New Law Taxes Parking Fees
April 18, 2007
The tax law adopted last fall after a battle between the Legislature and Governor Corzine is widely know for increasing the sales tax in New Jersey to 7%, from 6%. But it remains less widely known that the new law also subjected additional goods and services to sales tax, including parking for motor vehicles in certain facilities.
Broad Reach of Statute
The new law, designated P.L. 2006, C.44 (the “Act”), amends N.J.S.A. 54:32B and became effective on October 1, 2006. It requires that sales tax be collected on receipts from parking, storing or garaging a motor vehicle. A “person required to collect tax” includes “every recipient of charges for parking.” A “person” includes an “individual, trust, partnership, limited partnership, limited liability company, society, association, joint stock company, corporation, public corporation or public authority, estate, receiver, trustee, assignee, referee, fiduciary and any other legal entity.” Thus, the statutory reach is extremely broad.
Exempt from the tax are residential parking, employee parking (as defined in the Act), municipal metered parking, and any parking receipts subject to tax under another law or ordinance. The New Jersey Division of Taxation has issued guidance on what does, and does not, constitute “municipal metered parking.” Excluded from the definition is “parking spaces or stalls in a structure of any kind, whether controlled by meters on a post, attended or unattended kiosk pay system, parking attendants, or lift gates however controlled.” Thus, any parking garage owner or operator must collect and remit the tax.
Mechanics of Collection
N.J.S.A. 54:32-B-12(a) provides that the tax must be separately stated and charged to purchasers of goods and services. If a purchaser gets a sales slip or receipt, the tax must be stated, charged and shown separately unless a waiver is obtained. Importantly, this section further states that “[t]he tax shall be paid to the person required to collect it as trustee for and on behalf of the state.” Finally, a person responsible for collection has the same right to collect the tax as he or she would to collect payment for the goods or services, as if the tax were part of the purchase price. While it is not unlawful for a person to fail to collect the tax from the customer, the person is nonetheless responsible for paying what would be the tax to the Division of Taxation. Note also that it is unlawful for a person responsible for collecting the tax to hold out that the tax does not apply or that they will pay it for the customer. The person responsible for collection must keep records, including copies of each receipt or sales slip showing the tax collected.
Potential Retroactive Municipal Exemption
Municipalities have complained that the law places an unfair burden on them because it effectively requires them to raise their parking fees by 7%, or face a loss in parking revenue of 7% if the taxes are paid out of existing fees without raising rates. As a result, Assembly Bill No. 4065, introduced in early March, would eliminate the sales tax on municipal parking by making all municipal parking exempt. If adopted, it would be implemented retroactively, and would provide that refunds will be available upon application for taxes previously paid, pursuant to a statutory procedure. Only the customers that paid the tax, or the entity responsible for collecting and remitting the tax, may request a refund.
In summary, the new tax law subjects parking facilities, including valet parking arrangements, to sales tax. Although municipalities may receive a retroactive exemption, other entities are not likely to be relieved from the burden of collecting the new sales tax.