Sales and Use Tax On Modular Housing Sold In The State Of New Jersey...And Other States Too
If you are a modular manufacturer selling modular homes, sited in the State of New Jersey, you may be remitting sales/use tax improperly and if so that could be a very costly mistake.
Generally, in most states, modular manufacturers are remitting sales/use tax on either “the manufacturers actual cost of materials” used in the manufacture of the modular home in the factory, or sixty percent (60%) of the manufacturer’s invoice price to the builder.
If you have been remitting tax that way in New Jersey, the law is not clear as to whether a manufacturer can remit tax on materials only or whether the manufacturer is required to remit tax on the full involve price of the modular home to the builder. And as mentioned, if you are doing it wrong, you will be liable to pay for the balance of the unpaid tax, plus interest and penalties, if your company is audited by the New Jersey Tax Division…and sooner or later you probably will be. And in that event, you will not be able to go back to the builder to collect the additional tax.
Nowhere in the New Jersey Statures, regulations or any department directive is there any mention of tax on modular housing. In fact, the only mention of modular housing anywhere in the state law is a section codifying how “manufactured housing” is taxed, and the code specifically states that the regulations do not apply to modular homes.
Section 18:24-7.19 – of the code, Taxation of manufactured and mobile homes provides
(a) This section is intended to clarify the taxation of manufactured or mobile homes under 54:4-1.2 et seq. This section does not apply to the sale of modular buildings because they are not on a permanent chassis.
The code goes on to provide that the tax on “manufactured homes” is computed on 100% of the manufacturers invoice price to the dealer.
After requesting a Letter Ruling from the New Jersey Division of Taxation, we are informed that the State expects modular manufacturer to remit sales tax on 100% of the selling price to a modular builder in the State of New Jersey.
The State of Georgia has a similar view on Modular Housing Sales and Use Tax. There are differing nuances in the modular housing sales and use tax in other state laws as well and how or whether freight costs are taxable. As mentioned above, if your company is not sure how sales and use tax is handled in every state you ship into, you could be faced with significant (six figure) tax liability come audit time.
For more information on modular housing sales and use tax in the states where you do business, or any other legal issue in the modular housing industry, please do not hesitate to contact me. I can provide a detailed analysis for each state where your company does business.
Steven R. Snyder, Attorney at Law
(717) 975-7799
stevenrsnyderesq@gmail.com
www.steveonyourside.com