How To File A Bulk Sale - Asset Transfer Tax Declaration In New Jersey For Real Estate Investors

Bulk Sales in New Jersey are a puzzle wrapped up in an enigma for Real Estate Investors . Today I demonstrate how I file a bulk sale or asset transfer tax declaration form for my investment properties when they get sold. If you forget or your attorney forgets to file on time, they could hold a huge escrow, but if you file on time you will have to leave very little or maybe nothing at all behind. Get paid what you deserve at closing is music to Real Estate Investors ears.

*FULL DISCLAIMER: WE ARE NOT GIVING YOU LEGAL ADVICE, IF YOU PLAN ON FILING A BULK SALE PLEASE REFER TO YOU ATTORNEY OR CPA.

What is a Bulk Sale and why must it be reported to the New Jersey Division of Taxation?

The purpose of the Bulk Sale Statute is to protect a purchaser from inheriting any tax debt from a seller of business assets. A bulk sale is the sale (or transfer or assignment) of an individual's or company's business asset/s, in whole or in part, outside of the ordinary course of business. (See examples below.) When a bulk sale of business assets occurs, the New Jersey Division of Taxation needs to be notified so it can collect any taxes owed. Business assets are any assets that generate income or loss and may include:

Tangible property such as inventory or materials,
Real property (land, buildings etc.), and
Intangible assets, such as goodwill.
Sales of assets made in the ordinary course of business, such as retail sales to customers, are not considered bulk sales.

Examples of bulk sales transactions:

A mechanic owns an auto repair business and decides to retire. He sells his auto repair business (including tools, equipment and inventory) to another mechanic.
A baker gives all his business assets (the bakery and its equipment) to another person as a gift.
Examples of transactions that are not bulk sales:

A paint store makes a retail sale of brushes and floor stain to a contractor.
An established developer regularly buys and sells properties in New Jersey.
2. What taxes are the Division of Taxation trying to collect through the notification of a Bulk Sale?

The bulk sale may generate a capital gain that is subject to income tax. In addition, a business liquidating assets may need to make final payments of sales taxes, withholding taxes, etc. Any delinquent/deficient taxes owed by the seller also may be collected.

3. How do I report a bulk sale to the State of New Jersey?

The purchaser of business assets, other than in the ordinary course of business, must notify the State at least 10 business days in advance of the sale. This will allow an escrow to be established if the seller has potential tax obligations. To report a bulk sale, file form C9600 .

(The bulk sale rules also may be applied when property is transferred in ways other than a sale. See P.L. 1995 chapter 161 (C54:32B-22C) and P.L. 2007, c. 100, sec. 5, codified as N.J.S.A. 54:50-38.)

4. What is a business?

A business is any endeavor from which revenue or consideration is realized for the purpose of generating profit or loss.

5. What is a business asset?
A business asset is any asset that generates income or loss. Business assets can include goodwill, materials, supplies, licenses, patents, copyrights, equipment, leases, merchandise, inventory, realty, or vacant land. A business asset can be tangible or intangible.

6. Who notifies the Division of Taxation of a bulk sale?

The purchaser or the purchaser's attorney must submit all notifications of bulk sales. A filing by the seller or a third party does not protect the purchaser from being held responsible for potential tax obligations of the seller.

7. How does the purchaser properly notify the Division of a bulk sale?

The Division of Taxation considers a notification to be proper if the purchaser provides a completed form C9600 . A completed form includes, among other information:

Valid New Jersey tax ID numbers for both the seller and purchaser;
A specific closing date, which must be at least 10 business days after submission;
Proper mailing addresses for both parties and/or their attorneys;
Signatures of the purchaser or the purchaser's attorney;
A copy of the executed contract of sale, court order, or assignment agreement clearly showing the sales price and all the terms and conditions of the transfer.
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