Newark Urban Enterprise Zone

Sales and Use Tax Regulations

SUBCHAPTER 31.     URBAN ENTERPRISE ZONES ACT

18:24-31.1     General

(a)   The New Jersey Urban Enterprise Zones Act, Chapter 303, Laws of 1983, N.J.S.A. 52:27H-60, et seq., approved August 15, 1983, provides for the establishment of urban enterprise zones in urban areas suffering from high unemployment and economic distress. Each designation shall be for 20 years. Zones are designated by an Urban Enterprise Zone Authority. The Authority may grant certain sales tax and other tax benefits to businesses existing in or formed in enterprise zones, which have met the definition of a qualified business. This subchapter of the sales tax rules set forth the possible benefits, the necessary definitions, and the procedures for qualifying for any of these sales tax benefits.

(b)   The possible sales tax benefits include an exemption for retail sales to a qualified business, a partial exemption for retail sales by a qualified business, and an exemption for sales of building materials and services used in constructing or maintaining buildings or realty of a qualified business.

(c)   No business can obtain tax benefits under this subchapter unless the Urban Enterprise Zone Authority has determined that the business meets the definition of a qualified business under N.J.S.A. 52-27H-62c paraphrased below in N.J.A.C. 18:24-31.2.

Amended by R.1993 d.313, effective July 6, 1993.
See: 25 N.J.R. 1486(a), 25 N.J.R. 2899(c).
Amended by R.1998 d.288, effective June 1, 1998.
See: 30 N.J.R. 1206(b), 30 N.J.R. 2070(b).
   In (a), deleted ", and the right to establish enterprise zones shall expire 10 years from August 15, 1983" at the end of the second sentence.

18:24-31.2     Definitions

The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise:

"Qualified business" means:

1.   An entity authorized to do business in New Jersey which, at the time of designation as an enterprise zone, is engaged in the active conduct of a trade or business in that zone; or
2.   An entity which, after that designation but during the designation period of 20 years, becomes newly engaged in the active conduct of a trade or business in that zone, and has at least 25 percent of its fulltime employees employed at a business location in the zone, who meet at least one of the following criteria:

i.   Residents within the zone, within another zone or within the municipality within which the zone or any other zone is located; or
ii.   Either unemployed for at least one year prior to being hired and residing in New Jersey, or recipients of New Jersey public assistance program, for at least one year prior to being hired; or
iii.   Found to be economically disadvantaged, pursuant to the Jobs Training Partnership Act, P.L. 97-300 (29 U.S.C. 1501, et seq.)

"Enterprise zone" or "zone" means an urban enterprise zone designated by the Urban Enterprise Zone Authority under N.J.S.A. 52:27H-60, et seq.

Amended by R.1993 d.313, effective July 6, 1993.
See: 25 N.J.R. 1486(a), 25 N.J.R. 2899(c).

18:24-31.3     Exemption for retail sales to a qualified business

(a)   Retail sales and leases of tangible personal property (except motor vehicles and energy) to a qualified business and sales of services (except telecommunications and utility service) to a qualified business for the exclusive use or consumption of such business within an enterprise zone are exempt from the sales and use 14 taxes imposed by N.J.S.A. 54:32B-1 et seq., provided that the designation of the enterprise zone by the Urban Enterprise Zone Authority specifically makes this exemption available to the qualified business.

(b)   Tangible personal property includes, for example, items such as office supplies, office or business equipment, office and store furnishing, trade fixtures, and cash registers. Services include installing, maintaining or repairing tangible personal property used in business (other than a motor vehicle); maintaining, servicing or repairing real property used in business, including janitorial services, and advertising services used or consumed exclusively within the enterprise zone.

(c)   Qualified businesses purchasing or leasing tangible personal property (except motor vehicles and energy) or services (except telecommunications and utility services) to be used or consumed exclusively within the enterprise zone shall furnish to their vendors, suppliers or lessors a properly completed UZ-5, Urban Enterprise Exempt Purchase Certificate.

Amended by R.1993 d.313, effective July 6, 1993.
See: 25 N.J.R. 1486(a), 25 N.J.R. 2899(c).
Amended by R.1998 d.288, effective June 1, 1998.
See: 30 N.J.R. 1206(b), 30 N.J.R. 2070(b).
   In (a) and (c), inserted exceptions relating to energy and to utility service; and in (c), substituted "including janitorial services, and advertising services used or consumed exclusively within the enterprise zone" for "and "and advertising services" at the end.

