Newark Urban Enterprise Zone

Sales Tax Exemption

1. What kind of personal property can a qualified business buy or rent under the sales tax purchase
exemption?
2. Are any taxable services exempt?
3. Does the purchase exemption apply to telecommunications services?
4. Does the purchase exemption apply to other types of purchases, such as purchases of gas, electricity, meals, rooms, admissions, or to the petroleum products gross receipts tax?
5. If a qualified business has other business locations outside of the zone, can it purchase tax exempt property for use at those locations?
6. Are motor vehicles, and parts, supplies and repairs for motor vehicles, exempt?
7. What about the purchase or rentals of nonconventional vehicles, such as forklifts?
8. Are charges for the repair of machinery or equipment of a qualified business made at location outside a zone exempt?
9. What does a qualified business give its vendors or lessors for proof of exemption from sales tax on its purchases or rentals?
10. A qualified business repairs or expands its building. Are there any exemptions with respect to the costs incurred?
11. Is there a distinction between repair and maintenance services, and new construction, when the qualified business owns the property being worked on?
12. A contractor, which is a qualified business, buys building materials for construction on, or repair of, property of an owner who is not a qualified business. Does the contractor's exemption apply?
13. A contractor rents or leases a crane or other equipment for use on a qualified business construction job. Is the rental or lease exempt from tax?
14. Must exempt purchases by a qualified business be made from vendors located within an Enterprise Zone?
15. Is there an exemption for advertising material?
16. Can a UEZ business apply for a refund of sales tax on transactions made after the business became qualified but before it received the exemption certificates?
17. Is the cleaning of wearing apparel (uniforms, etc.) subject to the seven percent (7%) tax exemption?
18. Can the purchase of alcohol be tax exempt if used as an ingredient of an end item, i.e., special baked products and/or food products?
19. Are the sales tax benefits available to businesses located in an Urban Enterprise Zone-impacted business district?

1. What kind of personal property can a qualified business buy or rent under the sales tax purchase exemption?
The purchase exemption applies to office and business equipment and supplies, furnishings, trade fixtures, repair or construction materials and all other tangible personal property purchased by a qualified business (other than motor vehicles and parts and supplies) for exclusive use or consumption on the premises of the qualified business at its zone location. Only personal property controlled by the "qualified business" qualifies for the exemption.

2. Are any taxable services exempt?
Most services performed for a qualified business at its zone location are exempt. Examples are repair, janitorial and maintenance services of all kinds. However, telecommunications services (see question 26), repairs of motor vehicles (see question 33) and utility service, are not exempt.

3. Does the purchase exemption apply to telecommunications services?
No. The purchase exemption does not apply to the sales tax on telecommunications services, such as telephone, computer, fax, "beeper" and alarm security telecommunications services. On the other hand, the purchase or rental of non-mobile telecommunications equipment, and repair and maintenance of the equipment, qualify for exemption - if, on the billings, such charges are stated separately from the charges for the telecommunications services.

4. Does the purchase exemption apply to other types of purchases, such as purchases of gas, electricity, meals, rooms, admissions, or to the petroleum products gross receipts tax?
No. The exemption only applies to taxes imposed by the Sales and Use Tax Act, on "tangible personal property" and "services", which do not include gas, electricity, prepared foods and beverages, rooms or admissions. Further, the exemption does not apply to petroleum products gross receipts or fuel taxes, because they are not imposed under the Sales and Use Tax Act.

5. If a qualified business has other business locations outside of the zone, can it purchase tax exempt property for use at those locations?
No. The statute provides the purchase exemption only "for the exclusive use or consumption of such business within an Enterprise Zone."

6. Are motor vehicles, and parts, supplies and repairs for motor vehicles, exempt?
No. The exemption applies only for items purchased for use exclusively at the place of business within the zone. Similarly, rentals and leases of motor vehicles (including trailers and housetrailers) are not exempt. (See questions below for more information.)

7. What about the purchase or rentals of nonconventional vehicles, such as forklifts?
The sales tax exemption applies to the purchase, rental and use of nonconventional vehicles used exclusively at the place of business in the zone. This exemption also applies to parts and repairs for such vehicles.

