A bill calling for stall boarding to be exempt from the sales tax is geared to helping New Jersey's struggling horse industry
A new law to drop a stall tax on boarding horses would be a boost for farms and stables But what the 2011 visitor told Nurko brought her to tears.
The woman, who turned out to be a state auditor asked, "Do you pay sales tax?" to which Nurko responded, "For what?"
The auditor told the Bordentown stable owner that as of October 2006, she was supposed to be paying sales tax to the state for every stall used for boarding horses in her 70-acre operation.
"Are you kidding me? You're going to put me out of business," a stunned Nurko replied.
Although she has a state tax ID number, she never got the word that 2006 legislation had mandated sales tax on storage facilities, a category that had been stretched to include horse stalls.
"It was on the books and nobody knew about it. I didn't know about it, and I deal with the horse industry extensively. It came out of left field. It wasn't until a year or two ago that enforcement came to bear," explained New Jersey Farm Bureau President Ryck Suydam, a Somerset County hay farmer who took office in 2012.
"All of a sudden, stable owners were getting charged."
Those charges also included interest and penalties, making the tax even more difficult to bear for stable owners, who generally run their operations on a very narrow profit margin, if they're not into the red.
Nurko, who owed more than $20,000, has been on a payment plan of $397per month since the middle of 2012. Meanwhile, her income has decreased, because her boarding fee went up when she added the sales tax, so a number of horse owners went elsewhere; to non-compliant stables in New Jersey or to farms in nearby Pennsylvania, which does not have such a tax, Nurko said.
She is just one of many New Jersey stable owners who are unaware that they were supposed to be charging the 7 percent sales tax and have found out that it could cost them their livelihood. Some stables are running under the radar, but it may be only a matter of time until auditors learn about them from community bulletin boards in tack or feed stores, advertisements or signs at the end of their driveways.
Assemblyman Ron Dancer (R-Monmouth/Burlington/Ocean/Middlesex), the son of harness racing great Stanley Dancer, has introduced a bill in the state Legislature to ease the burden on stable owners. Although it will not be acted on during the Legislature's current session, he has pre-filed it for the next session, which begins Jan. 14, and hopes to get support both from the public and legislators on a bipartisan basis.
The bill clarifies sales tax collection responsibilities of horse boarding businesses, and redefines "storage space" so that it does not include "lease or rental of a stall in a barn, stable, or other similar structure or facility for the boarding or stabling or for the keeping and holding" of equines.
"We need to to attract and then retain and restore the equine industry in the state of New Jersey, and this bill is a big step toward that," Dancer maintained.
Horse businesses are struggling in the most densely populated state in the union.
"We've got to turn this industry around," said Dancer.
"We can begin with more favorable and equitable tax treatment."
The state Department of Agriculture put out a 2008 guide on horse-keeping sales and use taxes in cooperation with the state Department of the Treasury. It states, "the business of boarding or training horses or of renting horses is not a `farming enterprise' " -- which was news to people running their equine operations on farms in the state.
"There's been a lot of confusion...do we consider horses storage, in the conventional sense of storage of products?," Dancer asked rhetorically, while noting that some pursuits, such as horse breeding or training, are not subject to the tax.
He mentioned that representatives of the Department of the Treasury "said they themselves would like legislation to give a very clear, unambigious language with regard to the treatment of horses" in this situation.
He will be joined at a Jan. 19 informative workshop on the subject of the tax by Mount Laurel attorney Dana Bowling, whose specialties include equine matters, and an accountant. The session, open to all, will be held from 1-3:30 p.m. at Rick's Saddlery in Cream Ridge.
Joan Harper, a former board member of the Horse Park of New Jersey, originally called Dancer's attention to the problem. Harper, who is selling her Cream Ridge farm and moving to North Carolina, notes that some stables have shut their doors to boarders as a result of the taxes.
"In my view, this is unbelievably serious," said Bowling, who commented that one of her clients owes $40,000, but she has heard of other farms that owe even more.
"I have a lot of clients who have faced extreme financial hardship as a result of the tax. A lot of the issues stem from the fact that the change of law in 2006 was not very well-publicized. So many farms who would have had the best intentions of complying simply didn't because they didn't know. The accruing liability for many of these folks has become completely insurmountable for them," continued Bowling, who said the new bill will benefit from grassroots support.
To follow what's going on with the law, go to http://danabowlinglaw.com/nj-equine-legislation/. To contact Bowling for more information or to offer input, email her at equinelegislation@danabowlinglaw.com.
Stacey Yalenti, a certified public accountant who specializes in the horse industry at the Abby Road Group in Flemington, advises stable owners never to go it alone in an audit, and to answer questions from state representatives in an office setting with appropriate documentation, not off-the-cuff at their barn.
She believes the tax has put a lot of horse businesses at risk.
Yalenti noted "state tax law generally places a four-year statute of limitations on tax audits, beyond which the division (of taxation) may not audit without your written consent. The statute of limitations does not apply, however, for any period during which a taxpayer failed to file a return. That is a lot of exposure and financial risk for a boarding farm that has never filed a sales tax return."
She added, "The prospect of having to deal with that financial strain is depressing at best. Farms that have never collected sales tax on board are apprehensive to begin doing so now," fearing that will be a red flag for the state to crack down.
Passage of Dancer's bill could solve a lot of problems, and the farm bureau supports it. The farm bureau's website is http://njfb.org.
As Suydam explained, "New Jersey needs horses. It's a big part of the economy, and helps maintain a lot of that open space that everyone is so fond of looking at. If taxes cripple an (equine) operation, (the land) might turn into something else."
ON THE RAIL -- Admission is free for next Sunday's 11:30 a.m. Zone II awards brunch at Bridgewater Manor, Route 202-206 in Bridgewater, but an RSVP is required. Contact Katie Benson at (908) 534-8833 or via email at jackkate@aol.com.
ACTIVITIES SCHEDULE
Today: CJL Farm, Hunter's Crossing Farm, 121 E. Valley Brook Road, Long Valley; Woodedge Show, Gloucester County Dream Park, 400 Route 130 South, Logan Township; Palermo Winter Festival Show canceled because of weather.
Saturday: Duncraven Winter Circuit, 1300 Trenton-Harbourton Road, Titusville (through next Sunday).
Next Sunday: U.S. Equestrian Federation Zone II Awards Banquet, Bridgewater Manor, Route 202-206, Bridgewater; CJL Farm Show, Baymar Farms, 38 Harbor Road, Morganville.
Nancy Jaffer may be reached at nancyjaffer@comcast.net.