If you plan on conducting business transactions in the State of New Jersey, it is imperative to find out if the sale is subject to the Bulk Sales Law. The current bulk sales law, N.J.S.A. 54:50-38, applies to any sale, transfer or assignment in bulk of any part or all of a person’s “business assets,” other than in the ordinary course of business (e.g. the bulk sales law would not apply to a homebuilder selling homes as they would be considered inventory). If the sale is subject to the bulk sales law, the Purchaser is required to notify the New Jersey Division of Taxation.
To satisfy the notice requirement of the Bulk Sales Act, the Purchaser must submit a completed Form C-9600 and a copy of the executed contract of sale, at least ten (10) business days prior to the proposed closing of the transaction. The C-9600 and contract must be sent by registered, certified or overnight mail by Fed-Ex or UPS. If the purchaser fails to abide by the bulk sales notice requirement the purchaser will be subject to liability for any state tax obligations due by the seller at the time of closing including interest and penalties. Therefore, closings should not commence without a response from the Division of Taxation.
The New Jersey Division of Taxation will notify the purchaser and seller if they will require an escrow to be held at the closing. If an escrow is required, the New Jersey Division of Taxation will notify the buyer to withhold the amount from the purchase price proceeds for possible unpaid tax liabilities of the Seller. Once the amount required is placed into escrow, at or prior to closing, the purchaser may proceed with the closing without liability for deficiencies in the seller’s tax payments beyond the escrow.