Effective Use Tax Rates
Sales and Use Tax Compliance Agreements, better known as Effective Use Tax Rate Agreements (EUTRA), are formal, individualized agreements between the Division of Taxation and a business regarding Use Tax payment and filing requirements. EUTRAs:
- Allow the use of an "effective tax rate" to calculate Sales and Use Taxes owed;*
- Generally have a term of three years or less;
- Have both parties agree upon the conditions that would require modification or termination of the agreement.
*The Division determines the "effective tax rate" by calculating the ratio of the base period taxable purchases to the base period total purchases.
If the business is qualified for the program, it can apply the agreed upon "effective tax rate" to all applicable purchases made during each filing period, rather than applying the standard tax rate to each taxable purchase.
When the business submits a request to enter the program, we will determine if the business is qualified to participate before conducting an audit to establish the "effective tax rate." A business is eligible if it:
- Is required to file and remit any New Jersey Sales and Use Tax returns and payments; and
- Demonstrates a willingness and ability to understand and comply with tax laws; and
- Maintains an acceptable system of internal controls and business records; and
- Has maintained a good filing record for all taxes and is currently in good standing.
The Division will not enter into agreements with businesses that:
- Have failed to correct improper reporting methods;
- Filed for bankruptcy or are controlled by a company that has filed for bankruptcy;
- Maintain inadequate books and records and have poor internal controls; or
- Are involved in or have been involved in an ongoing criminal investigation.
- Some of the EUTRA benefits include:
- No need to pay the Sales Tax at the time of purchase;
- No requirement to compute and remit the Use Tax on a transaction-by-transaction basis;
- Predictability and consistency of approach in tax reporting;
- Decisions regarding tax compliance are made by in-house and/or outside tax experts as opposed to non-tax personnel;
- Increased accuracy in Sales and Use Tax budgeting;
- Greater certainty and consistency of Sales and Use Tax expenses;
- Development of a cooperative business relationship with the Division of Taxation;
- Lower audit costs;
- Increased confidence in reported taxes;
- Redirection of staff to other audit candidates;
- Ensures timely receipt of Sales and Use Taxes.
Once the agreement is approved, we will issue the business a Direct Pay (Audit) Certificate
(ST-6X), which is to be presented to the seller at the point of sale. The business will not pay Sales Tax at the time of purchase. Instead, the business will use the effective rate to calculate tax on the total invoice amounts when remitting any necessary monthly payment or when filing the quarterly return.
- Some purchases are excluded by the agreement. Examples include, but are not limited to:
- Resale and inventory purchases;
- Utility and Telecommunications services;
- Meals and lodging;
- Motor vehicles, vessels, and aircraft;
- Items upon which the Division and the business do not agree;
- Capital Assets (generally not included in a EUTRA).
- As a part of this agreement:
- We agree to waive the audit process. However, we may terminate the agreement and conduct an audit if the business fails to fulfill the terms of the agreement;
- The business agrees to waive all rights to refund claims. However, the business can file a refund claim for overpayments or amounts erroneously paid to vendors for items outside the agreement; and
- Either party can terminate the agreement with a 90-day written notice.
- We may require a modification of an agreement for several reasons. Examples are:
- Legislative changes to the Sales and Use Tax statutes;
- Mergers or acquisitions;
- Significant start-up or closing costs of facilities;
- Significant changes involving business activities;
- Adoption of cost-containment programs; or
- Significant financial or accounting changes.
We will conduct a review of procedures and sample transactions at the time the initial agreement is due for renewal to determine if the business is in compliance with the agreement. We may also conduct an interim review if the business reports changes in the business or accounting practices, or there are changes in tax law which would significantly affect the agreed-upon rate.
For further information or for program entry requests, contact:
Note: We generally do not conduct a line-by-line review of purchases or “true-up” at the end of the agreement, unless there have been significant changes that would affect the rate.
Phone: (609) 588-3333
Fax: (609) 631-4710 or