FREQUENTLY ASKED QUESTIONS
LAW AND PROCEDURES FOR THE FILING OF THE C-9600 FORM
1. What is the bulk sale law?
In 1995, the Bulk Sale law, for the protection of the purchaser and the state, was enacted by P.L. 1995 chapter 161 (C54:32B-22C) and amended in 2007 by P.L. 2007, c. 100, sec. 5 (codified as N.J.S.A. 54:50-38). The law states that the purchaser, assignee or transferee of any business assets, other than in the ordinary course of business, must notify the state at least 10 business days in advance so an escrow can be established if the seller, assignor or transferor has potential tax liabilities to the Division of Taxation.
2. What is a business
The term “business” is defined to mean “any endeavor from which revenue or consideration is realized for the purpose of generating profit or loss”.
3. What is a business asset?
Any asset tangible or intangible can include, but are not limited to goodwill, materials, supplies, licenses, patents, copyrights, equipment, leases, merchandise or other inventory and realty.
C-9600 NOTIFICATION AND EXCLUSIONS
4. Who notifies the Division of a Bulk Sale?
All notifications are required by statute to be submitted by the Purchaser or the Purchaser’s attorney if they are represented. Filing of the notice by the Seller or a third party does not protect the Purchaser in any way.
5. How does the Purchaser notify the Division properly?
For the notification to be considered proper and complete the following must be provided by the Purchaser.
A fully completed form C-9600, including:
- valid NJ tax ID numbers for both the Seller and Purchaser
- a specific closing date, must be at least 10 business days after submission
- proper mailing addresses for both parties and/or their attorneys
- signed and submitted by the Purchaser or their attorney
- a copy of the executed contract of sale, court order or assignment agreement clearly showing the sales price and all the terms and conditions of the transfer
The C-9600 and a contract must be received by the Division of Taxation ten (10) business days (i.e. excluding weekends and holidays) prior to the closing date.
These documents should be submitted registered or certified mail to the Division of Taxation, Attn: Bulk Sale Section, PO Box 245, Trenton, NJ 08695-0245 or by overnight mail, Fed-Ex, or UPS to the Division of Taxation, 50 Barrack Street, Trenton, NJ 08695, Attn: Bulk Sale Section.
Find the C-9600 here
6. Is there a fee for filing the C-9600 form?
7. Why is a copy of a signed contract of sale, transfer or assignment required by the Division as part of the C-9600 form notice?
The signed contract provides the final agreement and commitment of the parties to the transaction. It gives the terms and conditions of the agreement and the authorization and obligation to provide an amount of money to be held in escrow by the purchaser.
8. Can the Purchaser submit the notice without the Seller’s NJ Tax ID number?
If the Purchaser cannot obtain the NJ Tax ID number, they may submit the C-9600 and the Division will contact the Seller to obtain the information.
9. Can the C-9600 and contract be hand-delivered or faxed to the Division?
No. Registered, certified or overnight mail, Fed-Ex or UPS are the only delivery options acceptable by statute.
10. Proper notification was received by the Division less than ten (10) business days prior to closing. Will Purchaser be protected?
No. If the closing occurs prior to the 10 business day period and the Division has not prescribed an escrow to the Purchaser, it is a Bulk Sale violation and the Purchaser will be held responsible for the tax liability of the Seller.
11. What if the Purchaser fails to satisfy the notice requirements?
If the Purchaser fails to notify the Division of Taxation timely or properly, the transaction is considered a Bulk Sale Violation. This means the Purchaser is now responsible for any State tax liabilities such as deficiencies, assessments on delinquent returns, and any possible assessments for future audits owed by the seller. The Division can take steps necessary to satisfy the Seller’s tax indebtedness including judgment, levy and seizure of assets of the Purchaser as well as the Seller.
12. How will the state respond to the C-9600?
The State will issue one or more of the following notices:
- Escrow Letter – sent to the Purchaser with a copy to the Seller, stating the amount of money to be held at the time of transfer.
- Returns Required Letter - sent to the Seller, outlining which returns must be filed and paid to obtain clearance for the bulk sales case.
- Clearance Letter – sent to the Purchaser stating Purchaser will not assume any liability of the Seller and no escrow is required.
- Insufficient Notice – sent to the Purchaser, listing items that are missing from the notification and must be sent in to make it complete.
- Bulk Sale Violation – sent to the Purchaser, notifying of the assumption of the seller’s liability.
