Clothing, unprepared food, prescription and over-the-counter drugs, and labor on a qualifying capital improvement are exempt from New Jersey’s 6.625% sales tax.
What is exempt from NJ sales tax?Certificates, registration and audit help for businesses
New Jersey exempts clothing, unprepared food, prescription drugs and other everyday purchases from its 6.625% sales tax. A business keeps the exemption on a sale only if it is registered, collects the correct exemption certificate, and keeps that certificate on file. Wasserman Accounting CPAs registers New Jersey businesses, sets up their certificates, files their returns, and represents them in an audit.
NJ sales tax exemptions in three points
A seller owes the tax, plus penalties and interest, on any exempt sale where it cannot produce a fully completed exemption certificate received within 90 days of the sale (Bulletin S&U-6).
Wasserman Accounting CPAs handles registration, exemption certificates, quarterly filings and audit response for New Jersey businesses.
A CPA or EA sets up the exemption certificates your business needs before your next exempt sale. Call 609-281-8096 or send the contact form.
Set up my certificatesWhat items are exempt from sales tax in NJ?
New Jersey exempts these categories from sales tax. The Division sets out the full list in its Sales Tax Guide, Bulletin S&U-4.
- Clothing and footwear
- Still taxableFur clothing and sporting equipment
- Unprepared groceries, including fresh produce, meat, dairy, bread and packaged goods
- Still taxablePrepared and hot food, alcohol, candy and soft drinks
- Prescription and over-the-counter drugs
- No carve-outExempt across the whole category
- Durable medical equipment for home use and prosthetic devices
- ConditionWheelchairs, walkers and other mobility equipment need a prescription
- Newspapers and magazines
- No carve-outExempt across the whole category
- Labor on a capital improvement to real property
- Documented onForm ST-8, given by the property owner to the contractor
New Jersey taxes repairs and routine maintenance even on property that qualifies for the capital improvement exemption. We confirm whether a job is a repair or a capital improvement before you invoice it. The clothing exemption and the grocery rules each have their own guide, and the New Jersey sales tax rate guide covers what you charge when a sale is taxable.
Who is exempt from sales tax in New Jersey?
New Jersey exempts purchases by these buyers when the buyer gives the seller the matching certificate.
Resellers buying inventory to sell on
Manufacturers buying machinery used directly and primarily in production
Research operations buying equipment used directly and exclusively in laboratory research and development
Nonprofits, charities and religious organizations, including 501(c)(3) groups, that hold an ST-5
Farmers buying property and services used directly and primarily in producing agricultural or horticultural commodities for sale
Federal and New Jersey government agencies, which give the seller a purchase order or contract and pay from government funds in place of a certificate
Property owners, for the labor on a qualifying capital improvement
How does a nonprofit get its ST-5?
A nonprofit applies for its ST-5 on Form REG-1E, and the Division of Taxation takes up to eight weeks to process it. Three rules set what the certificate covers.
When it takes effect
The ST-5 is effective from the date the Division receives the application, or from the organization’s formation date if it files within six months of forming.
Tax paid while it waited
The organization can claim back sales tax paid on purchases delivered while it waited for the certificate, on Form A-3730 within four years of paying it, with the receipts.
Whose money paid for it
The exemption covers only purchases paid from the organization’s own funds (N.J.A.C. 18:24-10.2).
A business that is not on this list pays sales tax on its own purchases and collects it on its taxable sales. We set up the certificate your business qualifies for, and for nonprofits we prepare the REG-1E and file the refund claim.
Which NJ sales tax exemption certificate do you need?
New Jersey issues a separate certificate for each type of exemption, and the seller has to collect and keep the one that covers the sale. Every blank form is on the Division’s sales and use tax forms page.
| Certificate | Who gives it | What it covers |
|---|---|---|
| ST-3 | A buyer purchasing for resale | Goods bought to resell, so the reseller collects tax from the final customer |
| ST-4 | A buyer with a qualifying exempt use | Property used in an exempt way, such as manufacturing machinery or research |
| ST-5 | A qualified nonprofit or charity | Purchases paid from the funds of a registered exempt organization, charity or religious institution |
| ST-8 | A property owner to a contractor | Labor on a qualifying capital improvement, so the contractor does not charge tax on it |
| ST-13 | A contractor to a supplier | Materials and services for work on an exempt organization's or government's property |
Out-of-state sellers and drop shippers use other forms: ST-3NR, the Streamlined ST-SST, or the multijurisdiction certificate. If you are not sure which form applies to a customer, we will set the right one up for you.
