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Legislative Update: NJ Sales Tax on Horse Boarding May Soon Be a Thing of the Past!

Below is our original blog post on this issue.  For updated information on the bill as it makes its way through the Legislature, please visit our Equine Legislation webpage.

As those involved in New Jersey’s equine industry are well aware, the Division of Taxation began to assess sales tax on horse boarding beginning in October 1, 2006. This action was based on the fact that, by law, horses are viewed as property and the rental of a unit for storage of property (such as a U-Haul or other similar storage unit) is subject to the Sales and Use Tax. No exception was made for the rental of a stall for a horse or other equine animal.

This was an unfortunate development for our industry, especially in light of the fact that countless owners and operators of horse boarding businesses were unaware of the change in law at the time. As a result, many did not comply with the new requirements and failed to collect the necessary tax for payment to the state.  For those who attempted to comply, the materials provided by the Department of Agriculture and Division of Taxation provided basic information but left many questions unanswered.

In recent years, the Division of Taxation has actively enforced its right to collect this tax, including back taxes owed for prior years along with interest, penalties and fines.

Due to the state’s enforcement activity and the significant amount of some facilities’ accrued liability, many businesses have had no choice but to stop boarding horses and shut their doors. Some lost business when customers’ out-of-pocket costs increased, leading them to board at other facilities that chose not to comply with the law. And others, who already were struggling to make ends meet, are now facing serious financial hardship. While the Division offers a Voluntary Disclosure program that may minimize the penalties and fines associated with back taxes, only those who are prepared to issue a payment for the back taxes owed can take advantage of the program. Consequently, many business owners have attempted to “fly under the radar,” hoping they are not caught, since they simply cannot afford to make the necessary payments required to participate in the Voluntary Disclosure program.

Thankfully, action is being taken in an attempt to address the issue. Assemblyman Ronald S. Dancer (R) from Legislative District 12 has introduced a bill to the New Jersey Legislature that, if passed, will clarify the sales tax collection responsibilities of horse boarding businesses. The bill seeks to amend the current law to indicate that the rental of a stall for an equine animal would NOT be deemed to be a “space for storage” that is subject to sales tax.

UPDATE!  The bill, which was previously known as A4479 has been reintroduced to the legislature, since a new legislative session started on January 14, 2014.  The bill is now known as A1301. It has been assigned to the Assembly’s Tourism and Gaming Committee for review.

If this bill is passed, it will be a major victory for the equine industry in New Jersey and the positive effects will be immeasurable.  However, this important bill may face opposition in light of the fact that it seeks to keep more money in the pockets of New Jersey’s citizens and business owners, rather than the state’s coffers. It will be crucial for those in the industry to actively support this bill – by working together, we can effectuate positive change!

The bill has a long way to go before it can be passed and the legislative process takes time. We are now coordinating a statewide effort with others who are affiliated with the equine industry to garner support for the bill. We will work together in order to educate our legislators about the adverse effects the imposition of this tax has had on the industry and the need for relief so that we can protect and preserve the equine industry in the State of New Jersey.

If you wish to be involved in our future efforts, please send an email to equinelegislation@danabowlinglaw.com and provide your contact information, including your name, address, phone number(s) and email address.

In the meantime, while we are waiting for the new session of the Legislature to begin, this firm is seeking personal stories from farm/business owners related to the adverse effects of this tax. Hearing these stories may help the legislators to understand the situations that farm and business owners are facing.  If you wish to share your story, please use our form, so that we can effectively organize and utilize submissions appropriately. Your identity will not be shared publicly without your express written permission; however, the substance of your story may be shared in connection with our efforts to support this or other legislation intended to stop the imposition of sales tax on horse boarding in New Jersey.

Thank you for your support!