Taxpayers in, or making sales into, New Jersey may be subject to the New Jersey Litter Fee. Taxpayers with manufacturing activities have until March 15 to file refunds based on the “wholesaler-to-wholesaler” deduction. Taxpayers that have overlooked this fee should consider disclosing the liabilities in exchange for a reduced assessment.
As we previously reported here, New Jersey imposes a Litter Control Fee (the “Fee”) on wholesale and retail sales of certain consumer products in, or into, New Jersey. The Fee is effectively a gross receipts tax on the sale of “litter generating products,” which includes anything “produced, distributed, or purchased in disposable containers, packages or wrappers.”
Over the past two years, New Jersey has been aggressively enforcing compliance of the Fee. As a result, many taxpayers began filing reports remitting the Fee. If you have been filing reports remitting the Fee, you likely have an opportunity for refund. We believe that there are statutory exclusions and apportionment methods that can help reduce your liability. For example, the “wholesaler-to-wholesaler” deduction may apply to significantly reduce the Fee. The deadline to file refund claims for the 2013 tax period is March 15.
New Jersey takes the position that if a taxpayer is also a manufacturer, it cannot qualify for the wholesaler deduction. However, based on the plain reading of the statute and regulations, the intended legislative purpose, and constitutional arguments, we believe that the deduction should apply even if the company is also in the business of manufacturing. For many taxpayers, the application of this deduction results in substantial refunds.
Further, if you believe you may be subject to the Fee and have not yet filed reports and have not been contacted by New Jersey, we urge you to consider coming forward through voluntary disclosure. Disclosing these liabilities could avoid the potential for a multi-year assessment (in the case of non-filers, the Division has been assessing back to 2002).
We encourage you to contact one of the authors of this alert or another member of the Reed Smith State Tax Group to discuss the impact on you. For more information on Reed Smith’s New Jersey tax practice, visit reedsmith.com/njtax.
Client Alert 2017-051