receipts received from all sales made and services rendered on and after January 3, 1983 but prior to July 1, 1990, are subject to the taxes imposed under subsections (a), (b), (c), and (f) of section 3 of this act at the rate, if any, in effect for such sales and services on June 30, 1990, except if the property so sold is delivered or the services so sold are rendered on or after July 1, 1990 but prior to July 1, 1992, in which case the tax shall be computed and paid at the rate of 7%; provided, however, that if a service or maintenance agreement taxable under this act covers any period commencing on or after January 3, 1983 and ending after June 30, 1990 but prior to July 1, 1992, the receipts from such agreement are subject to tax at the rate, if any, applicable to each period as set forth hereinabove and shall be apportioned on the basis of the ratio of the number of days falling within each of the said periods to the total number of days covered thereby.
(2) Except as otherwise provided in this act, receipts received from all sales made and services rendered on and after July 1, 1990 but prior to July 1, 1992, are subject to the taxes imposed under subsections (a), (b), (c) and (f) of section 3 of this act at the rate of 7%, except if the property so sold is delivered or the services so sold are rendered on or after July 1, 1992, in which case the tax shall be computed and paid at the rate of 6%, provided, however, that if a service or maintenance agreement taxable under this act covers any period commencing on or after July 1, 1990, and ending after July 1, 1992, the receipts from such agreement are subject to tax at the rate applicable to each period as set forth hereinabove and shall be apportioned on the basis of the ratio of the number of days falling within each of the said periods to the total number of days covered thereby.
(3) Except as otherwise provided in this act, receipts received from services rendered on or after the operative date of section 1 of P.L. , c. (now pending before the Legislature as this bill), are subject to the taxes imposed under paragraphs (2) and (4) of subsection (b) of section 3 of this act at the rate of 6%, except if the property so sold is delivered or the services so sold are rendered on or after the operative date of section 1 of P.L. , c. , in which case no tax shall be due, provided, however, that if a service or maintenance agreement taxable under this act covers any period commencing on or after July 1, 1992, and ending after the operative date of section 1 of P.L. , c. , the receipts from such agreement are subject to tax at the rate applicable to each period as set forth hereinabove and shall be apportioned on the basis of the ratio of the number of days falling within each of the said periods to the total number of days covered thereby.
b. (1) The tax imposed under subsection (d) of section 3 shall be paid at the rate of 7% upon any occupancy on and after July 1, 1990 but prior to July 1, 1992, although such occupancy is pursuant to a prior contract, lease or other arrangement. If an occupancy, taxable under this act, covers any period on or after January 3, 1983 but prior to July 1, 1990, the rent for the period of occupancy prior to July 1, 1990 shall be taxed at the rate of 6%. If rent is paid on a weekly, monthly or other term basis, the rent applicable to each period as set forth hereinabove shall be apportioned on the basis of the ratio of the number of days falling within each of the said periods to the total number of days covered thereby.
(2) The tax imposed under subsection (d) of section 3 shall be paid at the rate of 6% upon any occupancy on and after July 1, 1992, although such occupancy is pursuant to a prior contract, lease or other arrangement. If an occupancy, taxable under this act, covers any period on or after July 1, 1990 but prior to July 1, 1992, the rent for the period of occupancy prior to July 1, 1992 shall be taxed at the rate of 7%. If rent is paid on a weekly, monthly or other term basis, the rent applicable to each period as set forth hereinabove shall be apportioned on the basis of the ratio of the number of days falling within each of the said periods to the total number of days covered thereby.
c. (1) Except as otherwise hereinafter provided, the tax imposed under subsection (e) of section 3 shall be applicable at the rate of 7% to any admission to or for the use of facilities of a place of amusement occurring on or after July 1, 1990 but prior to July 1, 1992, whether or not the admission charge has been paid prior to July 1, 1990, unless the tickets were actually sold and delivered, other than for resale, prior to July 1, 1990 and the tax imposed under this act during the period January 3, 1983 through June 30, 1990 shall have been paid.
(2) Except as otherwise hereinafter provided, the tax imposed under subsection (e) of section 3 shall be applicable at the rate of 6% to any admission to or for the use of facilities of a place of amusement occurring on or after July 1, 1992, whether or not the admission charge has been paid prior to that date, unless the tickets were actually sold and delivered, other than for resale, prior to July 1, 1992 and the tax imposed under this act during the period July 1, 1990 through December 31, 1990 shall have been paid.
d. (1) Sales made on and after July 1, 1990 but prior to July 1, 1992 to contractors, subcontractors or repairmen of materials, supplies, or services for use in erecting structures for others, or building on, or otherwise improving, altering or repairing real property of others shall be subject to the taxes imposed by subsections (a) and (b) of section 3 and section 6 hereof at the rate of 7%; provided, however, that if such sales are made for use in performance of a contract which is either of a fixed price not subject to change or modification, or entered into pursuant to the obligation of a formal written bid which cannot be altered or withdrawn, and, in either case, such contract was entered into or such bid was made on or after January 3, 1983 but prior to July 1, 1990, such sales shall be subject to tax at the rate of 6%, but the vendor shall charge and collect from the purchaser a tax on such sales at the rate of 7%.
(2) Sales made on or after July 1, 1992 to contractors, subcontractors or repairmen of materials, supplies, or services for use in erecting structures for others, or building on, or otherwise improving, altering or repairing real property of others shall be subject to the taxes imposed by subsections (a) and (b) of section 3 and section 6 hereof at the rate of 6%; provided, however, that if such sales are made for use in performance of a contract which is either of a fixed price not subject to change or modification, or entered into pursuant to the obligation of a formal written bid which cannot be altered or withdrawn, and, in either case, such contract was entered into or such bid was made on or after July 1, 1990, but prior to July 1, 1992, such sales shall be subject to tax at the rate of 7%.
