SENATE CONCURRENT RESOLUTION No. 130

 

STATE OF NEW JERSEY

 

INTRODUCED MAY 22, 1997

 

 

By Senators PALAIA, MATHEUSSEN, Cafiero, Bubba and Scott

 

 

A Concurrent Resolution concerning legislative review of a Department of Treasury regulation pursuant to Article V, Section IV, paragraph 6 of the Constitution of the State of New Jersey.

 

    Be It Resolved by the Senate of the State of New Jersey (the General Assembly concurring):

 

    1. Pursuant to Article V, Section IV, paragraph 6 of the Constitution of the State of New Jersey, the Legislature may review any rule or regulation of any department to determine if the rule or regulation is consistent with the intent of the Legislature as expressed in the language of the statute which the rule or regulation is intended to implement.

 

    2. Taxes imposed under the "Sales and Use Tax Act," P.L.1966, c.30, are measured by the "amount of the sales price'' of the property sold or used, pursuant to section 2 of P.L.1966, c.30 (C.54:32B-2). Recognizing that some taxpayers might understate the taxes due, the Legislature in section 19 of P.L.1966, c.30 (C.54:32B-19) authorized the Director of the Division of Taxation in the Department of the Treasury to determine the amount of tax due from such information as may be available if a tax return is not filed or if a return when filed is incorrect or insufficient. If necessary, the tax may be estimated on the basis of "external indices."

    Automobiles are sometimes purchased directly from their non-auto dealer owners. Because the sellers are not professional retailers licensed to collect sales tax, the motor vehicle code contains a provision that allows the purchaser to pay the appropriate sales or use tax when the automobile is registered. It is the duty of the purchaser to report the amount of sales price for determining sales or use tax; this is a particularly tempting opportunity to understate purchase price and minimize taxes. The director uses the N.A.D.A. Official Used Car Guide as the "external index" to verify whether the purchase price claimed matches standard value, and sends "notices of deficiency" to taxpayers who claim to have paid less than standard fair value. Taxpayers may contest such a notice, and provide information verifying the purchase price claimed.

 

    3. The Director of the Division of Taxation in the Department of the Treasury has promulgated regulations concerning the applicability of the "Sales and Use Tax Act" to automobile purchases. A regulation concerning sales of automobiles, codified at N.J.A.C.18:24-7.6, states that the director will use "external indices to establish the basis upon which tax shall be paid" whenever "the purchase price stated for a motor vehicle is not indicative of the true value of the property." The Legislature finds that it never intended that the basis on which sales or use tax shall be paid would be determined by the "true value" of the property and not the actual price paid.

 

    4. The Legislature finds that the provision of the "Sales and Use Tax Act" regulations concerning motor vehicles codified at N.J.A.C.18:24-7.6 is, to the extent that it states or implies that taxes due are based on the "true value" of the property rather that the "amount of the sales price'' of the property, in direct contravention of the intent of the Legislature.

 

    5. The Secretary of the Senate and the Clerk of the General Assembly shall transmit a duly authenticated copy of this concurrent resolution to the Governor and the Director of the Division of Taxation.

 

    6. Pursuant to Article V, Section IV, paragraph 6 of the Constitution of the State of New Jersey, the Director of the Division of Taxation shall have 30 days following transmittal of this resolution to amend or withdraw the regulation or the Legislature may, by passage of another concurrent resolution, exercise its option under the Constitution to invalidate the regulation codified at N.J.A.C.18:24-7.6.

 

 

STATEMENT

 

    This concurrent resolution expresses the finding of the Legislature that a Division of Taxation regulation, N.J.A.C.18:24-7.6, concerning the determination of sales and use taxes on automobile purchases, is inconsistent with Legislative intent pursuant to Article V, Section IV, paragraph 6 of the New Jersey Constitution.

    The sales and use tax law requires that taxes be paid on the purchase price of a vehicle. The Director of the Division of Taxation reviews motor vehicle purchases, to verify that the full sales price has been reported and that full taxes have been, by comparing the reported sales price with the N.A.D.A. Official Used Car Guide ("blue book") value.

    This concurrent resolution finds that N.J.A.C.18:24-7.6 contravenes Legislative intent to the extent that the regulation states that the "true value" of a car is the dollar amount on which sales and use tax is imposed, instead of the actual amount of the price paid for the car being the basis of tax.

    The Director of the Division of Taxation will have 30 days to withdraw or amend the inconsistent regulations or the Legislature may, by the passage of another concurrent resolution, invalidate the regulation in whole or in part.

 

 

                             

 

Determines that Division of Taxation regulations regarding sales and use taxes imposed on motor vehicles are inconsistent with Legislative intent.