OTTAWA, Ont. — The CTA has negotiated an agreement with New Jersey regarding the application of the New Jersey Corporate Business Tax (CBT) on Canadian-based trucking companies.
The agreement will significantly mitigate the impact of back taxes on Canadian carriers and simplify the compliance process for past tax years.
The CTA negotiated the new agreement in collaboration with the governments of Canada and Ontario.
New Jersey’s position is that, if a Canadian trucking company has made one pick-up or delivery in the State of New Jersey since 1993, this company is liable for CBT payments back to 1993 — plus interest and penalties. Under the agreement reached with CTA, the State of New Jersey will only require payment of the CBT for the current tax year (2002) plus the prior three years (1999-2001). A statutory five per cent penalty and interest charge will also apply (three per cent above prime).
New Jersey will not require carriers who qualify for the minimum tax payment (presently US$500) to file a CBT return for previous tax years (1999-01) –only for current (2002) and future years.
This concession by the state with regards to tax forms will also mitigate the cost of CBT compliance as such forms are often complicated and require carriers to hire U.S. tax experts which may cost trucking companies almost as much as the tax itself.
What does this limited CBT look back provision mean for Canadian carriers in dollars and cents? A carrier that has been making one pick-up or delivery in the State since 1993, as a minimum CBT tax filer, would owe the State in excess of US$9,000. Under the CTA agreement, this same company could cut their tax liability, including interest and penalties, to approximately US$2,600 — a savings of US$6,400.
Carriers who owe more than the minimum tax will be able to receive a foreign tax credit from the government of Canada, as CTA was able to retrieve a positive ruling from Canada Customs and Revenue Agency regarding the tax credit eligibility of the CBT.
The agreement between New Jersey and CTA is only available to Canadian carriers who have not been previously assessed by New Jersey. However, the State of New Jersey has assured CTA that it will consider potential remedies for Canadian carriers that have been previously assessed on an individual basis.
“The right thing to do for all U.S. states is to stop applying these taxes to Canadian carriers without a permanent establishment in the United States. Canadian provinces respect the transportation terms of the Canada-U.S. Income Tax Treaty, it’s time all U.S. states considered doing the same,” said CTA CEO David Bradley.
“However, as a short-term solution the agreement reached with the State of New Jersey mitigates the impact of these types of taxes on Canadian trucking and highlights the value of a strong association and professional Canadian Consulate office in New York working in partnership to resolve such matters.”
Bradley said the CTA is grateful to the State of New Jersey for its commitment to working with the association regarding the application of the CBT on Canadian-based fleets. This agreement between CTA and the State of New Jersey will expire December 31, 2003. In the New Year, CTA will send the State of New Jersey a list of Canadian carriers that wish to participate in this agreement. The New Year will also mark the reintroduction of the State of New Jersey’s truck seizure program for Canadian carriers failing to comply with the CBT. This program provided the impetus for discussions between CTA and the State of New Jersey and was suspended for Canadian carriers only during CBT discussions.
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