New NJ Tax on Purchase Commercial Real Estate

Tax Law and Planning

Starting August 1, purchasers of commercial real estate for more than $1,000,000 will have an additional tax, or "fee", to contend with. Chapter 33, Laws of 2006, calls for a 1% fee to buyers of commercial property purchased for over $1 million. This brings the fees for purchasing commercial real estate in line with the purchase of residential real estate, which for several years has been subject to a "mansion tax" of 1% to buyers of residential property valued at more than $1 million. Sellers of property will still need to contend with the Realty Transfer Tax, regardless of whether buyers are subject to the additional 1% fee.

There will be several exceptions to the 1% fee on transfer of commercial property:

* Where the real property transfer is incidental to a corporate merger or acquisition, if the real property value represents less than 20% of the total assets subject to the merger or acquisition.

* The purchaser is recognized by the IRS as exempt from income tax (ie: a public charity or private foundation).

The 1% fee also applies in certain non-deed transfers. For example, if a controlling interest in an entity that owns commercial real estate valued at more than $1 million is transferred, then the buyer will pay the 1% fee. This would apply, for example, if an LLC owned commercial real estate valued at more than $1 million, and the LLC itself was sold.

For more information, see the Division of Taxation Website.

Estate Tax Repeal Defeated Again (Who knew they were voting?)

Category: Estate and Inheritance Tax

Last night the US Senate again addressed the total repeal of the estate tax.

First question - why all the silence? Where was the press push and fanfare of the last vote attempt? Where was the opportunity for public debate and communication with representatives before the vote? I could not have been more surprised this morning that total repeal of the estate tax had been brouhght to a vote again.

Democrates in the Senate filibustered the vote to totally repeal the estate tax, in the Senate Republicans again fell shy of the 60 needed to break the filibuster. The vote was 57-41.

What's next? Putting Estate Tax Repeal/Reform into a revised Pensions Law. According to the Office of Senate Democratic Leader Harry Reid:

WASHINGTON, July 20 /U.S. Newswire/ -- With reports that Republicans are working to sneak billions of dollars in estate tax giveaways into the Pensions Conference Report, Senate Democratic Leader Harry Reid released the following statement:

"For over four months, American workers, retirees and businesses have been waiting patiently for the Republican Congress to deliver a pensions bill that will provide retirement security to millions of Americans. Now, instead of delivering those workers a clean bill, Republicans are desperately trying to satisfy a privileged few by providing them hundreds of billions in additional estate tax breaks. Fiscally irresponsible estate tax giveaways have been rejected by the Senate before and will be rejected again. We need a Congress that works for all Americans, not one that abuses the system to satisfy the special interests. I hope my Republican colleagues will move in a new direction by dropping the estate tax giveaway so we can quickly pass the pensions conference report. It is time to put American workers before special interests."

NJ 7% Sales Tax Effective 7.15.06

Category: Tax Law and Planning


As of 7.15.06, the New Jersey Sales Tax rate to be collected by local businesses is 7%. Sales tax violations have always been aggressively pursued by New Jersey, and claiming ignorance regarding the increase will likely not act to waive tax payment, penalties and fines. See the Department of Taxation Notice Here.

REMEMBER - SALES TAX LIABILITY IS A PERSONAL LIABILITY OF THE OWNER OF AN ENTITY. IN OTHER WORDS, YOUR CORPORATION OR LLC WILL NOT PROTECT YOU FROM PERSONAL LIABILITY IF YOU FAIL TO COLLECT AND REMIT THE PROPER TAX AMOUNT.

For more information, visit the NJ Department of Taxation. And keep going back, as new categories of goods and services that were previously exempt from sales tax will be subject to sales tax starting October 1, 2006.