N.J.S.A. 54:50-38 instructs the Director, Division of Taxation, to notify the purchaser, transferee
or assignee of business assets of any possible claim for State taxes. This directive includes all
final business tax returns and payment.
Procedure
The estimated tax on the gain portion
of the escrow to be held at closing is initially calculated by
multiplying the gross consideration by the tax rate of the taxpayer.
Upon completion of this declaration, submission to and review by the Division, the estimated tax
on the gain portion of the escrow may be reduced appropriately.
Upon closing of the transaction, the escrow will be held by the transferee’s attorney and the
estimated tax on the gain portion
of the escrow will be demanded by the Division to be applied to
the appropriate tax type and year. A confirmation of receipt and the application of the estimated
tax payment will be sent to the transferor’s attorney.
The taxpayer files their year end business tax return, claims credit for the payment and pays any
additional tax due. They may request a refund or credit if an overpayment exists.
Specific Line Instructions for Estimated Tax Calculation
Special Note: Lines 1 through 9 establish gain. Line 10 assigns share.
Line 1: Total sale price or consideration of all assets currently being transferred.
Line 2: Total amount of settlement charges to transferor associated with this transaction.
Line 3: If fully depreciated enter zero.
Line 8: Calculate amount deferred based on installment or short term notes.
Line 9: For NJ1065 filers: If any member/partner is not an individual or if the number of
nonresident member/partners exceeds five (5) stop here and attach the most current
membership directory. The Division will calculate and communicate the estimated tax
for resident filers and/or withholding amount for nonresident filers.
Line 11: Individual tax rates may be found in the most current NJ-1040 instructions.
Corporate tax rate 6.5% ($1-$50,000), 7.5% ($50,001-$100,000) or 9% (above
$100,000).
Line 12:
C-Corporation - use the greater of declared tax or minimum tax. ($500, $750, $1,000,
$1,500 or $2,000 based on NJ Gross Receipts.)
S-Corporation - minimum tax applies in addition to any tax on gain.
This is the declared amount that the Division will demand from escrow to be applied to the
taxpayer’s account(s).
Details of Installment proceeds:
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