State & Local Tax Blog

You May Never Want to Do Business in NJ After Reading This

This article by Jason Method of the Gannett News Service may convince you never to do business in NJ.   He tells the story of South Carolina businessman J. Barry Godwin whose company builds and delivers Stingray power boats.
Read what happened to one of his truck drivers who was merely passing through the state.
“A New Jersey tax collector threatened to impound Godwin’s company truck, which was stopped at the state border as it was moving $120,000 worth of Stingray power boats to another state, unless the company wired $46,200 in business taxes to New Jersey immediately. The state claimed that Stingray owed the back taxes because, although it had no stores in the state, it sold boats here.

Godwin said he had no choice but to wire the money to the state Treasury that afternoon.
“I was treated like a criminal,” Godwin said. “When you cross the New Jersey state line, it’s another world.”
New Jersey officials say their tax enforcement is fair.
“We do this in order to obtain compliance from out-of-state companies conducting business in New Jersey so that they pay the appropriate taxes and do not receive an unfair competitive advantage over New Jersey businesses by avoiding these taxes,” Treasury spokesman Tom Vincz said in an e-mail.
Vincz could not say how much money is collected under this legal principle, called “economic nexus.” The state collected $2.7 billion in all corporate taxes last year.
But some out-of-state business owners say New Jersey has become so aggressive that the tax bills have crossed over to the absurd.
Godwin, of Stingray Boats in Hartsville, S.C., said in an interview that he thinks New Jersey has gone too far. Godwin said the company was unaware that it had any issue with New Jersey before the revenue agent stopped its truck at a weigh station in Carney’s Point near the Delaware border. Godwin also was surprised because the truck loaded with six powerboats worth $20,000 each was only headed through New Jersey, to make a delivery in Massachusetts.
The revenue agent, Godwin said, asked the truck driver whether the company delivered boats to any dealers in New Jersey. The driver radioed the company headquarters and found out that Garden State Yacht Sales in Point Pleasant Beach sold the company’s boats. The agent ordered the driver out of the truck and called Godwin. She wanted to know the company’s revenue from its New Jersey sales for the past seven years.
The agent and company officials calculated the tax bill over the telephone.
“She told me, ‘Your load of boats is not leaving here until you pay fines and back taxes,'” Godwin said. “‘If we don’t get the money by 1 p.m., I’m going to impound your truck and boats, and you’ll have to find a place for your driver to go.'” Godwin said he pleaded for more time. “I asked, ‘Can you let my truck go and we work this out?’ She said, ‘No, you have to pay the money,'” Godwin said.
The company had no choice but to wire the money to the state. The company since has decided it would be too expensive to pursue an appeal, he said. ”
Stingray was not the only company to be stung by revenue agents. We’ll tell you about those in another post. But this one is enough to see how aggressive some states are becoming in asserting nexus on out-of-state companies.

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