New Jersey, renowned for its beautiful Jersey beaches and lush gardens, is a hotspot for business. However, figuring out the intricacies of New Jersey sales tax can be a bit tricky.
This guide breaks down everything you need to know about the Garden State’s sales tax, from determining the right sales tax rates to understanding exemptions and filing processes. By the end of this comprehensive guide, you’ll be equipped to handle New Jersey sales tax with confidence and ease.
Sales Tax Nexus in New Jersey
When a business creates either a physical or economic nexus, it is required to collect sales tax in New Jersey.Physical Nexus
A physical nexus means having a significant physical presence or engaging in enough activities within a state to require the collection and payment of sales tax. The factors that determine a physical nexus in New Jersey include:- Physical Location: This includes having an office, a place for distribution, sales, or showcasing products, a warehouse or storage facility, or any other place where you conduct business.
- Inventory in the State: This covers situations where you store your products within the state, even if it’s done through a third-party fulfillment center or 3PL (like Amazon FBA) or an online marketplace.
- Employees, independent contractors, agents, or other representatives operating on your behalf.
- Affiliate Nexus or Click-through Nexus:
- You could trigger a physical nexus if you have affiliates, whether they operate online or in-person, who have collectively sold more than $10,000 worth of products for delivery in New Jersey during the previous four quarterly periods ending on March, June, September, and December.
- Presence at Trade Show: You must collect sales tax at New Jersey trade shows if you participate as an exhibitor and took orders at a tradeshow.
Economic Nexus
States have established regulations to collect sales tax from out-of-state sellers who meet certain revenue and/or transaction thresholds. This rule is known as economic nexus. Beginning January 1, 2018, the threshold for economic nexus in New Jersey is $100,000 in gross revenue on the previous or current calendar year’s sales or 200 or more separate transactions sourced to the state. While the nexus criteria mentioned above generally apply to most businesses, additional methods exist for establishing economic sales tax nexus. To access a comprehensive list of these rules, please refer to the governing laws for economic sales tax nexus requirements in New Jersey.
New Jersey Sales Tax on Goods and Services
Knowing whether the goods you’re selling or services you’re offering are taxable in New Jersey is one of the first things you need to know.Tangible Products
Almost all goods are taxable in New Jersey, including:- Cosmetics
- Electronics
- Furniture
- Jewelry
- Automobiles
- Home Goods
- Groceries – Most food and drink items bought in any food store (supermarket, grocery store, etc.) are not subject to sales tax. However, sales of candies, soft drinks, and “prepared foods” are subject to sales tax unless purchased with government benefits from the Supplemental Nutrition Assistance Program (SNAP).
- Clothing and Footwear – Except fur clothing, accessories or equipment, sport or recreational equipment, and protective equipment.
- Prescription Drugs
- Newspapers, Magazines and Books
Services
In New Jersey, the majority of service-based transactions such as professional services, advertising, and interior design services are not subject to sales tax, unless they are specifically mentioned as being taxable. Some of the examples of services that are taxable are:- Information services
- Investigation and detective services
- Mail processing services for printed advertising/promotional material
- Massage services
- Sign fabrication and installation services
- Servicing or repair of real property
- Tanning services
- Tattooing
- Telecommunications
- Utility services
- Telephone answering services received by customers in New Jersey
Software-As-A-Service (SaaS)/Digital Products
SaaS is not taxable in the state of New Jersey as long as it is not electronically delivered to the user. However, any SaaS that meets the definition of an information service is subject to sales tax. Digital products (i.e., ebooks, downloadable video content, mobile apps) are taxable.Shipping/Handling
Shipping and handling charges in the state of New Jersey are taxable. But if the item you’re purchasing is tax-exempt, you may not be required to pay sales tax.Sales Tax Permits and Licenses in New Jersey
Now that you’ve got a handle on when sales tax nexus applies and which products are taxable in New Jersey, the next important step is getting your New Jersey Seller’s Permit.Seller’s Permit
You can register for a New Jersey sales tax permit online at the New Jersey Department of Treasury. Ensure you have specific information on hand when registering for a seller’s permit, including, but not limited to:- Business Identification Information (name, address, phone number, email address)
- Business Entity Structure (sole proprietorship, partnership, corporation, LLC, etc.)
