The New Jersey Bulk Sales Law (Bulk Sale Statute) applies to transactions involving the sale, transfer or assignment in bulk of business assets of any part or whole of the person’s business assets, other than in the ordinary course of business. N.J.S.A. 54:50-38. The Bulk Sale Statute makes no exclusions for sales of real estate that is used for commercial purposes (although that definition is exceedingly broad). For example, when realty, even vacant land that is a business asset, is being conveyed other than in the ordinary course of business, in whole or in part, such transaction is subject to the bulk sale statute.
The law provides, in pertinent part, that the purchaser/transferee/assignee (hereinafter referred to as purchaser) must:
“at least 10 days before taking possession of the subject of the sale, transfer or assignment, or paying therefor, notify the director by registered mail, or other such method as the director may prescribe, of the proposed sale and of the price, terms and conditions thereof whether or not the seller, transferor or assignor (hereinafter referred to as seller) has represented to, or informed the purchaser, transferee or assignee that the seller, transferor or assignor owes any State tax and whether or not the purchaser, transferee, or assignee has knowledge that such taxes are owing, and whether any such taxes are in fact owing.”Id.
This notice should be provided on form C-9600. Along with the notice, the purchaser is also required to submit a signed copy of the contract of sale, transfer or assignment. If the notice is missing any information, the purchaser must provide the required information in accordance with the 10 day time period. If the purchaser takes possession of the subject of the sale, transfer or assignment in less than 10 day time period, the purchaser will be liable for any State tax liability of the seller. It is very important to note that filing of the notice by the seller does not protect the purchaser in any way and therefore, the purchaser will be held responsible for any State tax liability of the seller. In addition to this, the seller must prepare the Asset Transfer Tax Declaration (Form TTD) and give it to the purchaser. This form helps the director in estimating the gain on the transfer of asset(s) and the estimated tax on the gain.
Once the Division of Taxation receives the notice, [w]ithin 10 days of receiving such notice, the director shall notify the purchaser, transferee or assignee by such means as the director may prescribe that a possible claim for State taxes exists and include the amount of the State’s claim. Id. Then, the purchaser or purchaser’s escrow agent must hold the amount claimed in escrow. If the Division fails to notify the purchaser of escrow obligations in a timely manner, the bulk sale law provides that:
“the purchaser, transferee or assignee may transfer over to the seller, transferrer or assignor any sums of money, property or chooses in action, or other consideration to the extent of the amount of the State’s claim. The purchaser, transferee or assignee shall not be subject to the liabilities and remedies imposed under the provisions of the uniform commercial code, Title 12A of the Revised Statutes of New Jersey, and shall not be personally liable for the payment to the State of any such taxes theretofore or thereafter determined to be due to the State from the seller, transferrer or assignor.”Id.
Once the Division is assured that all tax obligations of the seller have been met, it will issue a letter of clearance to the purchaser or its agent allowing the purchaser to release the balance of the escrow funds to the seller. Thus, upon receipt of the letter of clearance, the purchaser is relieved of any further liability.
An excellent resource on the Bulk Sales Law is the NJ Division of Taxation’s website’s FAQ page at https://www.state.nj.us/treasury/taxation/emailfaqs.shtml
2011 Nissenbaum Law Group, LLC