Trucking company owners face so many hardships every day; low rates, driver turnover, truck issues, parking, payment issues and rising insurance and registration fees. One small trucking company owner found out today that while things might be bad now in the world of trucking, they can always get worse.
When the owner of JMT Express out of South Carolina received a call from his driver, who was stopped and pulled into the scales in New Jersey, I am sure he was not thinking that he would be forced to pay a ransom of $8,800 under the threat of his truck, trailer and the load of time-sensitive medical supplies being impounded by the State of New Jersey.
Company owner Travis Fowler was told that he had not paid his New Jersey state taxes, although his company was based, and registered in the state of South Carolina. He was told that this fine was a franchise tax that he owed for buying and selling goods and services in New Jersey and the “assessment” of what he owed was $8,800, due immediately or his truck and trailer would be impounded.
“I told them that I do not buy or sell goods in the state, nor do I buy or sell goods at all, my customers do, I just transport them,” said Fowler in the Facebook group Trucking: Rates and Lanes. He was told that they do not know if he does or does not, but he was going to pay or they would impound the truck. With no choice, Fowler paid the fine and his driver continued on. But he has questions.
“I haul medical supplies very often, some are for dialysis patients, how in the world can they hold stuff hostage for a tax that I am not even supposed to pay?” Fowler asked in an interview with Freight Broker Live. The answer is a little something called nexus.
The Trucking Nexus
A nexus is basically a connection between a taxing jurisdiction, like a state, and an entity like a business that must collect or pay the tax. According to an undated release from the NJ Dept. of the Treasury states “Whether a business is subject to corporation business tax based on trucking activity depends on the nature of the business. For instance, trucking or delivery companies are subject to the corporation business tax on income because they are considered to be doing business in the State since they are in the business of delivery and pick-up of cargo.”
Fowler was given a receipt for his payment and the documentation and instructions needed to file an appeal. This according to one Overdrive.com article (all should read) is part of the ransom. According to the article, Tom McDonald, who led this program for NJ told the site that the state gives high fines out as “incentive to comply” as it increases the likelihood of an appeal.
According to the article “When a company voluntarily registers, the state, in its benevolence, limits back collections to three years. When a company is forced to register, the agency goes back as far as it cares to. In that case, the company owes 25 percent (after five months) per year late fee for not filing on time, another 5 percent per year for not paying on time, then interest on the balance at 5 percent above the prime rate.
“If we assess you and you don’t appeal, we think you owe us more money,” McDonald says. His staff will then investigate, pushing until you give full compliance.”
Nexus is created in more than half of all states if company owned trucks are used to deliver or pickup goods. These are: AL, AZ, AR, CA, CO, DE, DC, FL, GA, HI, KY, LA, MD, MI, MN, MS, MO, MT, NE, NH, NJ, NY, NC, ND, OK, PA, RI, TX and WV. The following states create nexus if company owned trucks are merely passing through the state without delivering or picking up goods: AL, AZ, CO, FL, ID, IL, IN, IA, LA, MD, MA, MI, MO, MT, NM, ND, OK, OR, UT and VA. If you travel through these states and you are not registered to pay taxes in these states, you might find yourself in the same position as Fowler.
“This is two weeks removed from end of year taxes and tags, during a slow season, on now an election year. $8,800.00 is not an amount of money a small trucking fleet has laying around to pay a state that just wants to meet their budget” said Fowler. “Something like this could smaller companies out of business, but it seems as though with all the new regulations, that’s what they want to happen.”