How did New Jersey's UEZ exemption apply during a lease when a zone expired or the lessee lost and later regained qualified-business status?

Plain-English summary

A qualified UEZ business could use Form UZ-5 for an exempt lease, but the lessor generally had to begin collecting tax immediately after the zone or business eligibility ended.

The exemption covered leases and rentals of tangible personal property used exclusively by a qualified business at its UEZ location.

When the business gave the lessor a fully completed Form UZ-5 at the beginning of the transaction, it did not need another certificate during the lease until that certificate expired.

If the UEZ itself expired, the lessor generally collected Sales Tax on the remaining lease starting the next day. The same next-day rule applied when the business lost UEZ eligibility before the lease ended. In either situation, specific lease terms addressing tax consequences of a change in law controlled when present.

If the business was later recertified and continued the lease or entered a new lease with the same lessor, it had to give the lessor an updated Form UZ-5.

A qualified business that paid tax on an eligible transaction could file Form A-3730-UEZ with supporting documents within one year after the tax payment.

What this means for you

Qualified UEZ lessees

Provide Form UZ-5 at lease inception, track its expiration and your UEZ status, and issue a new certificate after recertification.

Lessors

Monitor zone and customer eligibility dates. Unless the lease's change-in-law terms applied, collection began the day after eligibility ended.

Refund claimants

The TAM gave a one-year filing deadline for Form A-3730-UEZ refund claims.

Common questions

Q: Was a new UZ-5 required every lease payment?
A: No. The original certificate applied until it expired.

Q: When did tax collection begin after UEZ status ended?
A: The next day, unless applicable lease terms addressed the law change differently.

Q: Did recertification require a new certificate?
A: Yes.

Q: How long did the business have to seek a refund of eligible tax paid?
A: One year from the payment date.

Citations and references

• Form UZ-5 — Urban Enterprise Zone Exempt Purchase Certificate
• Form A-3730-UEZ — UEZ Sales Tax refund claim
• Urban Enterprise Zones Act — exemption authority discussed in the TAM

Source

• Landing page: https://www.nj.gov/treasury/taxation/tam-pubs.shtml
• Original PDF: https://www.nj.gov/treasury/taxation/pdf/pubs/tams/tam1.pdf

Original ruling text

Urban Enterprise Zone - Lease and Rental Periods
TAM-2010-1 – Issued November 1, 2010
Tax: Sales and Use Tax
The Urban Enterprise Zones Act provides certain businesses with an exemption from New Jersey
Sales Tax. Under this exemption, qualified businesses do not have to pay Sales Tax on purchases
of most tangible personal property (office and business equipment, supplies, furnishing, fixtures,
etc.) or on payment of certain taxable services (construction work, repair, maintenance and
installation services, etc.) that are for the exclusive use and consumption of the qualified
business at its Urban Enterprise Zone (UEZ) location. The Sales Tax exemption for purchases also
applies to the lease and rental of tangible personal property used exclusively for a qualified
business at its UEZ location.
A qualified business is an entity engaged in business activities within one of New Jersey’s UEZs.
Qualified businesses meet requirements which, upon application and approval, allow the State
to certify the businesses as active participants in the UEZ program. A qualified business is
eligible to receive tax incentives, including the Sales Tax exemption that applies when making
purchases exclusively for its business operations at its UEZ location.
A qualified business that gives a fully completed Urban Enterprise Zone Exempt Purchase
Certificate (Form UZ-5) to a lessor at the beginning of a lease transaction does not have to pay
Sales Tax during the lease term if the tangible property is delivered to its business location or
the business takes possession of the property within New Jersey. The qualified business is not
required to provide another exemption certificate during the lease period until the certificate
expires.
If a qualified business is located in a UEZ that expires,* the lessor must collect Sales Tax for the
remainder of the lease starting the day immediately following the UEZ termination date.
However, if there are specific terms within the lease agreement that address tax consequences
when there is a change in the law, those terms apply.
When a business no longer meets the requirements of the UEZ program and loses its eligibility
status before the end of a lease or rental period, the lessor must collect Sales Tax on the
remainder of the lease or rental period starting the day immediately following the termination
date unless as discussed above, specific terms within the lease agreement address tax
obligations when there is a change in the law. If a business that is recertified as a qualified
business after losing its status continues a lease or enters into a new lease agreement with the
same lessor, the qualified business is required to give the lessor an updated UZ-5.

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For more detailed information on leases and rentals, refer to the notice on Leases and Rentals of

Tangible Personal Property which is accessible from the Division’s website.

A qualified business that paid Sales Tax on a transaction eligible for the UEZ exemption may
apply for a refund using Form A-3730-UEZ. The form and supporting documentation must be
completed and submitted to the Division of Taxation within one year of the date that the Sales
Tax was paid. Additional refund information is available from the Division’s website.
*See Notice to Qualified Businesses Located in Urban Enterprise Zones – Expiration of Urban

Enterprise Zones on 12/31/16.

Note: A Technical Advisory Memorandum (“TAM”) is an informational statement of the law,
regulations, or Division policies. It is accurate on the date issued. Subsequent changes in the law
or regulations, judicial decisions or changes in Division policies could affect the validity of the
information presented in a TAM.

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