13. What if the Purchaser receives an Insufficient Notice response?
The Purchaser must return the required information as directed in the notice. A response will be issued within 10 business days of the date the Division receives all of the requested information. Failure to provide all information requested on the notice will be treated as non-compliance with the statute and may result in a Bulk Sale violation.
14. How much time does the Division have to respond to the Purchaser?
A response will be sent within 10 business days of receipt of the Bulk Sale notification.
15. Is there any way to expedite service?
There is no expedited service.
16. Can any response letter (Escrow, Clearance, etc.) be faxed?
The Division sends all correspondence via first class mail.
17. What if the Division fails to timely notify the Purchaser of its claim and escrow amount requirement?
The Division has 10 business days to issue the response. The Purchaser may contact the caseworker to confirm the response was issued.
If the Division fails to issue the response within the 10 business days, the Purchaser will not be liable for any State tax liability of the Seller.
18. What is an escrow?
For the purpose of a bulk sale, an escrow is a specific amount of money the State requires the Purchaser withhold from the proceeds at the time of closing.
19. How is the escrow calculated?
The escrow is calculated using several factors, including but not limited to; internal and external information, established Division tax liabilities, audits, the gain from the sale of the assets, and any unfiled returns including final returns.
20. Who is responsible for holding the escrow?
The Purchaser or the Purchaser’s escrow agent must hold the required amount in escrow. If the Purchaser or his agent does not hold the required escrow as instructed by the Division, the Purchaser will be liable for the Seller’s tax obligations.
21. The closing or the transfer occurred without notifying the Division, but the parties agreed upon an amount of money to hold in escrow. Is the Purchaser protected from liability for the Seller’s tax obligations?
No. This sale is now considered a bulk sale violation. The agreed upon escrow is a third party agreement that the Division was not privileged to and does not satisfy the bulk sale notice requirements.
22. Can the escrow exceed the purchase price? Why?
Yes. The New Jersey Tax Court has indicated that the escrow can exceed the purchase price. “…a purchaser may assume personal liability for the seller's delinquent taxes in excess of the price he pays for the business assets.” Bunting v. Director, Division of Taxation, 1 N.J. Tax 189, 197 (T.C. 1980).
23. What if there are no proceeds from the sale or the proceeds are insufficient to meet the escrow amount required by the Division?
It is still the purchaser’s responsibility to hold the escrow as prescribed by the bulk sale section. It will be between the purchaser and seller to decide who will provide the additional funds at the time of closing to satisfy the escrow.
24. Can the escrow be reduced?
The escrow may be reduced as additional information is received by the caseworker. Examples:
- Asset Transfer Tax Declaration Form from the seller
- Payment of deficiencies and/or audit assessments
- Filing and payment of delinquent returns
25. If taxes are not ordinarily due until the following year, are the returns included in the escrow amount?
A: Yes. The escrow will be calculated to include all taxes that are due and those that would become due as a consequence of the sale.
26. When will the escrow be released to the Seller?
Once the Division is assured that all Division tax obligations of the Seller have been met, it will issue a clearance letter to the Purchaser or his agent allowing the Purchaser to release the balance of the escrow funds to the Seller.
ASSET TRANSFER TAX DECLARATION
27. What is the Asset Transfer Tax Declaration (TTD) form?
The TTD is the form the Seller submits to the Division with information on the gain on the sale of business assets. It assists the Division and the Seller in calculating a more accurate amount of tax due.
28. Is the TTD form required for the Purchaser’s C-9600 notification to be complete?
29. When should the TTD form be submitted?
If the TTD form is required, it should be submitted to the Bulk Sale Section after the case has been assigned to a caseworker. TTD Forms submitted prior to the receipt of the Bulk Sale Notification will be discarded.
The Seller may elect to give the TTD form to the Purchaser to submit with the C-9600.
30. Where can the Seller obtain the TTD form?
The form and instructions can be downloaded and printed from the NJ Division of Taxation website: http://www.state.nj.us/treasury/taxation/pdf/ttdv1.pdf
REAL ESTATE TRANSACTIONS
31. Is the transfer of real estate that is used for income/business purposes subject to the Bulk Sale law?
32. Is the sale of vacant land a bulk sale transfer?
Yes, if the vacant land is a business asset.
33. Is a short sale of realty subject to Bulk Sale?
If the realty that is being sold, transferred or assigned is used for business/income purposes it is subject to Bulk Sale. A bank approval letter should be submitted with the C-9600 form.
