When a corporation has ceased doing business and the corporate charter is no longer desired, it is essential that the corporation be dissolved with the New Jersey State Treasurer through the Division of Revenue to avoid future Corporation Business tax, penalty, and interest. Every corporation subject to the New Jersey Corporation Business Tax Act, Chapter 162 Laws of 1945, as amended and supplemented (NJSA 54:10-A-1 et seq.) must submit New Jersey Corporation Business Tax Returns whether a corporation discontinued business or distributed assets in liquidation and it remains subject to at least the minimum tax ($500) on an annual basis from its incorporation or authorization date until it legally dissolves through the New Jersey State Treasurer by the Division of Revenue. Failure to dissolve the corporation when the corporation has ceased doing business will result in the legal requirement to continue to file Corporation Business Tax returns with the necessary remittance of the minimum CBT tax.
The dissolution shall be considered filed and effective as of the date the Division of Revenue receives the properly completed and executed articles of dissolution, payment of all fees, and notice of Tax Clearance from the Division of Taxation. All business tax eligibilities for the corporation will be ended as of the date the request for dissolution is received and accepted by the Division of Revenue. However, prior tax liabilities will still apply and be subject to the Division of Taxation's review. Please note that if the corporation does not resolve prior tax liabilities due the Division of Taxation and a Tax Clearance Certificate is not issued the business tax eligibilities will be reversed as if there was no lapse in subjectivity.
If dissolution procedures are not completed, and full payment of the outstanding liability is not received, the case will be forwarded to the Special Procedures Branch, Judgment Section, for further collection action. Notice and Demand for Payment letters will be sent to the Corporation and, in the event there is outstanding trust liability, to the corporate officers. Responsible corporate officers will be held personally responsible for trust fund taxes. If the tax liability is not resolved, a Certificate of Debt will be filed in the New Jersey Superior Court against the corporation and any responsible officers. A 10.7% Cost of Collection fee is added to the docketed judgment amount and becomes part of the outstanding debt. A Notification of Judgment letter is sent to the corporation and responsible officers who are covered by the docketed judgment.
Also, in accordance with N.J.S.A. 14A:6-12, N.J.S.A. 54:50-18 and other applicable provisions of the Law any officer or director of any corporation who distributes or causes to be distributed any assets in dissolution or liquidation to the stockholders without having first paid all corporation franchise taxes, fees, penalties and interest imposed upon said corporation, shall be personally liable for said unpaid taxes, fees, penalties and interest.
Effective July 1, 2016, the Referral Cost Recovery Fee rate is 10.7%
Please note that the Division is imposing a Referral Cost Recovery Fee as authorized by N.J.S.A. 54:49-12.3 and N.J.A.C. 18:2-2.5(d). In cases where any state tax remains unpaid and the Division of Taxation refers a taxpayer's account to an outside debt collection agency, a Referral Cost Recovery in the amount of 10.7% of the amount referred will be assessed. This fee will be in addition to the interest or penalties imposed. Other penalties will be imposed on delinquent returns as follows:
- Late Payment Penalty (5%)
- Late Filing Penalty (5% per month up to 25%)
- Monthly Late Filing Penalty ($100 per month)
- Amnesty Penalty of 5% for certain years
Interest is computed at 3% above prime rate compounded annually.
Considering these significant penalties and the fact that the minimum Corporation Business Tax is at least $500.00 taxpayers are advised to complete the dissolution process.
Effective July 1, 2003 the Divisions of Revenue and Taxation have established a streamlined dissolution process. The required forms
and a description of the process can be obtained from the Division of Revenue's Web site.