New Jersey Announces Tax Compliance Initiative for Media Companies

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On August 10, 2011, New Jersey announced a new corporate tax compliance initiative for media companies. Companies that come forward voluntarily can pay reduced tax and avoid significant penalties. But companies have only until November 15 to take advantage of this program.

New Jersey is one of the most aggressive states in terms of asserting tax jurisdiction over out-of-state businesses. The state taxing authority, the New Jersey Division of Taxation (or "Division"), has previously targeted intangible licensing companies, franchisors, software companies, and the financial services industry. Now it has turned its attention to media companies, including media content companies. Under the Division's audit policy, a media company that receives advertising, subscription, or syndication revenues from New Jersey-based clients or customers is subject to New Jersey corporate income tax. Under this so-called "economic nexus" standard, a media company is subject to New Jersey tax regardless of physical presence. That is, the Division requires a media company to file returns and pay tax to New Jersey even if it has no employees and conducts no activities in the state.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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