New Jersey Governor Signs 2019 Budget
By David M. Donnelly, Senior Manager, Tax & Business Services & Luke Connolly, Staff Accountant, Tax & Business Services
On July 2, New Jersey Governor Phil Murphy signed the state’s new $37.4 billion budget, an 8% increase over the prior year’s fiscal budget.
Beside some modifications to personal and business income taxes, the budget, a 600-page comprehensive plan, ranges from expansion of student funding to rebuilding infrastructure.
Below are some highlights of the income tax modifications effective for the state’s fiscal year, beginning July 1, 2018.
PERSONAL INCOME TAX
- The top income tax bracket will increase from 8.97% to 10.75% for individuals with income of $5 million or more. This tax is commonly known as the “Millionaire Tax.”
- Under an amnesty provision, state residents will now have the opportunity to pay back taxes without penalty or interest.
- An increase in the Earned Income Tax Credit will assist households with family incomes under $60,000.
CORPORATION BUSINESS TAX (CBT)
- Corporate filers will be subject to an increase in the Corporate Business Tax rate over the next four years. Filers with allocated net income over $1,000,000 will be assessed a 2.5% surtax for 2018 and 2019, and a 1.5% surtax for years 2020 and 2021.
- Effective for tax years beginning after 2018, a combined group must file a combined unitary tax return. A “combined group” refers to a group of companies which have common ownership engaging in a “unitary business.” The managerial member of a combined group may elect to have the combined group determined on a worldwide or affiliated group basis.
- For years beginning after 2018, sales of services will no longer be sourced based on where the services are performed. The change requires that sales be sourced where the benefit of the services is received. If received both in and out of New Jersey, the portion of the transaction that is allocated to New Jersey is based on the percentage of the services received at a New Jersey location, or a reasonable approximation can be made. If a determination cannot be made, the service is deemed to be received at a location from which the services were ordered in the customer’s regular course of business. If the location cannot be determined, the benefit of the service is considered received at the customer’s billing address.
SALES AND USE TAX
- A new tax on ride share services, such as UBER and Lyft, will be imposed, costing riders an additional 25 to 50 cents per ride.
- Other changes to sales tax related to the recent Supreme Court case South Dakota v. Wayfair were not included in the state budget, nor were any other changes to sales tax. However, this case will eventually generate additional revenue for New Jersey and other states from sales tax imposed on online shopping.
For additional information regarding the New Jersey budget and how it may affect you or your business, please contact your Marcum State and Local Tax professional.
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