New Jersey Lawyers Blog

Published on: April 17, 2014

New Jersey’s Sales Tax Exceptions and Anomalies

Sales taxes are an inevitable part of life in New Jersey, and indeed, across the country. Sales taxes make it possible for the state to fund important government programs and operations such as transportation infrastructures, aid to schools (to the extent that it supplements local property tax and other funding sources), health and welfare aid programs, licensing and compliance departments, and other general state expenditures.

However, individual taxpayers may also benefit from their payment of sales tax on a more direct basis by claiming sales taxes as an itemized deduction on their tax returns. Generally people who itemize their deductions for their federal taxes also deduct their income taxes. However, taxpayers have the option to elect to deduct any state and local general sales taxes paid during the course of the year instead.
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Published on: April 15, 2014

New Jersey Make Major Revisions to Its Limited Liability Company Law

by Maurice W. McLaughlin

The Legislature has recently made important changes to the laws governing New Jersey limited liability companies, which were effective March 1, 2014. The new revisions make drastic changes to the way New Jersey law treats limited liability companies. The law still allows the owners of a limited liability company to change the way they want their business to be run if they do not want it run in accordance with the law’s acts default provisions. However, when the LLC operating agreement is silent, the new Revised Uniform Limited Liability Company Act will govern.

Because these changes drastically alter the way LLCs are operated, profits are distributed, and decisions are made, it is essential to have your operating agreement reviewed by an experienced business attorney knowledgeable in the new Revised Uniform Limited Liability Company Act. Our attorneys are experienced in these areas and we have formed and crafted operating agreements to run hundreds limited liability companies. Please call us to have your LLC’s operating agreement reviewed by one of our business attorneys.

The following are some of the important changes.

Distributions. Under the old law, members of an LLC received distributions or profits and losses according to their ownership interest. Therefore, if two owners own the company 75 percent and 25 percent, they would receive profits and distributions of 75 and 25 percent, respectively. The new LLC law, however, requires that profits and losses be shared equally. Thus in that same company, rather than splitting the losses 75 and 25, each member would received half the profits, despite their unequal shares. Of course, this can be changed in the operating agreement, which can provide that distributions be made in proportion to ownership percentages, or based on any other reasonable formula.

Fiduciary Duties. The new LLC law creates an express fiduciary duty of loyalty for all members. Members cannot compete with their limited liability company or engage in self dealing. Thus, leasing property to the LLC or lending it money can be construed as self dealing. But again, this can be changed in the operating agreement.
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Published on: April 11, 2014

New Jersey’s Employment Laws Which Protect Against Sexual Harassment

by Boris Peyner

New Jersey’s employment laws protect employees from workplace sexual harassment. People accused of sexual harassment may be subject to individual liability under both civil and criminal laws. Employers may also be found liable for sexual harassment because of their employees’ actions.

Sexual harassment does not need to be sexual in nature. It can take at least two forms: (1) hostile work environment, and (2) “quid pro quo” sexual harassment. Hostile work environment sexual harassment is conduct that has been directed towards someone because of that person’s sex. For example, harassment that is based on stereotypes about women or men can be construed to be sexual harassment. Of course, harassment that is sexual in nature is sexual harassment. Therefore, inappropriate sexual propositions, jokes or advances can be construed sexual harassment and result in a civil lawsuit. This type of conduct is prohibited.

“Quid pro quo” sexual harassment is also prohibited. Quid pro quo sexual harassment is the demand by an employer, manager, or supervisor that terms and conditions of employment, such as raises, promotions, or simply keeping the employee’s job, in return for sexual favors. For example, if a boss requires an employee to have sex or enter into a romantic relationship to keep her job, get a promotion or avoid discipline, then the employer could be liable for quid pro quo sexual harassment.

Employees complaining about workplace sexual harassment are protected from retaliation. In fact, it is a violation of New Jersey’s employment laws for employers to retaliate against employees for their complaints about behavior that that employees reasonably believe is sexual harassment.

Simply, employees should not have to endure the stress or indignity of inappropriate sexual conduct in the workplace. However, not every type of workplace conduct based on gender is unlawful. Instead, to have an actionable claim of sexual harassment the conduct complained of must be serious enough or frequent enough to make a reasonable person believe that her working conditions are hostile or abusive.
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Published on: April 9, 2014

Pregnancy Discrimination Under New Jersey’s Law Against Discrimination

by Pauline M.K. Young

New Jersey’s Law Against Discrimination (the “LAD”) covers a wide variety of activities and relationships, including employment relationships. It makes it unlawful to discriminate against an employee or potential employee on the basis of race, national origin, nationality, age, gender, sexual orientation, religion, and several other specified classifications.

