Question for NJ EC's - new tax law

[JES2727]

A couple of days ago I received this from one of my corporate customers : "According to the New Jersey Income Tax requirements effective Jan 1, 2007 we must withhold NJ Income Tax at a rate of 7% from all unicorporated contractors unless we have a copy of that company's Business Registration certificate which includes their registration number. See NJSA 54A:7-1 "
Has anyone else seen or heard about this? I haven't heard this from any of my other corporate accounts, and I've got several. It's not that I can't provide a registration certificate, it's just that this particular customer is always jerking me around for my money and coming up with new reasons to not pay me, and I'm tired of it. I've made an appointment with an attorney for this afternoon, something I should have done 3 years ago when I started up.

 

[celtic]

A couple of days ago I received this from one of my corporate customers : "According to the New Jersey Income Tax requirements effective Jan 1, 2007 we must withhold NJ Income Tax at a rate of 7% from all unicorporated contractors unless we have a copy of that company's Business Registration certificate which includes their registration number. See NJSA 54A:7-1 "
Has anyone else seen or heard about this?

Yes, I have....just now
Here is some info:
NEW JERSEY TAX PRACTICE BLOG: WHAT THE …?

NJ - WT

P.L. 2006, c.85 Approved August 21, 2006

2b.
A person that obtains from its unincorporated contractor proof of the contractor's registration with the Division of Revenue in the Department of the Treasury shall not be required to withhold pursuant to subsection a. of this section. The types of proof required and the length of the retention period of the proofs shall be as prescribed by the Director of the Division of Taxation.

New Withholding Requirements

I haven't heard this from any of my other corporate accounts, and I've got several. It's not that I can't provide a registration certificate, it's just that this particular customer is always jerking me around for my money and coming up with new reasons to not pay me, and I'm tired of it.

This customer seems to be compliant with the law.

The other corporate clients *may* not be incomplance with the law:

2g. (1)
A person required to deduct and withhold tax under subsection a. of this section is hereby made liable for such withholding, except as that person may be excused from that withholding pursuant to subsection b. of this section.

3h.
If a person required to withhold under subsection a. of this section fails to deduct and withhold tax as required, and thereafter the tax against which the tax may be credited is paid, the tax required to be deducted and withheld shall not be collected from the person required to withhold under subsection a. of this section, provided however that the person required to withhold under subsection a. of this section shall not be relieved from liability for any additions to tax, penalties and interest with respect to that tax otherwise applicable in respect of that failure to deduct and withhold.

...and they will not be happy campers should their tax liabilities increase due to fees, fines and penalties.

The BIG question is:
​

What are the types of proof required .... as prescribed by the Director of the Division of Taxation?

(from 2b)




IMHO, as State Licensed ECs, we are already in the State's database of registered contractors [Contractors' Registration Act (the "Act"), P.L. 2004, c.16 (N.J.S.A. 56:8-136 et seq.)].


According to [N.J.S.A. 56:8-136]:

Proposed new rule N.J.A.C. 13:45A-17.4 establishes the exemptions to the registration requirement consistent with N.J.S.A. 56:8-140. Specifically, the exemption applies to:
(4) any person regulated by the State as an architect, professional engineer, landscape architect, land surveyor, electrical contractor, master plumber, locksmith, burglar alarm business, fire alarm business, or any other person in any other related profession requiring registration, certification, or licensure by the State, who is acting within the scope of practice of that profession,

Now I could go and reference N.J.S.A. 56:8-140 to prove my opinion, but is that really neccessary?

 

[celtic]

I've made an appointment with an attorney for this afternoon...

That must be some meeting..or did the shark eat you?

 

[JES2727]

That must be some meeting..or did the shark eat you?

No, just another long day....
Thanks for the reply, Celtic. I got alot of advice from the attorney, and there's a few things I need to change about the way I conduct my business. I'll get it right, one step at a time.
Anyway, it appears to me that the exemption you quoted applies only to the Home Improvement Contractor Registration we've got here in NJ now. I read the entire regulation about this new withholding thing ( P.L. 2006, c.85 Approved August 21, 2006), and it doesn't say anything about exemptions. I'm really not sure, but I'm faxing my Bus. Registration Cert. over to the customer right now. I'm just surprised that no one else has asked me for it, and that no one else on this board from NJ seems to have even heard of this new regulation.

 

[celtic]

I'm really not sure, but I'm faxing my Bus. Registration Cert. over to the customer right now.

You can't go wrong by exceeding the requirement.

I'm just surprised that no one else has asked me for it, and that no one else on this board from NJ seems to have even heard of this new regulation.

To be blunt...because it's B.S.
ECs, plumbers, etc that get licensed through the State are already in the "system".
Anyone not licensed through the State...aka, oh look I have a truck and a hammer, now I'm Joe's GC...MUST register with the State through the HICRA...and pay the fee. As tradesmen who have already met the State's requirements to conduct business, we have already paid that fee

 

[Oakey]

I received the notice right after Jan 1 about the new tax, told my accountant about it and he told me exactly as Celtic has stated.."what BS". Good luck in your collection efforts btw..

 

[celtic]

I received the notice right after Jan 1 about the new tax, told my accountant about it and he told me exactly as Celtic has stated.."what BS".

I think I'm on the wrong side of the print table...I need to expand my options.