Case Notes

   Tangible personal property is exempt pursuant to Urban Enterprise Zones Act. Fedway Associates, Inc. v. Director, Div. Of Taxation, 14 N.J.Tax 71 (1994), affirmed 282 N.J.Super. 129, 659 A.2d 536, 15 N.J.Tax 203, certification denied 142 N.J. 573, 667 A.2d 190.

18:24-31.4     Partial exemption for retail sales of tangible personal property by a certified vendor

(a)   Sales tax is imposed at 50 percent of the statutory rate, on receipts from retail sales, with exceptions state in (b) or (c) below, made by a certified vendor which is a qualified business from a place of business owned or leased, and regularly operated by the vendor for the purpose of making retail sales, and located in a designated enterprise zone.

(b)   This partial exemption does not extend to sales of motor vehicles, cigarettes, alcoholic beverages, or energy.

(c)   The provisions of this partial exemption do not apply to retail sales of manufacturing machinery, equipment or apparatus. Such sales may, however, be exempt from sales tax under the provisions of N.J.S.A. 54:32B-8.13, as further defined in N.J.A.C. 18:24-4.1 through 18:24-4.8.

(d)   In addition to being a qualified business, a certified vendor must regularly operate a place of business for the purpose of making retail sales. Items of tangible personal property must be regularly exhibited and offered for retail sale at this location, and the place of business may not be utilized primarily for the purpose of catalog or mail order sales.

(e)   All sales made by a qualified and certified vendor must be made from his place of business within an enterprise zone, that is, either the purchaser must accept delivery at the vendor's place of business within an enterprise zone, or the vendor must deliver the tangible personal property from its place of business within an enterprise zone. Only receipts from sales which originate and are completed by the purchaser in person at the vendor's place of business within an enterprise zone qualify for the reduced rate of sales tax; provided, however, that after a sale has been completed within an enterprise zone, the vendor may deliver the tangible personal property to the purchaser at a location outside an enterprise zone.

1.   Receipts from mail order, telephone, telex and similar sales transactions are subject to sales tax at the regular rate where delivery is made to a location within this State.

(f)   Vendors that meet the requirements in (a) and (b) above and that lease tangible personal property may pay use tax at 50 percent of the regular rate, as long as the lease meets the requirements above. However, if the lessor later leases the property to a lessee that fails to meet the requirements in (e) above of completing the lease transaction at the lessor's place of business, tax shall be due at the regular rate, unless the lessee is exempt under some other exemption provided by the Sales and Use Tax Act.

Amended by R.1985, d.31, effective February 4, 1985.
See: 16 N.J.R. 3193(a), 17 N.J.R. 320(c).
   (e) added.
Amended by R.1993 d.313, effective July 6, 1993.
See: 25 N.J.R. 1486(a), 25 N.J.R. 2899(c).
Amended by R.1998 d.288, effective June 1, 1998.
See: 30 N.J.R. 1206(b), 30 N.J.R. 2070(b).
   In (b), added a reference to energy; and in (e), rewrote the first sentence.

18:24-31.5 No partial exemption for retail sales of taxable services by a qualifying business

The Urban Enterprise Zones Act in Section 21 provides for an exemption to the extent of 50 percent of the statutory rate of sales and use tax on retail sales (other than motor vehicles, cigarettes, alcoholic beverages, energy, and manufacturing machinery, equipment or apparatus) by a certified vendor which is a qualified business. The statute does not provide for any full or partial exemption on the sale or furnishing of taxable services.

Amended by R.1993 d.313, effective July 6, 1993.
See: 25 N.J.R. 1486(a), 25 N.J.R. 2899(c).
Amended by R.1998 d.288, effective June 1, 1998.
See: 30 N.J.R. 1206(b), 30 N.J.R. 2070(b)
   Inserted a reference to energy.

18:24-31.6 Exemption for retail sales of building materials to or for a qualified business

(a)   Section 31 of the Act provides an exemption from sales and use tax on sales of materials, supplies or services to contractors or repairmen for exclusive use in erecting structures, or building on, or improving, altering or repairing real property of a qualified business within an enterprise zone.

(b)   Purchasers of materials, supplies or services to be used for construction, alteration and repair of structures and realty of qualified businesses within an enterprise zone shall furnish to their vendors or suppliers a properly completed UZ-4, Contractor's Exempt Purchase Certificate, Urban Enterprise Zone.

(c)   For the purpose of this section, a qualified business performing construction or similar work with its own personnel shall be considered as its own contractor, and shall be entitled to deliver a properly completed UZ-4 directly to the vendor.

18:24-31.7 through 18:24-31.9 (Reserved)