What is the sales and use tax in New Jersey?
Sales and use tax in New Jersey is a state level tax on general retail sales plus specific services. And “use tax” applies when the correct tax wasn’t collected at the checkout process.
Sales tax is collected by the seller on a taxable New Jersey sale. Then use tax is paid by the buyer on a taxable purchase that ends up in New Jersey — without the proper tax being charged.
Sales tax vs use tax: what’s the distinction?
Sales tax is charged on taxable purchases concluded in New Jersey. The use tax simply covers taxable purchases “used in New Jersey” when sales tax wasn’t collected.
What is the New Jersey sales tax rate?
The statewide New Jersey sales tax rate is 6.625% for most taxable transactions.
New Jersey does not enable cities or counties to add on rates. Therefore, most sales use one statewide rate.
Are there any reduced rates in New Jersey?
Yes — particular certified sellers in Urban Enterprise Zones (UEZ) and specific Salem County businesses might charge a reduced 3.3125% rate on qualifying sales in parallel to program rules.
What sales are taxed in New Jersey?
General retail sales of tangible goods, specified digital products and particular services are taxable in New Jersey — unless an exemption applies.
Digital products and service descriptions on invoices deserve extra attention, as taxability might turn on those details.
What are the main New Jersey sales tax exemptions?
New Jersey sales tax exemptions, in general, apply to everyday essentials and to specific transactions where the buyer satisfies qualifications in line with the law. We can exemplify them as below:
- Most grocery food — unprepared
- Most clothing and footwear
- Prescription drugs & many over-the-counter drugs
- Disposable paper products for household use
- Sales for resale — inventory bought to resell, with the right paperwork
How should a business document exemptions?
Taxpayers should hold the necessary exemption certificate on file since an exemption without documentation can turn into tax due afterwards.
Which everyday purchases are generally taxable in New Jersey?
Everyday purchases are taxable in New Jersey when they are non-essential retail items or taxable services. Yet, specific essentials are treated as exempt.
What records should you keep for New Jersey sales and use tax?
Save records that have an explanatory nature regarding your tax choices and support the return totals as outlined below:
- Sales reports that link with your accounting system
- Exemption certificates & resale documentation
- Purchase receipts for out-of-state buys where use tax might apply
What is New Jersey use tax?
New Jersey use tax is owed when a taxable item or service is bought outside the state for use in New Jersey — and the proper tax wasn’t collected.
It is generated when:
- An out-of-state seller doesn’t charge New Jersey tax
- A business buys taxable supplies/equipment from outside New Jersey
- Inventory bought tax-free for resale is used by the business instead
How do you calculate New Jersey use tax?
Taxpayers calculate use tax by applying the New Jersey rate in effect at purchase. Afterwards, they reduce it by any allowed credit for tax legally paid to another state — when credits are permitted.
When does a business have to collect New Jersey sales tax?
A business should collect New Jersey sales tax once it has nexus. Such a nexus can be created by physical presence or by satisfying the remote seller economic threshold.
What is New Jersey economic nexus?
New Jersey economic nexus is generated when a remote seller’s sales delivered into New Jersey exceed $100,000 in the current/prior calendar year — or when the seller has 200 or more separate transactions delivered into the state in the current/prior calendar year.
New Jersey’s guidance presents that the $100,000 threshold can cover specific nontaxable retail sales once you total the New Jersey-delivered sales.
When do you start collecting after you cross the threshold?
New Jersey generally allows up to 30 days to register and begin collecting after you fulfill the threshold.
Do marketplace sales change the answer?
Marketplace facilitators are generally required to collect and remit tax on marketplace transactions delivered into New Jersey.
How do you register and stay compliant in New Jersey?
Taxpayers stay fully compliant by registering when required, charging tax correctly, filing proper returns and holding record data that comply with the numbers on the returns. The process is presented below:
- Map what you sell — taxable, exempt, and “depends on details” items
- Check nexus in New Jersey and anywhere else you have customers
- Register and set up systems in order for the right tax to be charged and shown on invoices
- Collect certificates before treating a sale as exempt
- File, pay and reconcile so sales totals agree with the books.
What mistakes result in surprises with New Jersey sales and use tax?
Such surprises come from small gaps in day-to-day habits.
- Missing exemption certificates
- Unpaid use tax on out-of-state business purchases
- Crossing the remote seller threshold and not registering
- Posting taxable and exempt revenue to the same bucket in the books
Wasserman Accounting assists with New Jersey sales and use tax?
Wasserman Accounting partners with NJ businesses in order to confirm taxability, organize exemption support and manage registrations and filings.
If you need professional support, contact us today.
FAQs
What items are exempt from sales and use tax in New Jersey?
Specific essentials fall under New Jersey sales tax exemptions. They cover most unprepared grocery food, most clothing and footwear. and many prescription medicines. Therefore, the New Jersey sales tax rate usually won’t apply. If no tax was charged and the purchase is exempt, New Jersey use tax is generally not due.
What does New Jersey not tax on?
New Jersey sales and use tax generally doesn’t apply to everyday necessities like most unprepared food and most clothing and qualifying medicines and medical items in parallel to New Jersey sales tax exemptions.
What clothing is tax-free in New Jersey?
Most everyday apparel and footwear is exempt in accordance with New Jersey sales tax exemptions. Therefore, the New Jersey sales tax rate is generally not added at checkout. Specific items that look like clothing like certain accessories can be treated differently.