For Immediate Release
April 21, 2005

New Jersey Clarifies Trade Show Nexus Standards

This state takes a “No Nonsense” approach to what constitutes “BAT” nexus (Business Activity Tax).

New Jersey bases its determination on two hard-core factors:

• the nature and frequency of an out-of-state seller’s activities;  and

• the number of employees in the state.

While mere solicitation of business is not sufficient to create nexus for New Jersey’s corporation business tax, as supported by P.L. 86-272, an out-of-state corporation may be subject to a tax on its gross profits or gross receipts in New Jersey known as the Alternative Minimum Assessment (“AMA”).  There are thresholds for corporation’s that do not meet a minimum requirement.   Corporations are not subject to the AMA if they have less than $2.6 million of New Jersey gross receipts or less than $1.8 of New Jersey gross profits.

If an out-of-state corporation is not liable for the AMA, it must file a return and pay a minimum tax of $500 ($2,000 for controlled or affiliated groups).

The presence of employees at trade shown held in New Jersey for the purposes of soliciting  or generating business  is sufficient to establish a physical presence in the state and triggers a tax obligation to the state.  In order to avoid nexus creating activities, the out-of-state corporation must prove that its trade shows activities are solely limited in nature to conduct  that “explicitly or implicitly invites an order; and activities that neither explicitly nor implicitly invite an order but that are entirely ancillary to requests for an order, and involve maintaining a display at a single location for less than two weeks during the tax year, a foreign corporation will not be subject to corporation business tax based or measured by income.  (Emphasis added)

If you would like additional information on this topic or other  related questions, please contact James Privett, Regional Vice President - Sales & Use Tax Group at (615) 373-8373.  E-mail jprivett@thesaltgroup.com

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