What Items Are Exempt from Sales Tax in New Jersey? A Complete Guide

Yes, New Jersey is one of the few states that doesn’t charge sales tax on most clothing and footwear. This exemption includes most types of everyday wear, such as shirts, pants, dresses, and shoes. However, there are exceptions:

• Fur clothing – Sales tax is applied to fur coats and other fur items.

• Sporting equipment – Items like cleats, helmets, and certain protective gear (e.g., work gloves or safety boots) are taxable.

• Custom tailoring services – While the clothing itself is tax-free, services like custom tailoring may still be taxable.

Yes, capital improvements are generally exempt from sales tax in New Jersey, but only under specific conditions. The work must meet the following criteria:

• It must be a permanent improvement that increases the value of the property (e.g., installing a new roof, central air conditioning, or a new driveway).

• The homeowner must provide the contractor with a completed Certificate of Capital Improvement (Form ST-8).

However, repairs and maintenance, such as replacing a water heater or fixing a door, are generally taxable.

Sales tax exemptions in New Jersey vary depending on whether you are an individual shopper or a business entity. Here’s how you can ensure you receive the correct exemption:

For Individuals

Most sales tax exemptions for consumers are automatically applied at the point of sale. This means that when you purchase tax-exempt items—such as clothing, groceries, prescription medications, or newspapers—you do not need to take any additional action.

However, there are a few key things to keep in mind:

• If you are charged sales tax on a tax-exempt item, check your receipt and ask the retailer for a refund. Retailers may occasionally misclassify products, especially in cases where taxable and non-taxable items are similar.

• Some products have partial exemptions based on their ingredients or use. For example, while most groceries are tax-free, certain beverages and candy may be taxable depending on their ingredients.

For Businesses or Specific Services

Businesses and service providers that qualify for a sales tax exemption must submit the appropriate exemption certificate to their suppliers. The type of certificate required depends on the nature of the exemption:

• ST-3 Resale Certificate – Used by businesses that purchase goods for resale. This prevents sales tax from being charged on wholesale purchases, ensuring that tax is only collected when the product is sold to the final consumer.

• ST-4 Exempt Use Certificate – Used by organizations that purchase products for specific exempt uses, such as manufacturing or research.

• ST-5 Exempt Organization Certificate – Used by non-profit organizations, charities, and religious institutions that qualify for a tax exemption.

• ST-8 Certificate of Capital Improvement – Used by contractors performing tax-exempt capital improvements on real estate. Homeowners must provide this certificate to contractors to ensure that labor costs are not taxed.

Steps to Properly Claim a Business Sales Tax Exemption

1. Determine Eligibility: Make sure your business qualifies for the exemption and that the product or service you are purchasing falls under the exemption rules.

2. Complete the Correct Form: Download the necessary sales tax exemption certificate from the New Jersey Division of Taxation website. Fill it out completely and accurately.

3. Provide the Certificate to the Seller: Submit the completed exemption certificate to your supplier at the time of purchase. Retailers and wholesalers will not automatically apply exemptions without this documentation.

4. Maintain Proper Records: Keep copies of all exemption certificates and related documentation for at least four years, as required by law. If audited, you must prove that your exempt purchases were legitimate.

5. Ensure Compliance: If you improperly claim an exemption, you may be liable for unpaid sales tax, penalties, and interest. Always verify that your purchases qualify under the exemption rules.