The Limousine Associations of New Jersey passes a major hurdle today in its longstanding effort to repeal the tax dreaded by operators.
TRENTON, N.J. — New Jersey’s tax on limo operators appears headed to a repeal in the New Year as both chambers of its Legislature look poised to repeal the four-year measure.
The New Jersey Senate Budget and Appropriations Committee voted unanimously Wednesday to repeal the “Sales Tax on Service” that was imposed on the chauffeured transportation industry as of Oct. 1, 2006.
The repeal, contained in Senate Bill 680, now advances to the entire Senate chamber on Monday, Dec. 20 for an up or down vote. The Assembly is scheduled to take up the measure in January 2011. If passed and signed by Gov. Chris Christie, the bill would take effect immediately.
Helping the legislation is the fact that the two sponsors of the bill hold key positions in the Senate chamber. Sen. Paul Sarlo, D-36th District, is chairman of the Senate Budget and Appropriations Committee while Sen. Anthony Bucco, R-25th District, is the budget chair for the Republicans.
Wednesday’s committee decision followed testimony from LIMOUSINE ASSOCIATIONS OF NEW JERSEY executive director Barry Lefkowitz and LANJ legislative chairman Jeff Shanker, an operator at A-1 Limousine in Princeton, N.J.
Lefkowitz and Shanker told the committee how the 7% sales tax hurt operators statewide, compounding the effects of a difficult recession during the last few years. Since the beginning of the recession, the number of limousine companies in New Jersey has fallen from about 1,200 to 834.
Estimates show New Jersey operators collectively forked over about $3 million to $4.5 million per year in sales taxes, totaling at least $12 million to $18 million over the four-plus years the tax has been in effect, said Lefkowitz, citing state revenue and tax figures. At the time the sales tax was being debated, advocates claimed it would raise $27 million.
“To create such economic harm to an industry over that amount is just ridiculous,” said Lefkowitz, in an interview with LCT early Wednesday evening.
The sales tax dampened sales at coachbuilders, such as Empire Coachworks International in East Brunswick, N.J., and at dealerships as operators postponed vehicle purchases, Lefkowitz said. What’s more, some operators from the surrounding states of Pennsylvania, Delaware, and New York were able to court the corporate clients of New Jersey limousine companies by claiming they could charge “7% less” since they were based outside of the state and not subject to the tax, Lefkowitz said.
In working for the repeal, Lefkowitz already has met with the Speaker of the Assembly and Assemblywoman Nellie Pou, D-35th, also the chair of the Assembly Appropriations Committee. Furthermore, Lefkowitz met with the chief of staff of Gov. Christie on Dec. 7 to make sure the legislation to repeal the sales tax follows the Governor’s criteria for signing a bill.
“I am confident we will have complete bipartisan support,” Lefkowitz said.
FACT SHEET ON NEW JERSEY SALES TAX AND LIMOUSINE INDUSTRY
Lefkowitz prepared and presented the following fact sheet as part of his talking points Wednesday for state Senators considering S680:
• 80% of vehicles in NJ are sedans.
• 85% of NJ companies have 1-3 vehicles.
• 44% of NJ operators gross less than $250,000/year.
• There were 1,200 small businesses (and now there are 834) that make up the limousine industry in NJ (employment dropping from 29,000 to less than 22,000 people). Over 30% of the industry was lost due to the recession and inability to compete with others.
• Limousine by definition in NJ is 1-15 passengers, including [chauffeur].
• 65-75% of limousine business is tied to airports.
• NJ limousine operators pay highest insurance rates in country (up to $10,000/vehicle) for $1.5 million minimum liability coverage.
• Rising gas prices cannot in many cases be passed on to clients because of long term contracts.
• Pennsylvania, New York and Delaware do not have a sales tax on service.
• Taxis are exempt from tax and compete for airport and New York City business against limousines.
• Funeral cars are transporting passengers for a fee to airports, proms and weddings and they are exempt from tax and $1.5 million liability coverage.
• Out of state vehicles are not charging 7% sales tax and are taking customers from NJ operators and going after corporate clients.
• State does not have sufficient enforcement to collect tax on out of state operators.
• State cannot impose sales tax on the interstate part of trips or point to point trips in another state (this represents approximately 55% of limo trips).
• Tax forced small businesses to incur significant costs for administrating tax.
• State incurs unnecessary costs in trying to administer program for limousine industry.
• Treasury Department estimates on revenues produced by limousine industry are incorrect (by over two-thirds).
• An additional 20-25% of revenue for New Jersey operators is from out of state and international affiliates which is not taxable.
LCT BACKGROUND ARTICLE ON NJ SALES TAX
— Martin Romjue, LCT Magazine