The Hidden 6.625% Discount: Leveraging UEZ Benefits
The Urban Enterprise Zone (UEZ) program is one of New Jersey's oldest economic development tools. While it's best known for allowing retailers to charge half the sales tax (3.3125%), its most valuable benefit for developers is often overlooked: the sales tax exemption on construction materials.
The Construction Material Exemption
If you are building or renovating a commercial or industrial property within a UEZ, you can purchase all materials, supplies, and services tax-free. In a state with a 6.625% sales tax, this is a direct reduction in your hard costs.
How It Works
- Certification: You must apply to the local UEZ coordinator and become a "certified UEZ business."
- Contractor Forms: You provide your contractor with a specific exemption certificate (Form UZ-4 or UZ-5).
- Savings: The contractor buys the steel, lumber, and concrete tax-free.
Residential vs. Commercial
This is the catch. The exemption applies to commercial and industrial projects. It does not typically apply to the construction of residential units. However, in a mixed-use project, you can often exempt the materials used for the commercial portion (retail podium, lobby, shared structural elements).
Other Benefits
- Employee Tax Credits: Up to $1,500 tax credit per new full-time employee hired.
- Energy Sales Tax Exemption: Exemption from sales tax on natural gas and electricity consumption for eligible businesses.
Don't Overpay the State
I help developers identify if their site is in a UEZ and navigate the paperwork to claim their exemptions.
About the Author
Ryan Goldfarb is a real estate development advisor. He helps clients maximize all available state and local incentives.