- Federal Employer Identification Number (EIN or FEIN)
- Owner/Partner/Officer Information
- Business Activity Details (description of products or services sold, sales volume, date of the first sale or the expected date to start dates)
Resale Certificate
A resale certificate is a document that allows businesses to buy products without paying sales tax on them as long as they plan to resell those items to customers, who will then pay the tax. As a seller, you can also accept resale certificates from others looking to buy for resale. In New Jersey, sellers use resale certificates to buy goods from their suppliers that they intend to resell. The issuance of the certificates is always done in good faith that the seller would report tax on the final sale of the items. In New Jersey, the resale certificate is known as Form ST-3, or the Sales Tax Resale Certificate. You can also fill out the Streamlined Sales and Use Tax Certificate of Exemption if you would like to get sales tax exemption for multiple states simultaneously. If you don’t want the hassle of registering, sign up for our all-inclusive service that includes sales tax registration.Streamlined Sales Tax (SST)
The Streamlined Sales Tax (SST) is an initiative to simplify and standardize sales tax regulations across multiple states. New Jersey has been a party to this program since October 1, 2005, meaning you may use your SST in this state. Check with the Department of Treasury for the most current information on New Jersey’s participation in the Streamlined Sales Tax initiative.Calculating and Collecting Sales Tax in New Jersey
Sales Tax Computation
In New Jersey, the sales tax is made up of only the statewide sales tax, except for Salem County, which collects only its own local sales tax excluding the statewide sales tax. To figure out the total sales tax for your calculation, you’ll need to determine where your transaction occurs. Use TaxHero’s New Jersey Sales Tax Calculator to compute for sales tax. Here’s an example. Suppose an out-of-state seller satisfies the economic nexus criteria in New Jersey and sells to a customer in Newark City, NJ, with a ZIP code of 07106. In that case, the seller has to charge the customer a total sales tax, which can be broken down as follows:
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Origin-based vs. Destination-based
When making in-state sales, it is important to determine if you are located in an origin-based or destination-based state to figure out what rate to charge for sales tax. New Jersey is a destination-based state, meaning sales tax is determined based on the buyer’s location. That means for a New Jersey-based seller, sales tax is generally based on the buyer’s location when selling within the state. For out-of-state or remote sellers, the sales tax rate is always determined by the buyer’s location. For instance, if you’re selling a product from California to a customer in Newark City, New Jersey, where you have nexus, you’d apply Newark’s sales tax rate to that sale. To make life easier, consider using sales tax software or consulting a tax professional, like TaxHero, to ensure accurate tax calculations and collections. Understanding these tax rules helps you stay compliant, whether you’re in-state or out-of-state.Filing and Remitting Sales Tax Returns in New Jersey
The next step after collection is filing and remitting your New Jersey sales tax returns. Filing and remittance can vary in frequency, typically monthly or quarterly. You will be required to file and pay monthly if you:- Collected over $30,000 in sales tax during the prior calendar year; and
- Collected over $500 in sales tax within the initial or subsequent month of the current calendar quarter.
Due Dates
In New Jersey, the due date falls on the 20th day of the following month. For instance, sales tax collected in January is due by February 20 for monthly filers. However, if this day is a holiday, weekend, or in the rare occurrence of a natural disaster, the deadline is typically extended to the next business day. For instance, if you’re a monthly filer and filing sales tax for the month of January, and the February 20th deadline falls on a holiday or weekend, you’ll have until February 21st, the following business day, to submit. If you’re a quarterly filer, the due date for remittance falls on or before the 20th of January, April, July, and October for the preceding three-month period.Filing Sales Tax Returns
To file your sales tax return for New Jersey, a few options are available:- File online through New Jersey’s website portal.
- File by calling 1-877-829-2866 if you don’t have access to a computer. You will still be required to make your payment electronically.
- File with TaxHero – Let TaxHero take care of it so you don’t have to worry about missing a payment or return.
Timely Filing Discount
Some states offer a discount to businesses for collecting, filing, and remitting sales tax on time as an incentive to process sales taxes promptly. However, New Jersey does not offer a discount.Sales Tax Holiday
Currently, for 2023-2024, the planned sales tax holidays in New Jersey is:- Back-to-School sales tax holiday on August 26 to September 4, 2023, on various school-related items such as:
- School instructional material
- Sports equipment
- Computers (less than $3,000)
- School supplies
New Jersey Sales Tax Penalties
Like in most states, sales tax is a big part of how New Jersey generates revenue. Thus, maintaining compliance with sales tax regulations is of utmost importance. Failure to do so can lead to consequences and sales tax penalties. Therefore, it is crucial always to ensure you are up-to-date in filing, collecting, and remitting sales tax to the state. Here are the specific penalties for non-compliance with sales tax regulations in New Jersey:- Civil penalties amounting to $100 with an additional 5% of the outstanding sales tax every month or part thereof (up to a maximum of 25%)or 5% of the total sales tax due;
- On the criminal side, offenses can be classified as either disorderly person offense or second- or third-degree crime, depending on the severity and specific circumstances.