34. Is a formal foreclosure considered a bulk sale?
If a property goes through a formal foreclosure process, a Sheriff’s deed (or Marshall’s deed) is used to transfer assets to a transferee free and clear without encumbrances. There is no need to submit a Bulk Sale Notification.
35. Is a deed in lieu of foreclosure considered a bulk sale?
If the property is or has been used for income producing purposes, it is considered a bulk sale transfer.
36. Is it a bulk sale if a seller buys real estate to rehabilitate then sell it?
If the Seller buys, rehabilitates and then sells properties in their ordinary course of business, these sales are not subject to the bulk sale law.
If the sale is not within the Seller’s ordinary course of business, notification is required.
37. Is Bulk Sale Notice required if an individual is selling a one or two family rental property?
The Sale of any one or two family residence owned by an individual (defined as a single individual, married or civil union couple), an estate, or a trust as defined by the Bulk Sales Amendment is specifically excluded. Information on the amendment: http://www.state.nj.us/treasury/taxation/bulk_sale_act.shtml
38. For Non Resident Sellers of Real Estate is the minimum 2% included as part of the Bulk Sale escrow?
Yes. A Non Resident Seller of Real Estate is required to pay the greater of 2% of the purchase price or 8.97% of the gain. This is a portion of the Division’s initial escrow.
39. Who is an authorized agent for the Buyer or Seller?
The only authorized agent is their attorney. Any other representative (i.e. Realtor, CPA, Title Agency) must provide an Appointment Of Taxpayer Representative Form (Form M-5008-R) signed by the Buyer or Seller.
40. Does a Purchaser have to submit a Bulk Sale notice if the Seller is a disregarded entity?
41. What if the purchase price or the date of sale changes?
Notify the caseworker of any adjustment to purchase price or change of date.
42. A Purchaser files the C-9600 but before closing, assigns its rights to another party. Does the Assignee also file form C-9600, even though none of the terms of the sales agreement have changed, except for the substitution of the new Purchaser?
No, but the Division must be notified. The Assignee, by taking the place of the original Purchaser/Transferee must now take on all of the previous party’s rights and obligations under the law, including responsibility for holding the amount of escrow in the Division’s notice to the original Purchaser.
43. If the seller is a tax-exempt or non-profit organization, including but not limited to a church/synagogue/temple/mosque, and is selling its real property and/or tangible property not in the ordinary course of business, does the Purchaser have to file a C-9600 form with the Division?
Yes, even though the Seller may be exempt from some Division taxes, it may still have tax obligations.
44. Can sales by an Estate or Trust be a Bulk Sale?
Yes, if the assets being sold are business assets.
45. Are sales of stock or membership interests subject to Bulk Sales?
Stock owned by an individual is personalty, not a business asset. No Bulk Sale notice is required.
Stock owned by a business is an asset of the business and the Division must be notified unless the sale is within their ordinary course of business.
46. Who are checks payable to?
New Jersey Division of Taxation
47. What is an overnight delivery address?
Attn: Bulk Sales, 50 Barrack Street Trenton, NJ 08695
48. Where can you find other information about the administration of the bulk sale law by the Division?
Other information and guidelines may be found in Technical Bulletin 60-R
49. How can the Division be contacted for further information about the bulk sale law and its implementation?
Written inquiries should be submitted to the Division to: Bulk Sales Unit, New Jersey Division of Taxation, P.O. Box 245, Trenton, New Jersey 08695-0245. Phone inquiries may be made to (609) 292-6604 with a request to speak to an employee from the Bulk Sales Unit.
50. Is the sale, transfer, or assignment of a tax credit/tax credit certificate awarded under an Economic Development Authority (EDA) incentive program subject to the bulk sale law?
No. The bulk sale law does not consider any business assistance/incentive grant, or tax credit/tax credit transfer certificate generated, granted, awarded, received, or available under any New Jersey State or local program a “business asset.” Therefore, the bulk sale law does not apply to the sale, transfer, or assignment of such credits. This includes, but is not limited to, any credits provided by a successor program or any other program such as the New Jersey Economic Development Authority deems relevant. However, the individual or entity who benefits from any credits must obtain a Business Assistance and Incentive Clearance Certificate from the Division of Taxation prior to the sale, transfer, or assignment of any credits. Please click the link for instructions on applying for the Clearance Certificate.