In January of 2014, Governor Christie signed into law a bill (S2995) that both protects pregnant employees from discrimination and requires employers to provide pregnant employees with reasonable accommodations so that they can continue working. The Act applies both to women who are currently pregnant and those who have recently given birth. Therefore, if the pregnant woman, or woman who recently gave birth, requires accommodations in the form of, for instance, a modified schedule, additional breaks, or less strenuous work duties, as long as those accommodations are reasonable under the circumstances, the employer must allow them and cannot retaliate against the employee for needing, using, or asking for those accommodations.
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Published on: March 31, 2014

New Jersey’s Sales Tax

by Pauline M.K. Young

Sales taxes are imposed on all sorts of goods and services sold or provided in New Jersey. Generally the tax rate for most of those goods and services is seven percent (which was increased from six percent in 2006).

Most goods and services are taxed, including, for example, tangible personal property; digital products’ the production, installation, or maintenance of tangible personal property or digital products; storage of personal property; mail processing services; utility services; tanning services; tattooing; investigation and security services; information services; non-prescription massaging services; limousines and other transportation services; telephone answering services; radio subscription services; prepared foods (such as in restaurants); food provided through a vending machine; landscaping; entertainment (movie tickets, amusement parks, sports events, plays, etc.); gym memberships; and parking garages.
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Published on: March 25, 2014

Permissible Tax Deductions

by Pauline M.K. Young

On the federal level, income taxes, and indeed all taxes to some extent, are regulated and enforced by the Internal Revenue Service (“IRS”). While there are numerous statutes, regulations, and other laws which mandate the payment of taxes on any number of goods, services, and activities, the tax bible is the Internal Revenue Code (“IRC”). The IRC has been further expanded upon and interpreted in the regulations adopted by the United States Department of the Treasury located in Title 26 of the Code of Federal Regulations (“CFR”). The IRS also issues numerous publications in an attempt to provide further guidance for people, companies, and tax professionals, typically referred to as Internal Revenue Bulletins (“IRB”).

Oftentimes people frustrated with paying income taxes, while pulling their hair out or throwing their hands up, wonder if there is some way they can avoid the tax altogether. They might start devising some strategy to argue against the very concept of paying income taxes. However, rest assured, the power of the government to enforce the payment of income taxes is legal and valid, and its not going away.

Indeed, the very first section of the IRC imposes tax on income. The IRC goes on to define taxable income as gross income after permissible deductions are subtracted, and requires everyone (with limited exceptions) to file their tax returns every year. However, when calculating personal income taxes, there are certain ways that a taxpayer may make deductions upon the tax that they would otherwise owe. In doing so, people may either itemize their deductions or accept the “standard deduction.”
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Published on: March 19, 2014

Income and Expense Verification Requests in New Jersey Property Tax Appeals

by Jennifer C. Meusel

A law known as “Chapter 91” allows municipal property tax assessor’s to request income and expense information from a New Jersey property owner in order to assist in determining property “values” for its tax assessment. While this, standing alone, does not seem overly burdensome, if the property owners fail to respond to the assessor’s request pursuant to Chapter 91, property owners are barred from appealing their property tax assessment.

However, the law has strict provisions which must be followed by municipal assessors and taxpayers. The municipal assessor must send the request for income and expense information in writing, and the request must be sent via certified mail. The assessor must include a copy of the applicable statute with the written request. Moreover, the assessor’s request can only be made for properties which are producing income. The property owner must respond in writing to the assessor’s request within 45 days, and if he fails to do so, will not be permitted to file an appeal of the assessment. However, if the taxpayer fails to respond, the municipal assessor is still required to determine the full and fair market value of the property utilizing all available information. Additionally, the statute does include an exception, wherein if the property owner had good cause for being unable to provide the requested information, the applicable county tax board may take that into consideration.

Courts have construed the requirements imposed on the municipal tax assessor very strictly, due to the property owner’s resultant loss of the right to appeal if she fails to respond. New Jersey’s Tax Court has ruled that if the assessor does not comply with every requirement of the statute, “renders the statute inapplicable.” SAIJ Realty, Inc. v. Town of Kearny, 8 N.J.Tax 191, 197 (Tax 1986), including the provisions requiring the request be sent by certified mail and that a copy of the statute be included with the request. However, if the municipality meets the requirements of the law, the burden shifts to require the property owner to strictly comply with her obligations under the law, particularly responding in writing within 45 days.

New Jersey courts have consistently construed the law against property owners even in situations where it seems unjust. For example, even if the assessor’s request is overbroad or illegal, as long as the assessor has met the statute’s requirements, a property owner’s failure to respond can still result in loss of the right to appeal. The taxpayer is then required to respond to those requests which are not objectionable and advise the municipal assessor as to why the remaining requests are improper. Moreover, a property owner must still respond the properly sent request even if the request is made of a non-incoming producing property. The Tax Court has even held that failure to respond to a request, even when the request is made as to non-income producing property, will result in the taxpayer’s loss of its right to appeal the assessment. Furthermore, the Appellate Division of New Jersey’s Superior Court upheld the loss of the right to appeal where the taxpayer sent a response after the 45 days had expired. The Appellate Division also ruled that an appeal was properly dismissed where the requested information was provided to the attorney for the municipality, but not the assessor. These decisions were all justified because of the important governmental interest and the statute’s mandatory wording.
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Published on: March 17, 2014

Independent Contractor or Employee: How Do I Properly Classify My Workers?

by Boris Peyner

One of the most common areas in which business owners make a mistake is with the hiring and properly classifying new workers. Classifying a person as an independent contractor can have appealing benefits for an employer, but it can have detrimental tax consequences and other legal implications under both federal and New Jersey law.