(3) Sales made on or after the operative date of section 1 of P.L. , c. (now pending before the Legislature as this bill) to contractors, subcontractors or repairmen of services for use in erecting structures for others, or building on, or otherwise improving, altering or repairing real property of others shall not be subject to the taxes imposed by subsection (b) of section 3 or section 6 hereof; provided however, that if such sales are made for use in performance of a contract which is either of a fixed price not subject to change or modification, or entered into pursuant to the obligation of a formal written bid which cannot be altered or withdrawn, and, in either case, such contract was entered into or such bid was made on or after July July 1, 1992 but prior to the operative date of section 1 of P.L. , c. (now pending before the Legislature as this bill), such sales shall be subject to tax at the rate of 6%.
e. As to sales other than those referred to in d. above, the taxes imposed under subsections (a) and (b) of section 3 and section 6 hereof, and the taxes imposed under subsection (f) of section 3 and section 6 hereof, upon receipts received on or after July 1, 1990 and on or before December 31, 1990, shall be at the rate in effect on June 30, 1990, in case of sales made or services rendered pursuant to a written contract entered on or after January 3, 1983 but prior to July 1, 1990, and accompanied by a deposit or partial payment of the contract price, except in the case of a contract which, in the usage of trade, is not customarily accompanied by a deposit or partial payment of the contract price, but the vendor shall charge and collect from the purchaser on such sales at the rate of 7%, which tax shall be reduced to the rate, if any, in effect on June 30, 1990, only by a claim for refund filed by the purchaser with the director within 90 days after receipt of said receipts and otherwise pursuant to the provisions of section 20 of P.L.1966, c.30 (C.54:32B-20). A claim for refund shall not be allowed if there has been no deposit or partial payment of the contract price unless the claimant shall establish by clear and convincing evidence that, in the usage of trade, such contracts are not customarily accompanied by a deposit or partial payment of the contract price.
f. (1) The taxes imposed under subsections (a), (b), (c) and (f) of section 3 upon receipts received on or after July 1, 1990 but prior to July 1, 1992 shall be at the rate, if any, in effect on June 30, 1990 in the case of sales made or services rendered, if delivery of the property which was the subject matter of the sale has been completed or such services have been entirely rendered prior to July 1, 1990.
(2) The taxes imposed under subsections (a), (b), (c) and (f) of section 3 upon receipts received on or after July 1, 1992 shall be at the rate of 7% in the case of sales made or services rendered, where delivery of the property which was the subject matter of the sale has been completed or such services have been entirely rendered on or after July 1, 1990 but prior to July 1, 1992.
(3) The taxes imposed under subsection (b) of section 3 upon receipts received on or after the operative date of section 1 of P.L. , c. (now pending before the Legislature as this bill) shall be at the rate of 6% in the case of sales made or services rendered, where delivery of the property which was the subject matter of the sale has been completed or such services have been entirely rendered on or after July 1, 1992 but prior to the operative date of section 1 of P.L. , c. (now pending before the Legislature as this bill).
g. The director is empowered to promulgate rules and regulations to implement the provisions of this section.
(cf: P.L.1992, c.11, s.3)
3. This act shall take effect immediately, provided however that section 1 shall remain inoperative until the first day of the second month following enactment.
STATEMENT
This bill ends the imposition of the New Jersey sales and use tax on installation, repair and maintenance services.
Currently, the sales and use tax is imposed on the cost of most labor of installing, maintaining, servicing, and repairing tangible personal property that is not held for business resale and on the cost of most labor of maintaining, servicing or repairing real estate. While there is an exception for the labor of building improvements to real estate, most of the labor that businesses and individuals have performed on their property is taxable.
This bill repeals the imposition of the sales tax on the cost of labor to install, maintain, service, or repair personal property and the cost of labor to maintain, service or repair real estate. The economic rationale for this change is already present in the sales tax. While most transfers of property are taxed under the sales tax, the law currently exempts sales of machinery and equipment used in manufacturing and refining, in the production and transmission of energy and utility services, and in telecommunications. These are the basic business inputs that are eventually taxed when transformed into goods for final consumption, and taxation of these business inputs would discourage business expansion and result in double taxation. The same problem of double taxation exists for service inputs as for machinery inputs. While in theory it is possible to separate services that are production inputs from services that are consumer consumption, in practice it may be impossible.
There is a further problem with the taxation of services that discriminates against new and more efficient businesses. The taxation of services that are business inputs is likely to lead a firm to hire service suppliers (e.g., business equipment repairers, pipefitters, machinists) as employees rather than acquire the taxable services of outside firms. Larger firms and more established firms are more likely to be able to do work "in-house" than smaller, newer businesses or businesses that are trying to improve efficiency through out-sourcing their requirements for specialized services. Because work performed by an employee is not taxed under the current sales tax laws while services purchased from outside contractors are taxed, the current sales tax may act to discriminate against smaller or more efficient business organizations.
This bill repeals the sales and use taxes imposed on repair and maintenance services to eliminate an impediment to New Jersey business location and expansion and to remove a provisions that can discriminate against new small businesses. Although this repeal of an existing tax will initially reduce State revenues, the improved business climate will in time generate sufficient taxable income of other types to offset any revenue lost.
Eliminates the sales and use tax on repair and maintenance services.