The New Jersey Division of Taxation takes a bite on Sales Tax

New Jersey Dog Sales TaxA New Jersey taxpayer requested a Letter Ruling regarding the New Jersey Sales and Use Tax Act in connection to dog sitting and dog training activities. Letter Ruling 2013-1-SUT is binding on the Division of Taxation and the taxpayer requesting guidance exclusively. Therefore, a Letter Ruling cannot be relied upon for precedent.

The taxpayer who requested guidance was a certified dog trainer that offered dog owners the following services: 1) instruction on how to properly handle their dogs; 2) dog sitting services; and 3) selling clients trained dogs that were purchased by the taxpayer. The taxpayer wanted to know if the foregoing services were subject to NJ Sales and Use Tax. 

Generally speaking, New Jersey imposes a sales tax on the retail sale of tangible personal property, enumerated services, and specified digital products. Personal and professional services are exempt from sales tax, so long as any property transferred is inconsequential and not separately charged for.

The Division responded to the taxpayer’s inquiries as follows:

Under N.J.S.A. 54:32B- 2(e)(4)(A), the dog training classes were not subject to sales tax regardless of where the service occurred.

Under N.J.S.A. 54:32B-2(e)(4)(A), the taxpayer’s charges for dog sitting services that took place at the client’s home were to be considered an exempt personal service transaction so long as any property that is transferred is inconsequential and not separately charged for.

The Division of Taxation stated that the taxpayer must charge a sales tax for animal boarding or “day care” when such services occur at the taxpayer’s facility. Under N.J.S.A. 54:32B-3(b)(3), charges for storing all tangible personal property not held for sale in the regular course of business are subject to sales and use tax.

The taxpayer’s purchase of dogs for resale was not subject to sales tax upon the issuing of a fully completed resale certificate to the seller. However, under N.J.S.A. 54:32B-3(a), the taxpayer was required to charge a sales tax when selling the trained dog to a client. The distinction here is that the former was considered in the distribution stage. In other words, sales tax would be collected from the ultimate consumer when the dogs were sold in the retail market.

If the training services were part of the sales price of the dog, then under N.J.S.A. 54:32B-2, a sales tax would be due.

If you are experiencing a sales tax dispute with the New Jersey Division of Taxation, the Law Office of Todd S. Unger, Esq. LLC can help. The New Jersey Division of Taxation takes the collection of sales tax seriously. The failure to comply with tax laws, either intentionally or unintentionally can result in penalties, bank account levies, and responsible party assessments. Todd S. Unger, Esq. is a tax attorney that can help business owners and individuals resolve its sales tax liability. Contact the Law Offices of Todd S. Unger, Esq. LLC. today.

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