Notice to All Businesses Regarding
Changes to the Sales and Use Tax Act
Effective October 1, 2006
(Posted on the NJ Dept. of Revenue)

Public Law 2006, c. 44 increased the sales and use tax rate from 6% to 7%, beginning July 15, 2006. Beginning October 1, 2006, the law also extends the base of the sales and use tax by extending the tax to new services, and limiting some exclusions and exemptions.

As Of 10/1/06, The Law Imposes The Sales And Use Tax On The Following Services:

Space for Storage (N.J.S.A. 54:32B-3(b)(3))

Furnishing of space for storage of tangible personal property, by a person engaged in the business of furnishing space for such storage.

The law defines “Space for Storage” as secure areas, such as rooms, units, compartments or containers, whether accessible from outside or from within a building, that are designated for the use of a customer, where the customer has free access within reasonable business hours, or upon reasonable notice to the furnisher of the space, to store and retrieve property. Space for storage does not include the lease or rental of an entire building, such as a warehouse or airplane hanger. N.J.S.A. 54:32B-3(b)(3).

Tanning Services (N.J.S.A. 54:32B-3(b)(8))

Tanning services, including the application of a temporary tan provided by any means.

Massage Services (N.J.S.A. 54:32B-3(b)(9))

Massage, bodywork or somatic services, except such services provided pursuant to a doctor's prescription.

Tattooing (N.J.S.A. 54:32B-3(b)(10))

Tattooing, including all permanent body art and permanent cosmetic make-up applications.

Investigation and Security Services (N.J.S.A. 54:32B-3(b)(11))

The law defines “Investigation and Security Services” as:

(1) Investigation and Detective Services, including detective agencies and private investigators, and fingerprint, polygraph; missing person tracing and skip tracing services;

(2) Security Guard and Patrol Services, including bodyguard and personal protection, guard dog, guard, patrol, and security services;

(3) Armored Car Services; and

(4) Security Systems Services, including security, burglar, and fire alarm installation, repair or monitoring services. N.J.S.A. 54:32B-2(xx).

(NOTE: Alarm monitoring service has been subject to tax since July 1, 1990, as a telecommunications service.)

Information Services (N.J.S.A. 54:32B-3(b)(12))

The law defines “Information Services” as the furnishing of information of any kind, which has been collected, compiled, or analyzed by the seller, and provided through any means or method, other than personal or individual information which is not incorporated into reports furnished to other people. N.J.S.A. 54:32B-2(yy).

Limousine Services (N.J.S.A. 54:32B-8.11)

Transportation services originating in this State and provided by a limousine operator, as permitted by law, except such services provided in connection with funeral services. N.J.S.A. 54:32B-3(b)(13).

Membership Fees (N.J.S.A. 54:32B-3(h))

Initiation fees, membership fees or dues for access to or use of the property or facilities of a health and fitness, athletic, sporting or shopping club or organization in this State, except for membership in a club or organization whose members are predominantly age 18 or under.

Parking (N.J.S.A. 54:32B-3(i))

The receipts from parking, storing or garaging a motor vehicle, excluding charges for the following types of parking: residential parking; employee parking, when provided by an employer or at a facility owned or operated by the employer; municipal metered parking; and parking receipts subject to tax imposed by any other law or ordinance (e.g., municipal parking taxes).

As Of 10/1/06, The Law Extends The Sales And Use Tax To The Following Property:

Magazines and Periodicals (N.J.S.A. 54:32B-8.5(a))

Magazines and periodicals, whether or not accessed by electronic means, are subject to tax. However, the law retains the exemption for newspapers; and magazines and periodicals sold by subscription; and membership periodicals. The law defines a “Membership Periodical” as any periodical distributed by a nonprofit organization to its members as a benefit of membership in the organization. N.J.S.A. 54:32B-8.5(b).

As of 10/1/06, The Law Establishes The New Category Of "Digital Property"

The law defines “Digital Property” as electronically delivered music, ringtones, movies, books, audio and video works and similar products, where the customer is granted a right or license to use, retain or make a copy of such item. Digital property does not include video programming services, including video on demand television services, and broadcasting services, including content to provide such services. N.J.S.A. 54:32B-2(vv).

As Of 10/1/06, The Law Changes The Taxability Of The Following:

Prewritten Computer Software Delivered Electronically (N.J.S.A. 54:32B-8.56)

The law limits the current exemption for prewritten computer software delivered electronically to electronically delivered computer software that is used directly and exclusively in the conduct of the purchaser’s business, trade or occupation. Thus, electronically delivered software sold to individuals is subject to tax.

Laundering (N.J.S.A. 54:32B-3(b)(2))

The law specifically limits the sales tax exemption for laundering, dry cleaning, tailoring, weaving, and pressing to providing these services to clothing. As a result, all of these services will be taxable when performed on property such as draperies, carpets, blankets, comforters, slipcovers, tablecloths, napkins, dust cloths, mats, mops, industrial wiper cloths, fender covers, bed linens, hospital linens, table linens, linen supply towels and other cloths.

Installing Floor Coverings (N.J.S.A. 54:32B-3(b)(2))

Previously, certain floor covering installation services that resulted in a “capital improvement” were exempt. The law eliminates the exemption for the installation of floor covering, which includes carpeting, linoleum, tile and padding, so now the labor is taxable. Businesses that provide floor covering installations are still treated as contractors under the law.

Landscaping Services (N.J.S.A. 54:32B-3(b)(2))

The law defines “Landscaping Services” as services that result in a capital improvement to land, other than structures of any kind whatsoever, such as: seeding, sodding or grass plugging of new lawns; planting trees, shrubs, hedges, plants; and clearing and filling land. (N.J.S.A. 54:32B-2(ww)). Previously, certain landscaping services that resulted in a capital improvement were exempt. The law eliminates the capital improvement exemption for landscaping services, so now the labor is taxable. Businesses that provide landscaping services are still treated as contractors under the law.

Delivery Charges for Taxable Goods and Services (N.J.S.A. 54:32B-8.11)

The law modifies the exemption for delivery charges that are separately stated from the purchase price of an item on the invoice, bill or similar document given to the purchaser. The law provides for the taxation of delivery charges on taxable items and retains the exemption for delivery charges on nontaxable items like clothing.

The law defines “Delivery Charges” as charges by the seller for preparation and delivery to a location designated by the purchaser of personal property or services including, but not limited to, transportation, shipping, postage, handling, crating, and packing. If a shipment includes both exempt and taxable property, the seller should allocate the delivery charge by using: (1) a percentage based on the total sales price of the taxable property compared to the total sales price of all property in the shipment; or (2) a percentage based on the total weight of the taxable property compared to the total weight of all property in the shipment. N.J.S.A. 54:32B-2(rr). Thus, only the portion of the delivery charge that relates to the taxable property or services is subject to tax.

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