N.J. Sales Tax Bill Would Hit Downloads, Online Services
“Digital goods” sales would incur the N.J. sales tax under a bill approved by the state Senate Budget Committee on a party-line vote Mon. S-2628 would extend the tax to downloaded movies, music and software, plus “information access purchases or subscriptions” to websites such as online journals, among several other extensions. The tax would mean a 99 cents iTunes Music Store download would cost $1.05. Out-of-state businesses wouldn’t have to collect the tax unless “related through common ownership” to businesses operating physically in N.J. Neither Sen. Majority Leader and sponsor Bernard Kenny (D) nor Sen. Budget Committee Chmn. Wayne Bryant (D) could be reached for comment. Bryant told Today’s Sunbeam the bill would level competition between brick-and-mortar stores and online retailers. Acting Gov. Richard Codey (D) said he wants to extend the sales tax to other products and services in his March budget, but didn’t specify which.
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Business strongly opposes the bill. The obligation to pay sales tax on transactions with out-of-state businesses probably would fall on consumers, N.J. Business & Industry Assn. (NJBIA) First Vp Arthur Maurice told us. That creates a “terrible enforcement issue” that will require complicated rules for Internet transactions and “breed confusion” among consumers, he said. The law would trouble businesses in and out of state, he said: “If you're based in N.J., you're going to want to get out” if the bill becomes law. The state already has a reputation for high taxes and S-2628 is “just another reason for folks to say that this is just not a state we want to invest and create jobs in,” Maurice said.
Passage out of the Senate hinges on 2 votes. All 18 Senate Republicans are united against the bill, Senate Minority Leader Leonard Lance (R) told us. Democrats hold 22 seats in the Senate but need 21 votes to pass a bill. Lance is hopeful he can pick off 2 Democrats, but predicted passage if a vote is scheduled. The state Assembly is a different issue, since the entire chamber is up for re-election this fall. “Presumably even Democrats in the Assembly would be reluctant to raise taxes” with re-election looming, Lance said. The numbers are much rosier for Assembly Democrats, who hold a 47-33 advantage over Republicans.
An improving state budget might sink the bill, Maurice said. Between Codey’s budget proposal and S- 2628’s introduction, the nonpartisan legislative budget staff upped revenue estimates $1.5 billion in a $27 billion budget, he said: “The [declining] need for the revenue is such that it might be difficult to justify” any tax increases.
The budget must be approved by June 30, a deadline the legislature traditionally has met, Maurice said. Little opposition outside business has developed, since the bill, introduced last week, has had only one public hearing, he said. Lance’s constituents have complained generally about tax issues but not specifically about the “digital goods” provision, Lance said. Maurice said he will be “frankly surprised to see this not resolved by June 30,” predicting a “very low” possibility of passage if the bill retains the digital-goods provisions.