Tax News

CCH (cch.taxgroup.com) reports:

  A corporation could not use the three-factor apportionment formula to apportion its New Jersey corporation business tax income because it did not maintain a regular place of business outside the state. An employee's home office in Connecticut did not constitute the taxpayer's regular place of business outside New Jersey. Pursuant to New Jersey law, in order for an out-of-state location to be considered the taxpayer's regular place of business, the taxpayer must have either owned or rented the facility in its own name and must have been directly responsible for the expenses incurred in maintaining the place of business. In this case, the taxpayer did not own or rent the employee's home and the employee was contractually responsible for all expenses related to the home office. The taxpayer's out-of-state storage facilities also did not constitute regular places of business outside the state. New Jersey law also requires the taxpayer to employ one or more regular employees at the facility, and the taxpayer had no employees at the out-of-state storage facilities, which were owned by unrelated pipeline companies. Because the taxpayer did not maintain a regular place of business outside New Jersey, it had to allocate 100% of its income to New Jersey and claim credits for the taxes it paid to other states. This method of allocating the taxpayer's income fairly reflected the taxpayer's presence and activity in the state and therefore did not violate the Due Process or Commerce Clauses of the U.S. Constitution.

New Jersey Natural Gas Co. v. Division of Taxation , New Jersey Tax Court, No. 000240-2005 & 007284-2005, April 17, 2008, ¶401-354.

  Other References:

  Explanations at ¶11-505

  Explanations at ¶11-520