State regulatory enforcements come and go, but one fixture is New Jersey’s effort to wring corporate taxes from out-of-state carriers. Observers agree that carrier awareness of the tax is up from the late 1990s, when the state started flexing its muscle. Yet many drivers remain unprepared for close encounters of the financial kind with state tax agents.
“We’re looking at corporations and LLCs (limited liability companies),” says Tom McDonald, chief of field investigations for the New Jersey Division of Taxation. Stopping a leased operator enables the state to “reach out to the larger carrier,” McDonald says. “We will not seize the truck of a sole owner for liability of a corporation he drives for.”
But independents are at risk of getting a long, unplanned rest period until someone wires money to the state.
The reckoning often starts with a simple question: How long have you been driving into New Jersey? “They might say 10 years,” says Gail Toth, executive director of the New Jersey Motor Truck Association. “All of a sudden you’ve got a guy on the side of the road calculating 10 years’ back taxes.”
If the driver represents any corporation that has done business in the state, it’s common for a $1,000 back tax assessment to be made, McDonald says. That can be appealed, but either way, the carrier’s on the tax rolls.
A common checkpoint has been “truckers coming in to make deliveries at big warehouse facilities where they line up,” Toth says. The association also has reports of trucks checked at weigh stations. McDonald declines to discuss enforcement sites.
He disputes Toth’s assertion that the department uses a rotation of six to eight weekly crackdowns on certain types of businesses. “We do not ever target any industry,” McDonald says.
Bob Pitcher, vice president of state laws for the American Trucking Associations, says New Jersey is the only state “holding trucks for ransom.” McDonald contends, however, that New York and Pennsylvania, possibly Kentucky, Tennessee and others, “absolutely” are making out-of-state carriers cough up taxes. “We are hardly unique.”
Indeed, most states have similar laws taxing out-of-state businesses. But the specifics and interpretation differ widely, even from one governor’s administration to a successor’s, Pitcher says. Only certain laws specifically mention trucking, and “those states, to my knowledge, have never stopped a truck to pay,” he says.
HOW TO PERFORM THE N.J. SIDESTEP
Here are some suggestions to avoid the hassle and expense of New Jersey’s corporate taxes:
DON’T DO BUSINESS THERE. If you’re independent, refuse loads that originate or terminate in New Jersey.
KNOW YOUR CARRIER’S STATUS. Even if you would get off the hook, why risk potential headaches and unpaid downtime? If you’re leased, make sure your carrier is registered to do business in New Jersey and is paying taxes.
DON’T INCORPORATE. This is “the only way for a small operator to avoid being subject to tax,” says Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association.
KEEP STOPS TO A MINIMUM. Tax agents deal only with truckers who are parked.