N.J.A.C. 18:7-1.8 - Foreign Corporations Subject to Tax

(a) Qualifications for subject corporations. The tax is imposed on every foreign corporation subject to tax as described at N.J.A.C. 18:7-1.6 and includes every corporation that derives receipts from sources within New Jersey or engages in contacts within New Jersey or does business, employs, or owns capital or property, or maintains an office in New Jersey in a corporate or organized capacity, regardless of whether it has formally qualified or is authorized to do business in New Jersey, provided that the taxpayer's business activity in New Jersey is sufficient to give this State jurisdiction to impose the tax pursuant to the Constitution and statutes of the United States.

Example 1

A foreign manufacturing corporation has its factory outside New Jersey. Its only activity in New Jersey is the maintenance of an office within the State. The orders are forwarded to its home office outside the State for acceptance and the merchandise is shipped from the factory direct to the purchasers. The corporation is subject to the corporation business tax because it maintains an office within the State.

Example 2

A foreign corporation, which operates several retail stores outside New Jersey, leases an office in New Jersey for the convenience of its buyers when they come to New Jersey. It has several employees permanently assigned to such office. Salesmen call at the office to solicit orders from the buyers, and the merchandise is shipped to such office by the sellers. Upon receipt, the merchandise is examined and sent to the various stores of the corporation outside New Jersey. The corporation is subject to the corporation business tax because it maintains an office, is regularly doing business through its constituted representatives, and owns property in New Jersey.

Note: The foregoing examples illustrate conditions giving rise to subjectivity to the corporation business tax without regard to whether or not the corporation holds a general or special certificate of authority to do business in New Jersey.

Example 3

A foreign corporation has applied for and has received a certificate of authority to do business in New Jersey by the Division of Revenue and Enterprise Services, but does not actually do any business in New Jersey, nor does it have any office or property or any employees in New Jersey, nor does it own or employ capital here. The corporation has sought and received the privilege of exercising its corporate franchise in New Jersey and is, therefore, subject to the corporation business tax and must file a return and pay the minimum tax.

(b) A financial business corporation, a banking corporation, a credit card company, or a similar business that has its commercial domicile in another state is subject to corporation business tax in this State if during any year it obtains or solicits business or receives gross receipts from sources within this State. Sales and activities involving financial products, financial instruments, and financial services are not P.L. 86-272 protected, because financial products, financial instruments, and financial services are not tangible personal property. Therefore, a financial business corporation, a banking corporation, a credit card company, or a similar business that has nexus with New Jersey is subject to corporation business tax in this State based on income, or the minimum tax, whichever is higher.

1. The offering, soliciting, selling, or buying of and/or offering services (for a fee) pertaining to a digital asset (as defined at I.R.C. § 6045(g)(3)(D)) such as virtual currency or non-fungible tokens (NFTs) to in-State customers is the offering and selling of financial products, financial instruments, and financial services or other intangibles or services, except as provided for at N.J.A.C. 18:7-1.9A(b)6.

2. The following are examples of financial products, financial instruments, and/or financial services conducted through the internet:

Example 1

Robo Corp., a robo-adviser, solicits and sells stock through an online website and mobile application for a transaction fee. Robo Corp. actively solicits its services to in-State customers through a variety of means including, but not limited to, the internet. This is the selling and offering of financial products and services through the internet to New Jersey customers. Robo Corp. must file a corporation business tax return and pay the corporation business tax based on income or the minimum tax, whichever is higher.

Example 2

Invest Corp. offers investment advisory services for a fee to customers through the internet. Invest Corp. investment service advisors conduct virtual meetings with New Jersey customers through its internet application. This is the selling and offering of financial products and services through the internet to New Jersey customers. Invest Corp. must file a corporation business tax return and pay the corporation business tax based on income or the minimum tax, whichever is higher.

Example 3

Company A buys, solicits, sells, processes, and accepts virtual currencies and other digital assets to/from New Jersey customers through its website or downloadable mobile application for subscription fees. Company A requires that its business customers prominently display Company A's product offerings and services on the business customer's website, in stores, and in the business customer's own advertising. Company A solicits its product offerings and services to New Jersey through a variety of means, including, but not limited to, the internet. Company A must file a corporation business tax return and pay the corporation business tax based on income or the minimum tax, whichever is higher.

Example 4

Company T offers banking and/or financial products and services to customers located in New Jersey through the internet. Company T solicits its products and services to New Jersey customers through a variety of means. While Company T is not technically a banking corporation or financial business corporation, it is nonetheless offering and selling financial products and services to New Jersey customers. Company T must file a corporation business tax return and pay the corporation business tax based on income or the minimum tax, whichever is higher.

Example 5

Card Co. solicits credit cards, and other financial products and services to New Jersey customers, which Card Co. charges fees and/or interest to its New Jersey customers for its products and services. This is the offering and selling of financial products and services to New Jersey customers. Card Co. must file a corporation business tax return and pay the corporation business tax based on income or the minimum tax, whichever is higher.

Example 6

Max Card Ltd. is a limited liability company treated as a disregarded entity for Federal and State tax purposes that is owned and operated by Merchant Co., an online retailer. Max Card Ltd. solicits Merchant Co. brand credit cards and financial products and services to New Jersey customers on behalf of Merchant Co. and processes all of the customer transactions of Merchant Co. for a series of fees charged to the customers. This is the offering and selling of financial products and services to New Jersey customers. Since Max Card Ltd. is a disregarded entity, and therefore a branch of Merchant Co., Merchant Co. must file a corporation business tax return and pay the corporation business tax based on income or the minimum tax, whichever is higher. Max Card Ltd, as a disregarded entity, does not file a corporation business tax return or pay the corporation business tax.

(c) Mandatory submission of affidavit; proof of authorization to do business. A foreign corporation, which is subject to tax under the Corporation Business Tax Act, must submit an affidavit by a duly authorized corporate officer, stating whether or not the corporation at any time prior to the date of admitted subjectivity under the Corporation Business Tax Act held any authorization to do business in New Jersey or carried on in this State any of the activities set forth in N.J.A.C. 18:7-1.6(a).

(d) For a non-U.S. corporation, that is a separate return filer, which has nexus with New Jersey, and all of its income (or loss) is protected by a tax treaty, the corporation is still required to file a complete CBT return and pay the statutory minimum tax.

(e) A non-U.S. corporation with tax treaty protection, that is a member of a water's-edge combined group or an affiliated group, will be a taxable member of the combined group if it has nexus with New Jersey, although the items of treaty protected income (or loss) are excluded from the income of the combined group.

(f) Non-U.S. corporations that are members of a world-wide group combined return must include their treaty protected income, and the group must pay tax on this income pursuant to N.J.S.A. 54:10A-4(kk), and the group members will be taxable members of the combined group, if they have nexus with New Jersey.