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Filing Claim for Refund of 1% Sales Tax

Recently passed legislation increases the Ó£»¨ÊÓƵ sales and use tax rate from 6% to 7%. (P.L. 2006, c. 44) The change affects all retail sales of taxable merchandise or services that take place on and after July 15, 2006.

Sales and Use Tax Rate Change
Sellers must collect and remit 7% sales and use tax on all taxable sales of property and services that occur on and after July 15, 2006. Sales are considered completed upon delivery to the customer. There are two situations for which 7% sales tax must be collected, but the customer may apply for a 1% refund. The following are the specific statutory requirements for both.

Contracts Entered Into Before July 15, 2006 - If you entered into a written agreement or contract for a product or service and made at least a partial payment or paid a deposit prior to July 15, 2006, the vendor must charge 7% sales and use tax if the product is delivered or the service is rendered on or after July 15, 2006. However, within 90 days of final payment, you may apply to the Division of Taxation for a refund of the 1%. For example, if you signed a retail order form for an automobile prior to July 15, but did not take delivery of the vehicle until on or after that date, the tax is due at 7%, but you may apply for a 1% refund.

An invoice, bill of sale or purchase order is not a written agreement or contract for purposes of this provision. Thus, if you merely ordered a product prior to July 15 and took delivery after that date, the sale is subject to 7% tax and there is no refund available.

This refund provision does not apply to meals/catering services. Thus, if you contracted for catering services which will take place on or after July 15, 2006, the tax is due at 7%, regardless of whether payment was made in whole or part prior to that date, and there is no refund available.

Building Materials - If taxable building materials are delivered on or after July 15, 2006, the sale is subject to tax at 7%. However, where the materials are for use in formal written bids which cannot be altered or withdrawn, OR unalterable building contracts, entered into before July 15, 2006, the contractor who has paid 7% tax on the materials may apply to the Division of Taxation for a refund of 1%.

To apply for a refund of the 1% sales tax increase, you must:

1. Complete Refund Claim Form A-3730 and mail it within 90 days of the payment made for the product or the building materials.
2. Include a copy (not original) of a written agreement or contract, signed by you, indicating that you made a partial payment or deposit prior to July 15, 2006 (for contractors, instead of a contract for partial payment or deposit, you must provide proof that the contract is either of a fixed price, not subject to change or modification, or entered into pursuant to the obligation of a formal written bid which could not be altered or withdrawn);
3. Include proof of the payment/deposit made prior to July 15, 2006, such as a copy (not original) of a cancelled check, credit card payment receipt, credit card bill statement, electronic funds transfer (bank statement)* or a cash payment receipt showing payment/deposit made prior to July 15, 2006 (for contractors, instead of proof of payment before July 15, 2006, you must provide proof of a contract as described in 2 above); and
4. Include proof of delivery and final payment on or after July 15, 2006, including proof of payment of 7% Ó£»¨ÊÓƵ sales and use tax, with a copy (not original) of a cancelled check, credit card payment receipt, credit card bill statement, electronic funds transfer (bank statement)* or a cash payment receipt.

*You must highlight the pertinent payment if it is included in a statement containing other transactions.

Note: For Urban Enterprise Zone or Salem County reduced sales tax, a qualifying refund will be ½ of 1%.

For more information on the sales and use tax rate increase:

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