New Jersey's New Taxes

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Sometimes Fate
dumps a dropping in your lap and you just can’t ignore it. As it
happened, this week I received a missive in the mail from the great
state of New Jersey. Two missives, actually. One is a notice to
all retail sellers and purchasers of fur clothing. The other outlined
changes to NJ’s sales and use tax act. Why did I receive these?
Apparently because my Pennsylvania financial services company employs
a NJ resident. That’s the only connection. We don’t buy or sell
fur — or perform any services in NJ. So NJ must have sent these
out in “shotgun” fashion, to everyone in its database. An inefficient
waste of postage, if nothing else.

However, there
is a bit more to Fate’s little love-notes. As I wrote in a previous
article
, NJ has so many tax and other revenue streams that it
could make your eyes glaze over. Now, it seems, the Garden State
has legislated a few new ways to steal its residents’ money.

The Fur Clothing
Retail Gross Receipts Tax (FCRGRT) went into effect on July 15th,
and applies if a customer buys and picks up fur clothing in NJ,
or the item is delivered to a NJ address. This new 6% tax isn’t
quite as onerous as the recently increased 7% sales tax, and can
technically be borne by the seller or charged to the customer; either
way, of course, the customer will foot the bill. One wonders why
they didn’t just make this particular type of clothing subject to
sales tax, since in practice there is no real difference between
the two types of tax. Any tax on a “bad” commodity (e.g., alcohol,
tobacco, firearms) is completely arbitrary, so why not be arbitrary
in a simpler way, and make fur the one type of clothing subject
to sales tax? Why spend time creating an entirely new law? Alas,
I fear the NJ state legislators are positively inscrutable.

Don’t worry,
the legislators have made sure that you aren’t charged if you just
buy a hat with a bit of fur trim, as the fur must be a “chief component”
of an item’s value. (I suppose a judge will have to rule in borderline
cases; e.g., a fur/leather jacket.) Oh, and fake fur doesn’t count.
Apparently this is some kind of “politically correct” tax, which
will surely please vocal PETA, to the dismay of a smaller, less
noisy group of furriers and fur wearers.

If you think
you can avoid the fur tax by buying such items in another state,
you can do so — illegally, of course. Why? Because unless you pay
at least 6% in sales or other tax on your out-of-state purchase,
you are required to pay the difference to NJ in “use” tax. In case
you are unfamiliar with this term, it means the sales tax you so
cleverly avoided must be paid to the state in which you live, since
you are “making use” of the item in your home state. So, it’s either
sales tax or use tax, one or the other. (Use tax seems like a violation
of the Constitution’s
Full Faith and Credit clause
to me. Why has no one challenged
it?)

Naturally,
countless thousands of people become criminals every year, when
they drive to a nearby no-sales-tax state, return home with appliances
and other goodies, and never pay the use tax. In the case of a pricey
item like a fur coat, I predict that many shoppers will prefer to
save a few hundred bucks on tax and choose not to fill out NJ’s
“fur use tax return,” a form which is, quite absurdly, designated
FUR-18. Clearly, the use tax results in the unintended consequence
of promoting disrespect for the law.

No explanation
or rationale for the new tax is provided in the statute.
It states merely that “There is imposed on a person making retail
sales of fur clothing a tax at the rate of 6% of the gross receipts
from retail sales of fur clothing in this State.” There is no preamble
stating that “we need more money to balance our budget,” (let alone
something more honest like “we spend more money than we take from
you and our budget is in crisis”). In other words, the tax is nothing
more or less than an imperial decree. It is simply a case of “we
say you need to pay.” That’s it. Period.

After pondering
just this one specific tax, I don’t understand how any semi-intelligent
individual can think that he is even remotely represented by his
elected officials — or does anyone seriously believe that a majority
of the population would vote for increased taxes of any kind? I’m
sorry, but I find it impossible to avoid the reality that we are
indeed living in a nanny state, where our putative representatives
simply take it upon themselves, without any real accountability
or regard to their constituents’ wishes, to decide what’s best for
everyone else.

Of course,
the well-publicized increase in NJ sales tax from 6 to 7% will cost
taxpayers dearly — an estimated
$1.4 billion
over the next year. NJ has also eliminated some
exemptions, including those for tanning, massage and tattooing services.
You can still avoid sales tax when having clothing laundered or
dry cleaned, but the exemption no longer applies to carpets, blankets,
comforters, tablecloths or napkins. Additionally, if you park in
a lot that already charges you, you’ll now pay an additional 7%
in tax. If you pay membership fees at a health club, you’ll now
pay an extra 7% on top of that. New Jersey also wants you to fill
out a form and pay the use tax on any downloaded software not used
in a business. (I’m sure everyone, including teenaged computer gamers,
will happily comply.) These changes, decreed by the government of
New Jersey, for the good of all New Jersey residents (whether they
like it or not), go into effect on October 1st. It almost feels
good to be in Pennsylvania.

September
9, 2006

Andrew
S. Fischer has worked in various fields.

Andrew
S. Fischer

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