TRENTON — A trio of small business owners are urging the Legislature to close a tax loophole they say allows larger corporations to dodge some or all of their New Jersey tax liability.
Jerome Montes of the Main Street Alliance said at a Statehouse news conference Monday that the three business owners are part of a larger contingent of small business owners who favor a move to combined reporting to thwart large businesses that operate across state lines and shuffle profits to states with lower or no corporation business taxes.
"I'm not going to hide my revenue in another state, and they shouldn't either," said Jill Sasso, owner of Lawrenceville Provisions, which she described as a farm-to-table grocery store that opened its doors in April.
"For me, when the time comes, I'm willing to pay my fair share of corporate taxes, because I know it funds public services that I utilize as a resident, and it keeps the community safe, healthy and well educated and productive."
Under combined reporting, interrelated companies are treated as a single company for tax purposes, according to the bill (S982).
In one accounting strategy explained by the Wall Street Journal in 2007, a multi-state corporation, such as Wal-Mart, will create one subsidiary to own its stores and pay rent to a second tax-exempt real estate investment trust that pays dividends to a yet another subsidiary in a state with little or no corporate income taxes.
With a change in the tax code, New Jersey would get its share of the income based on the corporation's activity in the Garden State.
About two dozen states already mandate combined reporting, and New Jersey already requires combined reporting for casinos, said state Sen. Raymond Lesniak (D-Union), a bill sponsor who called corporations' tax avoidance "a legal way of cheating."
The nonpartisan Office of Legislative Services estimated the state could draw $110 million to $290 million more a year by changing the way multi-state corporations report their income.
The full Senate is slated to vote on the bill Thursday.
The small business owners, including Barbara Stanton, owner of Heritage Lighting in Lambertville, and Marilyn Sealy of Wells Rugs Service in Morristown, stressed the need for all businesses to pay their fair share to support state services.
"We all benefit from what our state has to offer. Small businesses like mine should not bear the burden of paying for services that benefit all businesses," Stanton said. "Passage would level the playing field for shops like Heritage Lighting and would provide New Jersey with badly needed funding for a wide variety of public services."