N.J. Admin. Code § 18:7-8.11 - Receipts; rents and royalties

(a) Receipts from rentals of real and personal property situated in New Jersey, and royalties from the use in New Jersey of patents or copyrights, are allocable to New Jersey.

1. Receipts from rentals include all amounts received by the taxpayer for the use or occupation of property, whether or not such property is owned by the taxpayer.

2. Receipts from royalties include all amounts received by the taxpayer for the use of patents, licensing agreements of intellectual property (for example, a licensing agreement to manufacture or sell a patented product), or copyrights, whether such patents, licensing agreements, or copyrights were originally issued to, or are owned, by the taxpayer. This also includes amounts received for licensing intellectual property in digital form.

3. A patent, licensing agreement, or copyright is used in New Jersey to the extent that activities thereunder are carried on in New Jersey.

(b) Receipts from royalties derived from trademarks or other intellectual property utilized in business in New Jersey are deemed located in New Jersey.

1. Receipts from royalties derived from trademarks or other intellectual property utilized both within and outside New Jersey will be allocated to New Jersey based upon the use of the trademarks or other intellectual property in New Jersey in relation to all use by the licensee.

2. Receipts from royalties derived from trademark license agreements or licensing agreements for other intellectual property, which wholly or in part authorize the licensee to sell or market products or services, are sourced to New Jersey in the same ratio as the licensee recognizes in its sales fraction receipts from sales related to the trademarked items or services.

Example 1: Corporation B is a Delaware corporation having legal title to certain trademarks. Corporation B licenses those trademarks to affiliated entities, and the affiliates pay Corporation B an arm's length royalty for their use. The trademarks are used by the affiliates within and outside New Jersey. Allocation of Corporation B's income from trademark royalties paid to it by affiliates is based upon the use of the trademarks in New Jersey by the affiliates. If an affiliate generates 10 percent of its sales revenue from the use of a trademark within New Jersey and therefore is recognizing 10 percent of the affiliate's revenue in its New Jersey receipts fraction numerator and 90 percent in other jurisdictions, 10 percent of the royalty paid by the affiliate to Corporation B for that trademark is apportioned to New Jersey by Corporation B.

Notes

N.J. Admin. Code § 18:7-8.11

Amended by 49 N.J.R. 1694(a), effective 6/19/2017 Amended by 57 N.J.R. 1303(b), effective 6/16/2025