LEGISLATIVE FISCAL ESTIMATE
[First Reprint]
SENATE, No. 3604
STATE OF NEW JERSEY
221st LEGISLATURE
DATED: MARCH 10, 2025
SUMMARY
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Synopsis: |
Eliminates transaction nexus requirement under Sales and Use Tax and Corporation Business Tax. |
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Type of Impact: |
Annual State revenue loss to General Fund. |
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Agencies Affected: |
Department of the Treasury. |
Office of Legislative Services Estimate
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Fiscal Impact |
FY 2026 and Each FY Thereafter |
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Annual State Revenue Loss |
Indeterminate |
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· The Office of Legislative Services (OLS) expects this legislation will result in an annual State revenue loss, though the magnitude cannot be determined due to data limitations regarding remote seller and corporate transactions.
· The revenue reduction will be proportional to the number of sellers and corporations currently meeting only the 200-transaction threshold. Although the OLS is unable to determine the number of remote sellers and corporations that would be affected by the bill, the OLS notes that each remote seller affected by the bill would result in a reduction of no more than $6,625 in annual sales tax collections, with additional indeterminate reductions in corporation business tax collections from affected corporations.
BILL DESCRIPTION
This bill eliminates the transaction nexus requirement for remote sellers under the Sales and Use Tax Act and corporations under the Corporation Business Tax Act. Currently, remote sellers must collect and remit sales tax, and corporations must pay corporation business tax, if they either have gross revenue from New Jersey sales exceeding $100,000 or conduct 200 or more separate transactions in New Jersey. The bill would remove the transaction threshold, leaving only the revenue threshold as the determinant for tax collection obligations.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS expects this legislation to result in annual decreases in State revenues by reducing the number of remote sellers that are required to collect and remit the sales and use tax to the State, as well as the number of corporations that are subject to the corporation business tax. However, the OLS is unable to quantify the anticipated reduction in State tax collections due to significant data limitations. The necessary information regarding the number of remote sellers and corporations whose tax obligations arise solely from meeting the 200-transaction threshold, as well as their total tax liabilities, is not available for analysis.
The fiscal impact of the bill would be limited to the foregone tax collections from remote sellers and corporations who meet the current 200-transaction threshold but have gross revenue below $100,000. Given that remote sellers with at least $100,000 in gross revenue from activity into the State would continue to be required to collect and remit applicable taxes, each remote seller affected by this legislation would result in a reduction of no more than $6,625 in annual sales tax collections, which represents the maximum tax on $100,000 in taxable sales at the 6.625 percent rate. Additionally, since these entities must conduct at least 200 transactions while generating less than $100,000 in revenue, the average per-transaction amounts are necessarily relatively small.
To provide context for the potential scale of impact, consider two hypothetical scenarios: (1) a remote seller completes 210 transactions in the State, averaging $37.50 per transaction, thereby generating approximately $500 in annual sales tax collections, and (2) a corporation conducting 210 transactions in the State, totaling $95,000 in annual New Jersey gross receipts, thereby generating not less than $500 in annual corporation business tax collections, which amount is the statutory minimum tax liability for corporations with gross receipts less than $100,000. If approximately 2,500 remote sellers and corporations meet only the transaction threshold, the annual revenue loss could approximate $1.3 million. However, the OLS emphasizes these scenarios are purely illustrative, as the actual number of affected entities and their remittances could vary significantly.
Without comprehensive data on the distribution of remote sellers and corporations by transaction count, revenue patterns, and current collections from affected entities, the OLS is unable to quantify the anticipated reduction in State revenue.
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Section: |
Revenue, Finance, and Appropriations |
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Analyst: |
Associate Fiscal Analyst |
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Approved: |
Thomas Koenig Legislative Budget and Finance Officer |
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).