ASSEMBLY APPROPRIATIONS COMMITTEE

STATEMENT TO

ASSEMBLY, No. 4208

STATE OF NEW JERSEY

DATED:  JUNE 23, 2022

      The Assembly Appropriations Committee reports favorably Assembly Bill No. 4208.

This bill expands the existing sales and use tax exemption for supermarkets and grocery stores located within food desert communities to include all supermarkets and grocery stores located within urban enterprise zones.

     Under current law, the sales and use tax is not imposed on certain purchases made by qualified businesses for their exclusive use within an urban enterprise zone.  In this circumstance, the receipts from the first $100,000 of retail sales of tangible personal property (except motor vehicles and energy) and sales of services (except telecommunications services and utility services) are exempt from the sales and use tax.  However, if a supermarket or grocery store is located within a food desert community, the business is eligible for an uncapped sales tax exemption on these purchases, including purchases in excess of the first $100,000 in qualifying sales.

     Under the bill, the uncapped sales tax exemption for supermarket and grocery stores would no longer be limited to those businesses located within food desert communities.  Instead, this bill provides that the uncapped exemption would also apply to any supermarket or grocery store that is located within an urban enterprise zone.  Accordingly, any supermarket or grocery store that is located within an urban enterprise zone, but not within a food desert community, would no longer be limited to a sales tax exemption on the first $100,000 in qualifying sales.

     Additionally, the bill expands the definition of “supermarket or grocery store” for the purposes of the sales tax exemption.  Under the bill, this term is defined as any retail outlet with at least 16,000 square feet, of which at least 80 percent is occupied by food and related products.  Under current law, this term includes retail outlets with at least 16,000 square feet, of which at least 90 percent is occupied by food and related products.

FISCAL IMPACT:

      The Office of Legislative Services (OLS) estimates that the bill would decrease annual State revenues by up to $50,000 associated with the expansion of the unlimited sales and use tax exemption for qualifying business purchases to include all supermarkets and grocery stores located within urban enterprise zones. 

      Specifically, the bill is expected to decrease annual sales and use tax collections by an amount equal to: (1) the number of supermarkets and grocery stores located inside of urban enterprise zones but outside of food desert communities; multiplied by (2) the annual value of taxes paid by these entities on qualifying business purchases in excess of $100,000.  According to the Department of Community Affairs (DCA), the bill is expected to extend the unlimited sales and use tax exemption to approximately 38 additional supermarkets and grocery stores.  Of the supermarkets and grocery stores that currently utilize the unlimited sales and use tax exemption, the average annual purchases made by each entity totaled approximately $108,000.  Based on this information, the OLS estimates that the bill would reduce annual sales and use tax collections by roughly $21,134.  However, the OLS is unable to determine whether the bill’s expanded definition of “supermarket or grocery store” will increase the number of supermarkets and grocery stores that qualify for the unlimited sales and use tax exemption, including those located within food desert communities.