Sales/Use Tax Questions

The New Jersey Institute for Continuing Legal Education recently learned that during the course of a routine, random audit of a law firm in Essex County, the New Jersey Division of Taxation assessed use tax on books, audio CD’s and other non-seminar related educational materials which the firm had purchased from us. Recognizing that this could have implications on lawyers throughout the state, the Institute consulted with Susan A. Feeney, Esq., with the firm of McCarter and English, who is widely recognized as one of the state’s leading authorities on sales/use tax. Ms. Feeney graciously volunteered to further investigate the matter on a pro-bono basis, for the Institute.

Based upon Ms. Feeney’s discussions with the Division of Taxation, the Institute’s Board of Trustees agreed to begin charging sales tax on its non-seminar related educational materials effective July 1, 2008. This will eliminate any future confusion over whether use tax is owed. A voluntary self-audit process was also agreed upon and approved by the ICLE Board. The self-audit process allows ICLE customers who purchased items subject to the use tax, to review their records and voluntarily remit any amount owed. The agreement also limits the applicable purchases to those made within the past five years and waives any penalties for late remittance of the use tax. Absent such an agreement, if a firm was audited, and had not been filing sales and use tax returns, there would be no limitation on the applicable time period or assessed penalties.

Since the Institute has no way of determining which customers have already paid their use tax, a letter was mailed to all customers who purchased items subject to the tax within the past 5 years. As part of the voluntary self-audit process, customers receiving this letter should review their records and determine what, if any, use tax is owed. Customers who owe use tax should remit payment as per the instructions contained in the letter. ICLE will forward the payments received to the Division of Taxation.

We recognize and regret that this voluntary self-audit process has angered some of our customers. However, please note ICLE was advised that pursuant to the New Jersey Sales and Use Tax Act, it is the obligation of the customer to pay use tax when sales tax has not been collected on items subject to this tax. Consequently, many of our customers may have already paid their use tax and will owe nothing. Those who have not already paid use tax will, essentially, now owe the same amount in use tax that they would have paid if sales tax had been collected at the time of purchase. As noted, the voluntary self-audit process also limits the applicable time period for purchases subject to the tax and waives penalties for those who have not previously paid this use tax. The Institute's Board of Trustees has also agreed that NJICLE will pay the applicable interest charges on any use tax payments submitted to us by customers on or before the July 31, 2008 deadline. Based on these factors, our counsel and Board believe the voluntary self-audit process is the most expeditious and least onerous method to resolve the matter for all concerned.

If you have any questions regarding the voluntary self-audit process or would like to verify what you purchased from ICLE, please contact Lisa Spiegel, Esq., Special Projects Director at (732) 249-5100 or via e-mail at lspiegel@njicle.com. You may also contact the New Jersey Division of Taxation, Taxpayer Representative Section, at (609) 292-5995. Their website is http://www.state.nj.us/treasury/taxation.

Thank you for your cooperation, patience and understanding regarding this unforeseen development. We regret any inconvenience you may be caused and look forward to serving your CLE needs now and in the future.