There is an old tax lurking behind the scenes. The Bulk Sales Act applies to the sale of commercial property and business. It is a state tax that the seller may be obligated to pay upon the sale of their business and assets. The purpose is for the Division of Taxation to collect on outstanding tax liabilities owed by the seller. In 2007, the New Jersey Legislature expanded the bulk sale requirements codified in N.J.S.A. 54:50-38. The statute provides that:
“whenever a person shall make a sale, transfer, or assignment in bulk of any part or the whole of the person’s business assets, otherwise than in the ordinary course of business, the purchaser…shall at least 10 days before taking possession of the subject sale…notify the Director [of the Division of Taxation]….who shall within 10 days after receiving the notice notify the purchaser…that a possible claim for State taxes exists…..
If the purchaser fails to give notice to the State, the amount of unpaid taxes becomes a lien on the proceeds of sale payable to the seller and the PURCHASER is personally liable for the payment of the taxes due to the State.
Why does it apply to real estate? The legislature and a Technical Bulletin, TB-60 have defined business assets to include the sale of realty. If the real estate is not the primary residence of the seller then the transfer should be reported by the buyer or their representative. This would include transactions for the purchase and sale of a multi family home or a single family rental properties etc…. The sale of real estate by a single entity such as an LLC or partnership where the sole business is the leasing, operation and management of that property should at a minimum trigger filing the notice.
There are some exceptions. To play it safe, as a buyer, it is better to file the notice of sale then to be subject to the tax liability after the closing.
