The New Jersey Division of Taxation (“Department”) is currently offering a Voluntary Disclosure Program (“Program”) for media and media content companies (“Media Companies”) for the payment of New Jersey’s Corporation Business Tax (CBT). The Program ends November 15, 2011.
The Department defines “Media Companies” as businesses that derive revenue from advertising, subscriptions and syndications, licensing, and miscellaneous sources. The Department’s policy is that when Media Companies derive revenue from New Jersey sources and contacts, the revenue may be sufficient to create nexus to impose the state’s CBT.
The Program limits the tax assessment look-back period to four years (the current period and the previous three years), and the Department will waive any late-filing penalties. However, there is a 5% “amnesty penalty” assessed on returns due on or after January 1, 2002 and before February 1, 2009.
To participate in the Program, a company must qualify for New Jersey’s general Voluntary Disclosure Program. Further, the company must file CBT returns with taxes due within 90 days of entering into an agreement. After a company files its CBT return(s), interest is due within 30 days of assessment by the Department. Interest is currently 6.25%.
Further, eligible Media Companies choosing not to participate in the Program will not be eligible for New Jersey’s general Voluntary Disclosure Program and will be subject to late-filing penalties and a longer look-back period, if discovered to have a filing responsibility after the expiration of the Program. The look-back period may extend as to the date when the Department believes that the company established a filing responsibility.
The Department provides the following guidance for Media Companies:
- The amount of receipts earned by licensing intangible property cannot exceed 10% of total gross receipts.
- Advertising revenue will be assigned to the numerator of its sales fraction based on the percentage of subscribers within New Jersey over subscribers everywhere.
- Subscription and syndication revenue will be assigned to the numerator of its sales fraction based on New Jersey Regulation 18:7-8.10(c) (Business Allocation Factor for Certain Special Industries).
- Licensing revenue use in the sale of consumer products will be assigned to the numerator of its sales fraction based on the percentage of subscribers within New Jersey over subscribers everywhere.
- All other apportionment and receipts sourcing, including miscellaneous revenue, will be based on current law and regulations.
- Discretionary apportionment relief from “throwout” allocation may be granted on a case-by-case review.
- Prospectively, the taxpayer and the Division of Taxation may agree to continue to use the sourcing methods described above for a set period of time into the future to the extent provided by state or federal law. If future legislation is enacted that specifically addresses the sourcing methodology for this industry, both the taxpayer and the Division of Taxation will be bound by such changes.
TECHNICAL INFORMATION CONTACT:
Robert Sheehan
Principal
Ryan
401.272.3363
robert.sheehan@ryan.com