New Jersey Bulk Sale Act: What You Need to Know
The New Jersey Bulk Sale Act is designed to protect buyers from taking on tax debt from selling assets related to business. Keep reading to learn more about how it can help you.
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What is a bulk sale?
A bulk sale is the transfer/sale of a part or whole of a company’s assets apart from regular business dealings.
Asset sales that occur during regular business are not part of bulk sales, such as a customer’s retail sale. The New Jersey Division of Taxation (DOT) must be notified whenever a bulk sale occurs in order to collect taxes.
What are business assets?
Business assets are defined as any assets which create either income gains or losses. Examples include:
- Property, such as a plot of land or a building
- Abstract assets, like philanthropy
What types of real estate transactions would qualify?
The bulk sale law can apply to:
- 1031 exchanges
- Real estate sales used in business/trade
- Sales of real estate owned by business entities
- Sales of rental properties
- Other bulk sale examples
- Other examples of a bulk sale include:
A restaurant owner decides to retire and sells the restaurant (equipment, property, etc) to another restaurateur.
Again, the Bulk Sale Act refers to the selling of assets that are not part of regular inventory sales. You can think of it as applying to sales outside the scope of your regular business dealings.
How to report a bulk sale?
The protocol for reporting a bulk sale differs depending on whether you’re the purchaser or the seller.
How the purchaser must report a bulk sale?
When reporting a bulk sale to the State of New Jersey, the purchaser needs to notify the State at least 10 business days ahead of the sale. This is necessary so that an escrow can be created if the seller owes taxes. Once the purchaser gets notice of escrow, the amount must be withheld from the proceeds of the sale. Note that the purchaser will be exempt from any of the seller’s old sales tax liabilities after reporting a bulk sale and escrowing the amount due.
When reporting a bulk sale to the DOT, the purchaser or their attorney needs to file all bulk sale notifications with a completed C9600 form. Filings by the seller/third party do not exempt the purchaser from this responsibility.
According to the DOT, a completed C9600 form must include:
- Valid New Jersey tax ID numbers for both the seller and purchaser;
- A specific closing date, which must be at least 10 business days after submission;
- Proper mailing addresses for both parties and/or their attorneys;
- Signatures of the purchaser or the purchaser's attorney;
- A copy of the executed contract of sale, court order, or assignment agreement clearly showing the sales price and all the terms and conditions of the transfer.
If the closing happens prior to the purchaser providing notification, it is a violation and the purchaser will be responsible for any tax obligations resulting from the sale.
How the seller must report a bulk sale
Once the purchaser tells the DOT about the sale, a request for information will be sent to the seller. The seller must complete the Form TTD Asset Transfer Tax Declaration, which must be filed asap. The DOT will also ask the seller about any outstanding tax balances or unfiled returns. Once they review the documentation, the purchaser is instructed to either send a tax payment to the DOT or pay the escrow to the seller.
What happens if the seller doesn’t fulfill the above requests?
The escrow amount will be withheld as the seller’s tax payment.
When dealing with the NJ Bulk Sales Act, it’s important to work with experienced professionals, including lawyers and accountants, who can guide you through the process.