EisnerAmper Obtains Favorable NJ Film Production Ruling
Working closely with the film industry, EisnerAmper has obtained the agreement of the New Jersey Division of Taxation that clearly establishes that production goods and services “used and consumed” at the location of the shoot in New Jersey are “qualified film production expenses” for purposes of qualification for the 20% film production tax credit.
This ruling removes any doubt about the scope of expenses incurred in New Jersey.
Property used in film production whether or not originally purchased, leased or rented out of state is included as a qualified New Jersey film production expense. In EisnerAmper’s opinion, the ruling significantly facilitates New Jersey location shooting since choices can be made to use the best available vendor regardless of location, and regardless of method of delivery to the location of the shoot in New Jersey.
View the ruling below, or click here to see the original letter from the State: NJ Film Tax Ruling
Learn more about our firm’s Film Tax Services.
STATE OF NEW JERSEY
DEPARTMENT OF THE TREASURY
DIVISION OF TAXATION
PO BOX 269
TRENTON, NJ 08695-0269
June 17, 2009
6 East 43rd Street
New York, New York, 10017-4650
This letter is in response to your letter sent on May 11, 2009 regarding what constitutes a qualified film production expense in New Jersey for purposes of the film production tax credit. Specifically you inquire if the “qualified film production expense” in New Jersey is that portion of the “total production expense” incurred as costs for property “used or consumed” in New Jersey, and incurred as cost for “services performed” in New Jersey regardless of the method of delivery of the property to the production location in New Jersey.
The relevant definitions are set forth at N.J.S.A. 54:10A-5.39(e) which states the following:
“‘Qualified film production expenses’ means and expense incurred in New Jersey for the production of a film including post-production costs incurred in New Jersey. Qualified film production expenses shall include but shall not be limited to wages and salaries of individuals employed in the production of a film on which the tax imposed by the “New Jersey Gross Income Tax Act,” N.J. S.54A:1-1 et seq. has been paid or is due; the costs of construction, operations, editing, photography, sound synchronization, lighting, wardrobe and accessories and the cost of rental of facilities and equipment. Qualified film production expenses shall not include expenses incurred in marketing or advertising a film.
‘Total film production expenses’ means costs for services performed and tangible personal property used or consumed in the production of a film.”
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The “use or consumption” refers to the place inside New Jersey where the goods are actually used, as opposed to the place outside the state where the goods may have been purchased under the Corporation Business Tax Act just as the same definition would apply under the Sales and Use Tax Act.
New Jersey did not enact a requirement that a qualified film production expense be incurred from or through a New Jersey resident or entity subject to tax in New Jersey. The intent of the New Jersey film production credit is to provide an incentive for film makers to locate their productions in New Jersey so that the state may benefit from any new jobs and investment incurred in New Jersey.
Therefore, a qualified film production expense incurred for goods used or consumed in New Jersey is includible in the numerator of the 60 percent fraction, in the denominator of the same fraction and qualify in the measure for the 20 percent credit notwithstanding that the goods may have been purchased from an out of state vendor and either shipped to or picked up and brought into New Jersey.
As for services, the film tax credit statute requires that to qualify for inclusion in the numerator of the 60 percent fraction, the expense is strictly limited to a service performed in New Jersey. Accordingly, if a service for a film production were to be performed both within and outside New Jersey, only the amount incurred for the portion performed within New Jersey would qualify for inclusion in the numerator of the 60 percent fraction.
I hope that you find this information helpful.
Very truly yours,
Tax Service Specialist
Regulatory Services Branch