On June 6, 2011, the Senate Budget and Appropriations Committee has approved A-2748, legislation initiated and strongly supported by NJAR® which exempts certain residential and seasonal rental properties from bulk sales notification requirements. The bill is scheduled to be voted on by the full Senate on June 9, 2011. Upon approval by the Senate, the bill must be approved by the General Assembly due to amendments that have been added to the legislation. If approved, the bill will go to Governor Christie for his consideration, who must sign the bill before it can become law. New Bulk Sales Addendum for Residential Contract of Sales
The NJAR® Risk Management Committee has developed a new Bulk Sales Addendum for Contract of Sales , which makes the buyers and sellers aware of the requirements. The New Jersey Bulk Sales Law, N.J.S.A. 54:50-38 applies to the sale of certain residential property as well as commercial real estate transactions. Under the law, the buyer may be liable for taxes owed by the seller if the law applies and the buyer does not file the Notification of Sale, Transfer or Assignment in Bulk (Form C-9600) with the Division of Taxation. NJAR®’s legal counsel recommends that all buyers file a Notification of Sale, Transfer or Assignment in Bulk (Form C-9600) with the Division of Taxation, whether it is residential or commercial transaction.
On March 3, 2011, the New Jersey Senate Budget and Appropriations Committee took testimony on A-2748/S-2313 legislation initiated and supported by NJAR®. This legislation exempts seasonal rental properties and certain other residential dwellings from bulk sales notification requirements. If enacted, this bill will take effect immediately and be retroactive to August 1, 2007. Before becoming law, this bill must also be passed by the full Senate as well as the General Assembly due to amendments which were adopted prior to Governor Christie’s consideration. NJAR® will be working with the members of the Senate to advance this legislation.
The New Jersey Division of Taxation recently issued aFrequently Asked Questions document regarding the law and procedures for complying with the Bulk Sales Act. The Division advises that when in doubt about whether or not a property falls under the Bulk Sales Act notification requirements, the buyer should file a completed bulk sale C-9600 form in a timely manner. If the buyer does not file the notice, the buyer is liable for any state tax liabilities of the seller. If the seller omits to tell a buyer of the income producing nature of the property, then the buyer can take legal action against the seller for any seller’s state tax liabilities that the Division seeks to assess against the purchaser.
NJAR®’s legal counsel recommends that all buyers file a Notification of Sale, Transfer or Assignment in Bulk (Form C-9600) with the Division of Taxation, whether it is residential or commercial transaction. Pursuant to the Notice Requirements, C-9600 must be filed by the buyer at least 10 business days prior to the closing. The form must be sent by registered mail, certified mail, overnight mail, Fed-Ex or UPS.
Although filing the form does not automatically mean that the Division will treat the transfer as falling within the bulk sale law, it guarantees that the purchaser will not incur any tax liability of the seller for failure to comply with the notice provisions of the law. If you have any further questions about the Bulk Sales Act and the Division’s FAQs, consult your attorney.
To address member concerns, NJAR® had legislation introduced back in May 2010 that will exempt certain properties from the Bulk Sales Act, including single family homes, two-family homes and seasonal rentals. Just recently, NJAR® has been in contact with the sponsors of the legislation, Senator Jeff Van Drew and Assemblyman Patrick Diegnan regarding the FAQ provided by the division, and they have assured us they are doing everything they can to get the legislation moving in a timely manner.
Assembly Approves Bulk Sales Notice Exemption
On June 21, 2010, the New Jersey General Assembly unanimously approved A-2748, by a vote of 79-0. This legislation exempts seasonal rental properties and certain other residential dwellings from bulk sales notification requirements. Before this bill can reach Governor Chris Christie's desk to be signed into law, it must still be approved by the Senate Commerce Committee and the full state Senate.
On May 13, 2010, Senator Jeff Van Drew (D-1) introduced S-1941, legislation exempting seasonal rentals and certain other dwellings which may have been used as vacation homes from bulk sales notification requirements in New Jersey. On May 6, 2010, Assemblyman Patrick Diegnan (D-18) introduced the companion bill, A-2748. Under the legislation, sales of single non-commercial dwelling units are exempt from bulk sales notification requirements in addition to sales of seasonal rental units and seasonal leases and time shares. If enacted, S-1941/A-2748 will take effect immediately and be retroactive to August 1, 2007, meaning that bulk sales requirements will not apply to properties included in this legislation back to August 1, 2007, the date when bulk sales notification requirements in New Jersey took effect. This legislation must be approved by both houses of the state Legislature and signed by Governor Chris Christie.
In June 2007, N.J.S.A. 54:50-38 was signed into law as part of the Bulk Sales Act. This statute provide that, when a person makes a sale in bulk of any part or the whole of the person’s business assets, other than in the ordinary course of business, the purchaser must notify the Director of the Division of Taxation of the sale at least 10 days prior to taking possession of the subject of the sale. Within 10 days of receiving such notice, the Division of Taxation will notify the purchaser whether or not it has a claim against the seller for State taxes and, if so, the amount of the claim. The notice that the purchaser is required to file is a Notification of Sale, Transfer or Assignment in Bulk.
On July 3, 2008, the Division of Taxation issued a Technical Bulletin stating that these Bulk Sales notice requirements apply to the sale of real estate if the primary use of the real estate is to support a business on its premises. The Technical Bulletin also states that the seller must submit an Asset Transfer Tax Declaration to the Division of Taxation in order to assist the Division of Taxation in estimating the amount of the claim for State taxes. View the Technical Bulletin (including the Asset Transfer Tax Declaration).
In response to informal inquiries that have been made to the Division of Taxation, the Bulk Sales Section of the Division of Taxation has provided advice that purchasers should comply with the Bulk Sales requirements when real estate is sold and there is any rental income from it, except for the sale of an owner-occupied single family home and the sale of real estate made in the ordinary course of the seller’s business. As a result, purchasers should comply with the Bulk Sales notice requirements in connection with the sale of residential real estate by an individual or a company if the owners rented the property to others during the period they owned it.
It is important to note that, if the purchaser fails to comply with the requirements of N.J.S.A. 54:50-38, then the purchaser will be personally liable for the payment of any State taxes owed by the seller to the State.