Legislators should reform the New Jersey Corporation Business Tax (CBT) so that it does not penalize companies that are located in New Jersey and create jobs here, NJBIA told the Assembly Appropriations Committee on September 15.

NJBIA First Vice President Art Maurice explained that all companies, regardless of where they are located, pay New Jersey’s CBT for the portion of their sales that take place within the State.

 Companies that have operations here, however, must also pay the CBT for their facilities and their employee payroll.  For out-of-state companies that simply sell their goods and services in New Jersey but do not have any jobs or properties here, these factors go untaxed.  So a company could lower its New Jersey CBT by moving its operations and jobs out of state, and simply sell its goods here.

"This is backwards," Maurice said.  "At a time when we are trying to stimulate our economy and create new jobs, our corporate tax structure is working against us.  Luckily, this problem can be easily solved by basing the CBT solely on a company’s New Jersey sales, regardless of whether that company is located in New Jersey or not.  Let’s stop taxing our own jobs."

The committee is scheduled to take testimony on A-2626 (Vas), which would do just that, enacting what is known as single-sales-factor reform.  NJBIA supports the bill.

"This reform levels the playing field for our companies, treating in-state and out-of-state companies equally," Maurice said.  "This legislation will create winners and losers.  Companies selling into New Jersey, but with the bulk of their physical operations outside of New Jersey, will pay higher business taxes (than under the current tax structure)."

The current tax structure was created decades ago.  In the 1950s, states adopted uniform legislation creating a three-part test to determine how states would calculate their shares of a multi-state business’ taxes.  In recent years, however, more states have moved to a single-sales-factor tax structure.  In fact, 17 states have adopted some form of single-sales-factor tax structure.  Competitor states New York, Massachusetts and Maryland have all adopted some form of single-sales-factor tax reform over the last few years.