In 1966 the New Jersey Division of Taxation adopted the New Jersey Sales and Use Tax Act, setting forth bulk sale notification requirements to provide the Division with notice of asset sales for the purpose of collecting any outstanding tax liabilities owed by a Seller. The notification requirements, were not, however applicable to commercial real estate transactions unless the transaction was part of the sale of business assets which included real estate.

On June 28, 2007, Governor Corzine signed into law, N.J.S.A. 54:50-38, effective June 28, 2007 and operative August 1, 2007, expanding the scope of the notification requirements to include all transactions in which a bulk sale is made.

In order to comply with the new law and avoid personal tax liability, all New Jersey real estate sale transactions, other than the sale of the Seller’s personal residence, should be administered in the following manner:

1. The contract of sale should include a provision that both Seller and Purchaser are required to fully comply with the statute. The provision should enumerate the various responsibilities of the parties, including, but not limited to: 1) the Seller providing the Purchaser with all required documentation; 2) The Purchaser filing all the requisite notices with the Division of Taxation at least ten days prior the sale; 3) withholding from Seller’s proceeds at closing the amount set forth in the Division’s initial reply notification to the Purchaser of the State’s claim to Seller’s tax debts owed, which amount should be held by the Seller until final determination is made; 4) a requirement that the Seller post
any additional amounts as required to fund the escrow and 5) a provision authorizing the Seller to make payment directly to the State.

2. The Seller must prepare and deliver to the purchaser the Asset Transfer Tax Declaration (Form TTD) which requires the Seller to disclose information that will assist the Division in estimating the gain on the transfer of assets and the estimated tax on the gain. This form may be found at http://www.state.nj.us/treasury/taxation/pdf/ttdv1.pdf

3. The purchaser must prepare a Notification of Sale, Transfer of Assignment in Bulk Form (Form C-9600). This form provides the basic information regarding the sale, transfer or assignment, including the names of parties, scheduled date of closing, terms of sale. This form may be found at:

http://www.state.nj.us/treasury/taxation/pdf/other_forms/misc/c9600.pdf

4. The Purchaser must then submit both forms to the Director at least 10 days prior to closing.

5. Within 10 days, the Division with notify the Purchaser/attorney of any possible claim for State taxes and specify the amount to be held in escrow by the Purchaser at closing.

6. After closing, any and all amounts owed to the State will be paid out of the escrow funds. When all final returns have been filed and all State taxes paid, the Division will issue a letter of clearance authorizing the release of any funds remaining in the escrow account.

All real estate attorneys should be aware of the statutory notification requirements and advise their clients accordingly. The application of the above requirements under New Jersey law have impacted a wider array of real estate transactions and that means that in any transaction that is not the standard single-family residence occupied by the Seller, the possibility of compliance with the law should be fully examined.

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