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Published in U.S. 1 Newspaper on August 9, 2000. All rights

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Sales Tax Law: Susan Feeney

If you thought doing your own taxes every April was

confusing, try doing it every day for a living and try concentrating

on sales and use tax — as tax managers at manufacturing companies

in New Jersey are doing. Susan Feeney, a partner at the

Newark-based

law firm McCarter & English LLP, will lecture about sales and use

tax at a seminar, called "New Jersey Sales and Use Tax for

Manufacturers,"

on Wednesday, August 16, at 8:30 a.m. Also speaking will be Steven

P. Sukel, a sole practitioner. Hosted by the National Business

Institute, the seminar will be at the Holiday Inn on Route 1 South.

Cost: $189. Call 715-835-7909.

"Tax managers are the people who are making the tax decisions

within companies on a day-to-day basis," says Feeney,

"deciding

on whether or not something is going to be taxed. They have to know

and interpret the rules."

And the rules about sales tax in New Jersey and whether or not

something

will be taxed can get pretty confusing, says Feeney. Many questions

come up for tax managers about what types of things are exempt and

those that aren’t, and there many gray areas, she says (E-mail:

sfeeney@mccarter.com).

A member of various local tax committees and state and county bar

associations, including New Jersey and New York, she went to Seton

Hall, Class of 1978, and Fordham law school. An amateur equestrian

she lives in Skillman with her Arabian horse "Sahara Hassan."

Feeney chose to focus on state and municipal tax law not only because

it is useful in everyday life but also because it offers substantive

answers. "I get to deal with controversy and to litigate but at

some point there is a yes or no answer." In 1979 New Jersey was

one of six states to have a tax court, and others have followed suit.

"Our tax court is very well-respected across the nation."

In the mid 1980s Feeney was involved with two cases against the state

Division of Taxation that established the tax rule that some retail

coupons are not subject to sales tax. "It’s equivalent to a cash

discount. Sales tax gets collected on how much goes into the cash

register," she says.

In one case, for Great Adventure, she helped establish that sales

tax on an admission charge need be collected only on the discounted

amount. In another case, she represented Burger King Corporation,

and proved that tax need not be paid on a cents-off coupon if the

discount comes out of the franchisee’s pocket. "Most fast food

companies charge tax on the coupon when they shouldn’t," says

Feeney.

Manufacturers’ coupons are different, however. A retailer can get

reimbursed for these, says Feeney, so the retailer must charge sales

tax. But if, for instance, a supermarket has a "double coupon"

policy, the customer should pay tax only on the value of the coupon,

not on the doubled coupon.

Retailers can also get reimbursed for bad debts that have been written

off. In the late ’80s, for instance, appliance dealers were supplying

appliances for condos but weren’t getting paid. Their cash flow

problems

were made worse because sales tax is due when the goods change hands.

"If you wrote off a debt for federal tax purposes you can usually

apply for reimbursement for the state tax," says Feeney.

All sales on products — with 40 enumerated exceptions — are

subject to tax in New Jersey, but for services, only a half dozen

of them are taxable, she says. They include telecommunications,

printing

and processing services, installation and maintenance to tangible

personal property (such as repairs to watches, cars, and televisions),

storage and safe deposit box rental, and utilities (electricity and

natural gas).

Some puzzling exceptions: Sales tax on real estate maintenance and

repair requires contract lawn and cleaning services to pay sales tax,

but not garbage removal services. Capital improvements, such as

permanent

landscaping, are also exempt. Also, a 1998 repeal on advertising

services

left in place a tax on direct mail services for offers mailed by a

New Jersey firm to an address in New Jersey, but no tax is collected

from out-of-state firms that do this mailing.

The seminar will focus mainly on manufacturing and the rules for tax

exemptions that affect businesses in this industry. "There are

many manufacturing businesses in New Jersey," says Feeney. And

"manufacturing is one area that has a broad range of rules

regarding

sales tax."

Decisions have to be made about the equipment and machinery used by

manufacturing companies, "such as whether or not new equipment

purchased will be exempt and on what conditions," and decisions

about the repair and installation of equipment. "If my machinery

is installed as part of the real estate, not just bolted to the floor,

I can make a case for not paying sales tax," says Feeney. Other

problem areas for exemption are research and development expenses,

chemicals and catalysts, and safety and recycling equipment.

Bottom line: follow the rules. Says Feeney: "Small companies that

do not collect the tax for years — and get audited — can be

bankrupted."

— Crista DiCostanzo


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