What does a New Jersey sales tax audit check on exemption certificates?
The auditor asks you to produce a fully completed certificate for each exempt sale. New Jersey applies these rules to each certificate, and sets them out in Sales Tax Exemption Administration, Bulletin S&U-6.
The 90-day rule
New Jersey relieves the seller of liability when the seller receives a fully completed certificate within 90 days of the sale. After 90 days, the seller owes the tax.
Keep it four years
You must keep each certificate, on paper or electronically, for at least four years from the last sale it covers and produce it on request (N.J.A.C. 18:24-10.5).
Blanket vs. single-purchase
A blanket certificate covers an ongoing relationship; a single-purchase certificate covers one sale. New Jersey treats a gap of 12 months or less between sales as a recurring relationship.
Incomplete certificates are invalid
An unsigned or partly completed certificate is invalid on its face. If the auditor finds one, the Division gives you at least 120 days from its request to substantiate the exemption.
On a sale with a missing or incomplete certificate, the Division assesses the tax plus penalties and interest. New Jersey treats collected sales tax as trust-fund money (N.J.S.A. 54:32B-14), and an officer or employee with a duty to collect and remit it is personally liable for tax the business did not pay (N.J.S.A. 54:32B-2(w)).
If the Division assesses you, you have 90 days from the notice to file a protest with its Conference and Appeals Branch or a complaint with the Tax Court, and we represent you in either.
Holding a notice or an audit letter?
We review your certificates and file your protest before the deadline, and our audit defense plan covers the representation. Call 609-281-8096.
How does a business claim a sales tax exemption in New Jersey?
To claim an exemption, a business takes these four steps in order.
- 01
Registers with New Jersey on Form NJ-REG before accepting any certificate
- 02
Gives suppliers the correct certificate (ST-3, ST-4, ST-5, ST-8, or ST-13) at the time of purchase
- 03
Keeps each certificate it gives or receives on file
- 04
Files Form ST-50 each quarter, and makes monthly payments if the Division assigns them
Returns and payments go through the Division’s online business filing service, and its sales and use tax FAQs answer the common filing questions. We file on your behalf as part of the engagement.
How Wasserman Accounting CPAs helps with NJ sales and use tax
We handle these sales and use tax services for New Jersey businesses:
- Sales tax registration and NJ-REG setup for new and expanding businesses
- Exemption certificate setup, review and collection, so you hold a completed, defensible certificate for every exempt customer before the Division asks for it
- Capital improvement and contractor guidance on ST-8 and ST-13, so labor is billed correctly
- Use tax reviews on out-of-state and online purchases shipped into New Jersey, and refund claims on sales tax you overpaid
- Economic nexus checks and voluntary disclosure for out-of-state sellers, which New Jersey requires above $100,000 in sales or at 200 transactions into the state
- Quarterly filing and payment on Form ST-50, and audit and notice response when the Division questions an exemption
Sales tax usually rides alongside the rest of the books, so we also handle bookkeeping, business tax returns and small business accounting. Everything we offer is on the full services list.
What affects the cost of NJ sales tax services
We quote a fee before work starts, based on:
- 01The number of exempt customers whose certificates we collect and review
- 02Whether you are registering for the first time or catching up on unfiled periods
- 03Your filing schedule: quarterly returns only, or quarterly plus monthly payments
- 04Whether you have an open notice or audit, which we scope as its own engagement
- 05The number of states in which you sell, if nexus reviews are included
For a nonprofit, the REG-1E application is a single fixed-scope task.
Call 609-281-8096 with your last four quarters of sales figures and we give you a quote on the call.
Who we work with
- Retailers and e-commerce sellers collecting NJ sales tax
- Contractors and trades handling capital improvements and repairs
- Wholesalers and resellers issuing and accepting resale certificates
- Nonprofits and exempt organizations using ST-5
- Out-of-state sellers who have crossed New Jersey's economic nexus threshold
- Any business that has received a sales tax notice or audit letter
Reviewed by
April Moore, EA, Hainesport, NJ. Enrolled Agent with 20 years in business tax preparation and quarterly regulatory filings.
Talk to a New Jersey sales tax CPA or EA
If you are registering, setting up exemption certificates, or holding a sales tax notice, we review your position and tell you what you owe and what you can defend.
Working out what to charge on a taxable sale instead? Read the New Jersey sales tax rate guide.