8. Are charges for the repair of machinery or equipment of a qualified business made at location outside a zone exempt?
Yes, provided that the machinery or equipment will then be used exclusively at the zone location of the qualified business.

9. What does a qualified business give its vendors or lessors for proof of exemption from sales tax on its purchases or rentals?
A completed and executed copy of the UZ-5. The transaction must be completed by delivery within the effective dates on the UZ-5. The vendor must keep the copy of the UZ-5 with his/her records like any other exemption certificate. Qualified businesses must continue to use the ST-3 for purchases for resale. LEASES (more than 28 days) - If a qualified business is leasing property (other than a motor vehicle) to be used exclusively at the place of business in the zone, the qualified business may give the lessor a UZ- 5 form to exempt the lessor from any sales or use tax otherwise due. (See also, question 33.)

10. A qualified business repairs or expands its building. Are there any exemptions with respect to the costs incurred?
Yes. The building materials are exempt, whether purchased by the qualified business or a contractor. (See also questions 34 and 35.)

11. Is there a distinction between repair and maintenance services, and new construction, when the qualified business owns the property being worked on?
No. Repair and maintenance services, and materials and supplies purchased for such services or for new construction, are all exempt, as long as the work is done for the qualified business and at its zone location. If the materials or supplies are purchased by a contractor (or a subcontractor), the contractor completes a UZ-4, obtainable only from the qualified business. After completing the UZ-4, the contractor may issue copies to its vendors or its subcontractors. Any subcontractor must attach its name, address and certificate of authority number (in addition to the name, address and number of the contractor) and then give the UZ-4 and attachments to its vendors.

12. A contractor, which is a qualified business, buys building materials for construction on, or repair of, property of an owner who is not a qualified business. Does the contractor's exemption apply?
No. The construction material exemption is available only if the property owner is a qualified business.

13. A contractor rents or leases a crane or other equipment for use on a qualified business construction job. Is the rental or lease exempt from tax?
No. A rental or lease to the qualified business for improving its premises is exempt, but a rental or lease to a contractor is taxable.

14. Must exempt purchases by a qualified business be made from vendors located within an Enterprise Zone?
No. To accept a UZ-4 or UZ-5 exemption certificate and not charge New Jersey sales tax, the vendor does not need to be located in a zone

15. Is there an exemption for advertising material?
Yes, as long as the advertising material is used exclusively at the place of business in the zone. This includes handbills, flyers, sales catalogs, etc., for distribution at the zone place of business, but does not include items used for mailing to customers in New Jersey. Direct mail advertising processing services also are not exempt from any sales or use tax due.

16. Can a UEZ business apply for a refund of sales tax on transactions made after the business became qualified but before it received the exemption certificates?
If the UEZ Authority has certified a business as a UEZ "qualified business," the business is entitled to the sales tax exemption provided by the UEZ Act, for purchases delivered to the business during the qualification period. If the qualified business has not received its UZ-4 and UZ-5 exemption certificates or simply forgot to use the certificate for certain purchases, the business may apply for a refund of sales and use tax paid on purchases for which the business was exempt. The business must file the claim for refund with the Division of Taxation within the appropriate time period (4 years, for tax paid on or after July 1, 1993).

17. Is the cleaning of wearing apparel (uniforms, etc.) subject to the seven percent (7%) tax exemption?
A "qualified business" will be exempt from sales tax on the cleaning of uniforms, etc., if the apparel or linens will be used only at the place of business in the zone.

18. Can the purchase of alcohol be tax exempt if used as an ingredient of an end item, i.e., special baked products and/or food products?
The purchase of alcoholic beverages to be used as an ingredient of a food product produced for sale is exempt under the purchase-for-resale exemption. The business should use a New Jersey ST- 3 Resale Certificate as proof of exemption.

19. Are the sales tax benefits available to businesses located in an Urban Enterprise Zone-impacted business district?
No sales tax purchase or use benefits are available. However, exemptions in the law for any business still apply; e.g., sale for resale exemption. The only benefit available to qualified businesses located within the Urban Enterprise Zone-impacted business district is the ability to collect sales tax at a reduced rate of 50% of most items of tangible personal property.