Going Out of Business Sale in New Jersey: The Rules Before You Hang the Banner

The Statute: 90 Days, One Sale Per 360 Days

The rule is in the Consumer Fraud Act, N.J.S.A. 56:8-2.8. It makes it an unlawful practice to advertise merchandise as a "going out of business sale," or in terms substantially similar to that, for a period in excess of 90 days, or to advertise more than one such sale in 360 days. The 360-day period starts on the first day of the sale, and each day in violation counts as a separate violation.

Three practical points follow from the wording. First, the limit attaches to the advertising, so the clock is about what you tell the public, not about when the last item leaves the building. Second, "substantially similar" language is covered, so renaming the same sale "final closeout" or "everything must go" in the same window is unlikely to reset anything if it tells shoppers the business is closing. Third, a second banner inside 360 days is a problem even if the first sale was short, so a store that ran a "closing" sale last spring and then decides to close for good this winter should check the dates before using the same language.

• Pick a start date on purpose. The 90 days and the 360-day lookback both run from the first day of the sale.
• Work backward from your lease end. If the lease ends on a fixed date, the last day of the sale should land comfortably before it, with time left for fixtures and cleanout.
• Do not use closing language unless the business is closing. The state's advertising rules separately prohibit false or misleading statements about the reasons for price reductions, so a perpetual "closing" sale is a risk twice over.

State Advertising Rules That Apply to Every Sign and Flyer

Whatever you call the sale, the Division of Consumer Affairs' general advertising regulation, N.J.A.C. 13:45A-9.2, applies to the advertisements. A few provisions matter most in a closeout:

• Say which items are special. If some advertised items are damaged or less than first quality, or are floor models, discontinued or one of a kind, the advertisement has to designate them. If you claim below-cost pricing on some items but not all, the below-cost items must be identified.
• Be truthful about the reason for the discount and the amount. The rule prohibits false or misleading representations about the reasons for, existence of, or amounts of price reductions, and about the quantity of advertised merchandise.
• Keep proof. Claims about price, quality or the nature of the offering must be substantiated through documents or records, which have to be available to the Division on request for 90 days after the advertisement's effective date.
• Be careful with comparison prices. The regulation restricts comparisons to suggested retail, inventory or invoice prices and similar terms that compare the cost of supply with the price at retail, and it limits use of "cost" and "wholesale" to prices that actually match what the advertiser paid.
• Do not call it a "public sale." The terms "Public Notice" and "Public Sale" are off limits unless the sale is required by court order or operation of law, with an exception for a sale run by an auctioneer on behalf of a non-business entity.
• Watch labels on the business itself. Describing an advertiser as a "liquidator," "clearance" or "warehouse" outlet when the term is not a bona fide description is also covered, which matters if a liquidation company is running the sale under its own name.
• Mark prices. N.J.S.A. 56:8-2.5 requires the total selling price of retail merchandise to be plainly marked by a tag, label or sign on the item or at the point where it is offered.

Closeout Is a Defined Term, and It Matters for "Limited Supply"

The regulation defines a "closeout sale" as a sale in which an advertiser offers at a reduced price items remaining at specified locations that the advertiser will not have available for sale within a reasonable period after all of them are sold. That definition has a practical effect: the general rule that an advertiser must keep enough advertised merchandise on hand to meet reasonably anticipated demand does not apply to items advertised as "limited supply" in a genuine closeout. If you are marking items that will not be restocked, say so clearly in the sign and in the ad. If you are quietly restocking, you are not running a closeout, and the closing language is a problem.

Local Permits: The Town Can Regulate Closing-Out Sales

State law gives municipalities their own authority here. N.J.S.A. 40:52-1(j) lets a governing body adopt ordinances to license and regulate sales advertised to the public as forced sales at reduced prices, or as insurance, bankruptcy, mortgage foreclosure, insolvency, removal, loss or expiration of lease, or closing-out sales, to regulate how those sales are advertised and conducted, to fix license fees, and to impose penalties. The same subsection excludes sales held under a judicial order or to enforce a lien, and sales by a licensed auctioneer.

Towns use that power differently, so the only safe answer is to ask your municipal clerk or zoning office before the first ad runs. As one example, East Hanover Township's code (Chapter 122) repeats the state's 90-day and 360-day limits, requires a permit issued by the Zoning Officer for going-out-of-business sales, makes each permit valid for 30 days, allows extensions in 30-day increments up to a 90-day total with an increasing fee schedule, and sets penalties of up to $1,000 and/or jail or work-program time per violation, with each day a separate violation. That is one township's ordinance, not a New Jersey rule; yours may be stricter, looser or silent.

• Call the clerk first and ask whether an ordinance covers closing-out, going-out-of-business or similar sales.
• Ask what the permit costs, how long it lasts, and what it requires, such as an inventory list or proof of lease.
• If a liquidation company runs the sale, ask who applies for the permit and whose name goes on it.

Auctions Have Their Own Local Rules

If the plan is an auction instead of a retail sale, the same statute, in subsection (i), lets a municipality license auctioneers and their business, license and regulate public auctions, and require a bond to the municipality of up to $5,000. According to the National Auctioneers License Law Officials Association, New Jersey has no statewide auctioneer license or licensing board, which means the requirements depend on the town where the auction is held. Ask any auction company you are considering what local license or permit it holds for your municipality and to show it to you.

Selling Everything to One Buyer: The Bulk-Sale Notice

A going-out-of-business sale to customers is retail selling. Selling the inventory, equipment or fixtures in one transaction to a liquidator, a competitor or another buyer is a different event for tax purposes. New Jersey's bulk sale law protects a purchaser from inheriting the seller's tax debts, and it applies to the sale, transfer or assignment of business assets, in whole or in part, outside the ordinary course of business. The Division of Taxation lists inventory and materials, real property and intangible assets such as goodwill among the covered assets, and says that retail sales to customers and other sales made in the ordinary course of business are not bulk sales.

The mechanics are specific. The purchaser, or the purchaser's attorney, must file Form C-9600 with a copy of the executed contract so that the Division receives it at least 10 business days before the closing date, and business days exclude weekends and holidays. The notice must go by registered or certified mail or by overnight or express carrier; hand delivery and fax are not accepted. The Division then responds, which may include an escrow letter requiring the purchaser to hold back part of the proceeds until the seller's State tax obligations are met, and a clearance letter once they are. If the purchaser does not give timely, complete notice, the purchaser is responsible for the seller's State tax obligations arising from the sale.

Two details matter for liquidations. The Division's FAQ says that when an auction house sells business assets for an entity that is not in the business of selling its assets, the auction house is the party that must notify the Division before its sale. And an escrow requirement can reduce what a seller actually receives, so a buyout offer should be evaluated with the 10-business-day wait and a possible holdback in mind.

Closing Your Tax Registrations

The sale of assets is not the end of the paperwork. The Division of Taxation's publication ANJ-13 explains that registered businesses that close must formally end their registrations or risk delinquency notices for returns that come due. For a business registered for sales tax, that means filing an ending quarterly Sales and Use Tax return by the due date for the last quarter it was open, even if no tax is due; submitting a Request for Change of Registration Information (Form REG-C-L); completing the back of the Certificate of Authority for Sales Tax; and returning the certificate. An employer that withholds income tax from wages has further steps, including giving employees their W-2s within 30 days of the last payment and filing ending withholding returns. Corporations, LLCs, limited partnerships and limited liability partnerships take additional steps to dissolve or withdraw and to obtain tax clearance. Ask your accountant to build these dates into the closing calendar rather than leaving them for after the last sale.