The New Jersey Division of Taxation (DOT) announced that a three-month voluntary disclosure program for remote sellers that have customer referral agreements with New Jersey will run from August 21 through November 21, 2017. For remote sellers participating in, and complying with the terms of the program, the DOT will waive all penalties, and consider periods prior to 2017 closed.

A law enacted in 2014¹ presumes² that a remote seller of tangible personal property, specified digital products or taxable services has nexus with New Jersey if the seller enters into an agreement with an independent contractor or other representative who has a physical presence in New Jersey and who, for commission or other consideration, directly or indirectly refers potential customers to the seller, provided a receipts threshold is met.³ This law applies to sales made, services rendered and uses occurring on or after July 1, 2014.

Under the program, remote sellers may enter into an agreement with the DOT to comply with New Jersey sales and use tax registration and reporting requirements. To be eligible to participate in the program, the remote seller must not have been contacted by the DOT regarding New Jersey sales and use tax compliance. For participating remote sellers who file any required returns for the first two calendar quarters of 2017, the DOT will consider all prior periods closed and will waive all penalties. Within 45 days of execution of the agreement, the remote seller will have to register with the New Jersey Division of Revenue and Enterprise Services (use code "O/S SELLER 5000"). Remote sellers who participate in the program also will have to electronically file their quarterly sales and use tax form (ST-50) and pay tax due; statutory interest must be paid within 30 days of filing the sales and use tax returns (interest will be assessed at the prime rate plus 3% for each applicable period).

Implications

Eligible remote sellers should consider participating in New Jersey's voluntary disclosure program in order to have penalties waived, prior years of possible non-compliance closed and the institution of a prospective filing process.

This program is in addition to New Jersey's participation in the Multistate Tax Commission's voluntary disclosure initiative for marketplace sellers. For more on that program, see Tax Alert 2017-1338.

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ENDNOTES

¹ N.J. Laws 2014, P.L 2014, c. 13 (AB 3486).

² This presumption can be rebutted if the person can prove that the representative did not engage in any solicitation in New Jersey on behalf of the person that would satisfy the nexus requirements of the US Constitution during the periods at issue.

³ These provisions only apply if the cumulative gross receipts from sales to in-state customers who were referred by such representative are in excess of $10,000 during the preceding four quarterly periods.