For example, employers maybe tempted to classify workers as independent contractors because they would then not have to pay the employer portion of social security and Medicare taxes for their workers. Employers will also not be required to comply with the Fair Labor Standard Acts and New Jersey Wage and Hour Law, both of which provide for minimum wage and overtime pay requirements. Instead, a worker who is an independent contractor will be considered “self-employed,” and will be required to pay the taxes as well as their full social security and medicare income tax. This has the effect of transferring seven percent of the cost of worker from the employer to the worker.

Before determining if a worker is an independent contractor or an employee, it is essential to seek advice from an experienced New Jersey employment attorney. Proper classification of a worker must be made on a case-by-case basis. Factors have been set forth by the United States Appellate Court for the Third Circuit and the New Jersey Supreme Court, which must be reviewed in making the determination.

The New Jersey Supreme Court explained that there are at least twelve factors that should be considered in determining if a worker is an employee. First, and most important, a worker is more likely to be considered an employee if the employer controls the means and manner her performance. Second, a worker can be considered an employee if her occupation is one that an employer can be required to supervise. Third, a worker who has the skill set that matches what the employer normally seeks of its employees to perform a job can be considered an employee. Fourth, a worker who is provided with equipment and a workplace by the employer is more likely to be considered an employee. Fifth, a person who continuously provides service to an employer can be construed as an employee. Sixth, workers who are paid directly by the employer can be construed as an employee. Seventh, a person who is actually terminated by the employer is more likely to be construed as an employee. Eighth, a worker who is provided annual leave is probably an employee. Ninth, a worker who is an integral part of the business of the employer is more likely to be construed as an employee. Tenth, a person who accrues retirement benefits will normally be considered as an employee. Eleventh, if a worker’s social security tax is paid by the employer then, she will probably be construed as an employee. Finally, the intention of the parties can help establish if a relationship is that of an employee-employer.
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Published on: March 14, 2014

Why Do I Have to Pay Income Taxes?

by Pauline M.K. Young

Taxes have been a vital part of our nation since its very founding. Indeed, even prior to the nation’s independence, local taxes were imposed upon the colonies.

Even under the Articles of Confederation, the predecessor to the United States Constitution, the states had power to tax their residents. However, that power was a loosely enforced power, and did not mandate that taxes collected be turned over to Congress. Then, with the adoption of the United States Constitution in 1787, the federal government obtained the power to “lay and collect taxes.”

However, even with the ratification of the Constitution, income taxes made up a very minimal amount of the government’s total revenue. In response to significant revenue concerns, the Sixteenth Amendment was adopted in 1913. The Amendment expanded the power to lay and collect taxes without apportionment among the states and without regard to each state’s population. However, it took time for the Bureau of Internal Revenue to organize the income tax. The need for revenue only increased with the beginning of World War I, which, even prior to the U.S.’s involvement, caused a decline in international trade and revenue. WWI thus became one of the main catalysts that molded income taxes into the general form that we recognize now.
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Published on: March 12, 2014

The Filing Deadline for some New Jersey Property Tax Appeal is changing

by Jennifer C. Meusel

If you own property in Monmouth County the property tax appeal deadline has changed. While the new date in the rest of the state remains April 1st, Monmouth County has volunteered to test out a new law changing the appeal date to January 15, 2014 or within 45 days of the bulk mailing of the municipal assessments, whichever is later. If your property is in Monmouth County and you did not file your petition to appeal your property tax assessment on or before January 15th, you will not be able to file and appeal this year unless the notice was mailed within the last 45 days or there was a town-wide revaluation.

New legislation was enacted and the governor signed into law, P.L. 2013, c. 15, creating a demonstration program which allows up to four counties to opt into the new law, two in the first two years and two more in the following two years. At the present time, only one county has opted in, Monmouth County.

This is a significant change because the deadline to file a petition to appeal a property tax assessment in the rest of the state of New Jersey remains April 1, or within 45 days of the bulk mailing of the property tax cards, whichever is later. While property tax cards are traditionally been mailed out in February, most Monmouth County municipalities have already mailed out their property tax cards. The appeals hearings in participating counties are expected to be conducted by the end of April.

The stated purpose of the new law is to establish a collaborative system of property assessment between the county board of taxation and the municipal assessors which it is hoped will result reductions in cost and increases in accuracy and consistency of assessments. The stated purpose of the change in the appeal deadline is to assist in municipal budgeting and to more evenly distribute tax losses to municipalities which result from tax appeals across the various governmental entities on whose behalf taxes are collected (i.e. school, county). However, the change appears suspiciously timed to limit property owners’ right to challenge their assessments and make more money for the towns.
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