New Jersey updates nexus rules for corporate business tax

high-rise buildings with a digital network

Gov. Phil Murphy recently signed into law New Jersey’s fiscal year budget bill A.B. 5669 alongside of A.B. 5323, enacting substantial amendments to the New Jersey Corporate Business Tax (CBT) laws, namely by modifying the Corporate Business Nexus Standards for the state. (Note there was a companion bill, S.B. 3737, that is identical; we will reference A.B. 5323 going forward as “the bill.”) The bill made substantial changes to New Jersey’s economic nexus rule for corporate income tax purposes by copying its economic nexus thresholds used for sales tax purposes.

In a recently issued technical bulletin, the New Jersey Division of Taxation provided details regarding its new bright-line nexus standards and updated its Public Law (P.L.) 86-272 guidelines. (In brief, P.L. 86-272 is a federal law that essentially protects out-of-state companies from income-based taxes by states where their only activity is soliciting orders of tangible personal property. The protections do not apply to services.) All of these new guidelines are effective for tax years ending on or after July 31, 2023.

Bright-line economic nexus standard

Under New Jersey’s new bright-line nexus rules, a business is deemed to have substantial nexus and be subject to the CBT when a corporation:

  • Derives receipts from sources within New Jersey in excess of $100,000 during the corporation’s fiscal or calendar year; or
  • Has 200 or more separate transactions delivered to customers in New Jersey during the corporation’s fiscal or calendar year. For any transaction that is a service transaction, “delivered to a customer” shall mean where the benefit is received under New Jersey’s market-based sales factor sourcing rule, the bulletin states.

These bright-line nexus thresholds apply regardless of whether a corporation files as a single filer or as a member of a New Jersey combined group. Note also, “for corporate partners that are unitary with a partnership that has New Jersey receipts or transactions with New Jersey customers, the corporate partner will have nexus with New Jersey if the corporate partner’s proportionate share of the partnership’s activities in New Jersey satisfy the bright-line economic thresholds,” the bulletin states.

P.L. 86-272 ‘protected activities’

This guidance also provides clarification regarding the application of P.L. 86-272 protections, which generally state that if a corporation’s only business activity within the state consists of the solicitation of orders by the corporation or its representatives of tangible personal property, then there is no obligation to file corporate income tax. The new guidance states that for New Jersey, “Even though a corporation’s activities may be protected by Public Law 86-272, if it is registered or otherwise has nexus in New Jersey, it is subject to the Corporation Business Tax minimum tax and must file a Corporation Business Tax return.” 

The guidance also provides a non-exhaustive list of activities that New Jersey deems to be exceeding the protections offered under P.L. 86-272. This guidance aligns with the Multistate Tax Commission’s (MTC) guidelines on protected activities, namely identifying several internet-based activities that are not protected under P.L. 86-272. Among the activities newly listed are:

  • Soliciting credit cards and other financial products and services to New Jersey customers
  • Offering, soliciting, selling, accepting, or buying of digital assets (i.e., virtual currency or non-fungible tokens (NFTs))
  • Offering, selling, providing maintenance, or performing such duties under a warranty or extended warranty service contract for the performance of services under the contract through any means, whether in person or through the internet
  • Contracting with a marketplace facilitator to facilitate the sale of the taxpayer’s products on the facilitator’s online marketplace where the marketplace facilitator maintains the corporation’s products at fulfillment centers in New Jersey
  • Placing software or ancillary data (e.g., apps or internet cookies) on computers and devices in New Jersey to gather market or product research that is packaged and sold to data brokers or other third parties
  • Contracting with in-state customers to stream (but not download) videos and music to electronic devices
  • Inviting and/or accepting applications for employment through an internet-based platform that are not specifically targeted to in-state residents or for in-state job positions other than for sales positions

See the bulletin for the full list.

What does CohnReznick think?

This new guidance provides better clarity for out-of-state corporations in determining whether their activities rise to the level of doing business for New Jersey CBT purposes. Additionally, following the Division’s adoption of many of the MTC’s guidelines regarding when internet-based activities do not qualify for P.L. 86-272 protection, out-of-state companies may now be deemed to be doing business in New Jersey as a result of their internet-based business activities. Accordingly, it is important for such businesses to review these changes and consider their implications. We recommend you consult with your tax advisor to confirm how these new changes might impact your business.


Harry Golematis, CPA, Director, State and Local Tax Services


Corey L. Rosenthal, Principal, Practice Leader, State and Local Tax Services



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