On September 5, 2023, the New Jersey Division of Taxation released Technical Bulletin TB-108, Nexus for Corporation Business Tax for Privilege Periods Ending on or After July 31, 2023. TB-108 was issued to clarify and provide guidance on changes made to the Corporation Business Tax primarily regarding economic nexus standards.
The new law, P.L. 2023, c. 96, provides for a bright line nexus standard to apply in addition to the existing rules for determining nexus for purposes of the Corporation Business Tax. For privilege periods ending after July 31, 2023, a corporation will be deemed to have substantial nexus in New Jersey if:
- The corporation derived receipts from sources within the state in excess of $100,000 during the fiscal or calendar year, or
- The corporation has 200 or more separate transactions delivered to customers in the state during the fiscal or calendar year.
TB-108 also incorporates most of the Multistate Tax Commission’s (MTC’s) revised Statement of Information regarding the application of P.L. 86-272 to internet business activities. One notable departure from the MTC guidelines involves the treatment of virtual currency and non-fungible tokens. Although P.L. 86-272 does not apply to intangible personal property transactions, New Jersey has added the following clarification to the list of examples:
The offering, soliciting, selling, accepting, or buying of digital assets such as virtual currency or non-fungible tokens (NFTs) and/or offering services pertaining to them is the offering and selling of financial products, financial instruments, and financial services and is not P.L. 86-272 protected.
Although it is reasonable that cryptocurrency and NFTs would be considered intangible property and therefore not protected by P.L. 86-272, New Jersey is the first state to define these virtual assets as financial products. There are several potential concerns with this position. All NFTs are not alike, making one classification difficult, given the differences among the products. It is also common that traders in virtual assets may not know the location of the buyers, making sourcing difficult. Confusion and possible litigation may arise if the state implies that the virtual assets are quasi-securities, contrary to federal treatment of the assets.
If you have questions about TB-108 and how your business may be affected, please reach out to one of the Ryan experts listed below.
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