Overview of the Energy Reform Tax Legislation
(Section (§) references refer to the sections in the bill, not to statutory sections; the legislation is available
; see Chapter Laws)
Effective January 1, 1998, the retail sale of gas and electricity will be subject to sales and use tax; gas, electric and telecommunications utilities will also be subject to the Corporation Business Tax. The Gross Receipts and Franchise Tax imposed on those entities has been repealed.
- Natural Gas and Electricity are defined as tangible property are subject to tax as such. (§17, 18)
- The transportation of gas/electricity (utility service) is a taxable service. (§18)
- Use tax is imposed on both the commodity and the utility service charge.
- Definition of "vendor" is amended to include energy sellers and transporters. (§17) The NJ Board of Public Utilities requires such vendors to have an in-state office to protect the interest of consumers (§61). The Division mailed out a Tax Registration Application (Form NJ-REG) to gas marketers; if the NJ-REG was not received, marketer should immediately contact Division of Revenue, Client Registration Section, (609)292-9292
- Since the tax is broad-based, there are no exemptions for purchases of energy for use in production, research and development or by farmers, qualified exempt organizations or qualified Urban Enterprise Zone businesses. (See partial exemption for "eligible persons", below)
- Statutory authorization for tax to be included in price, no separate statement of sales tax to the customer (§30)
Since the law requires that the tax be included in the price
, the general rules for sales tax computation (Gross Receipts minus Deductions equals Taxable Receipts) are not applicable for sales of energy transport. Rather, energy vendors must take the gross receipts from sales of energy and divide by 1.06 in order to arrive at the amount of actual receipts and the sales tax.
Eligible Persons will file:
- Eligible Persons" (§34) Certain consumers that have been purchasing gas from marketers are to be grandfathered for a five year period, up to a certified Base Level of Volume (BLV) for non-utility gas purchases only. The BLV is subject to a 20% reduction each year and is phased out completely on 12/31/2002. A Direct Pay Permit/ Certificate will be issued once the certification is submitted and reviewed by the Division(29/12). The statute authorizes an eligible person to directly pay tax to the division on purchases of non-utility gas on an annual basis; tax is due on transportation charges as well as gas purchased from a utility and the Direct Pay Permit/Certificate cannot be used to waive the payment of tax on those purchases.
Annual Energy Volume Report- to certify volume and purchase price; Annual Energy Use Tax Return- to pay any tax due in excess of BLV and request a refund of tax paid, if applicable.
- Current Cogeneration Facilities: (Purchase Exemption) Cogeneration facilities in operation on or before 3/10/97, or for which an application for an operating permit or a construction permit and a certificate of operation has been filed, are granted a permanent exemption for all purchases of natural gas and utility service for use in the production of electricity (§26(b)(2))
Exemption Requirements: For documentation purposes, cogens will provide the current Exempt Use Certificate (ST-4) to vendors
- Cogens/Self-generators that began operating after 3/10/97- (Purchase Exemption) These facilities are granted a partial sales tax exemption for purchases of gas and utility service, for use in the production of electricity to be sold "outside the fence" (i.e. to someone other than the on-site end user )(§26(b)(1).)
Since the cogen will not know at the time of purchase whether the gas will be used for an exempt purpose, they will also need to be on a Direct Pay system whereby they will self-assess tax due on gas used in producing electricity to the on-site user on a monthly basis; The Division will issue a Direct Pay Permit Certificate.
- Ogeneration facilities (Sales)- Sales of electricity and utility service "inside the fence" (i.e. to an on-site user/owner or affiliated /nonaffiliated (integrated) user (§26(a)(2)) are exempt from sales tax.
- Exemptions-Utilities, exempt from tax on all purchases of gas, electricity and utility service for their own use and consumption (§33(a)); Cogenerators, as described above; Federal agencies or instrumentalities; International organizations of which the United States is a member; Special contracts customers.
Written Inquiries should be directed to:
New Jersey Division of Taxation
P.O. Box 269, Trenton, NJ 08695-0269