Sales tax is a tax imposed on the retail sale of goods and services in New Jersey. The current New Jersey sales tax rate is 6.625%, which includes the state sales tax rate of 6.625% plus any applicable local sales taxes. This makes New Jersey one of the states with the highest sales tax rates in the U.S.
Sales tax is collected by merchants or sellers at the point of purchase and then remitted to the state. Use of the sales tax helps pay for important services that benefit New Jersey residents. Understanding sales tax obligations is crucial for all New Jersey businesses and consumers.
This comprehensive guide provides an overview of the New Jersey sales tax including:
- New Jersey sales tax calculator
- What transactions are taxable
- Exempt items
- Sales tax licenses
- Filing sales tax returns
- Allowed sales tax deductions
- Penalties for noncompliance
- Sales tax administration in New Jersey
So whether you are a business owner, tax professional or New Jersey consumer, read on to learn everything you need to know about New Jersey sales tax.
New Jersey Sales Tax Calculator
The New Jersey sales tax rate is 6.625% of the retail sales price of taxable items purchased in New Jersey. This includes the state sales and use tax rate of 6.625%. However, local sales taxes can raise the rate even higher in some areas.
The New Jersey sales tax calculator below makes it easy to find the sales tax and final total cost on any taxable purchase in New Jersey on different locations.
Nebraska Sales Tax Calculator
This calculator automatically applies the 6.625% New Jersey sales tax rate and calculates the total cost including tax. Simply enter the total purchase price to find the sales tax amount and final price owed.
New Jersey State Sales Tax Rate
- State sales tax rate: 6.625%
New Jersey levies a uniform 6.625% statewide sales and use tax.
What Transactions Are Taxable in New Jersey?
New Jersey imposes sales tax on the retail sale of most tangible personal property and certain services. Some of the transactions subject to the 6.625% New Jersey sales tax include:
- Sale of clothing and footwear
- Furniture and home furnishings
- Electronics like phones, computers and home appliances
- Toys, games and hobby supplies
- Jewelry, watches and accessories
- Sporting goods and equipment
- Books, stationery and office supplies
- Alcoholic beverages
- Nonprescription drugs and health products
- Cosmetics and personal care items
- Flowers, gifts and souvenirs
- Automotive supplies and equipment
- Admissions to recreational/entertainment events
- Prepared foods and drinks
- Hotel rooms and accommodations
- Parking, car washes and car services
- Dry cleaning and laundry services
- Pet grooming and boarding
- Limousine services
- Software sold over the counter
- memberships fees for gyms or fitness centers when enrollment is in NJ
In general, all retail sales of tangible personal property are taxable unless specifically exempted. Services may also be taxable in New Jersey if listed in the law.
Some exceptions to the general rule of taxability include:
Exempt Items in New Jersey
While most tangible goods are subject to New Jersey sales tax, there are some exemptions. Some of the more common exempt items include:
- Most groceries and unprepared food items
- Prescription drugs and over-the-counter medications
- Medical supplies and equipment
- Motor vehicle purchases or leases
- Clothing and footwear (exempt Aug. 1 to Aug. 31)
- Farm equipment and machinery
- Commercial trucks, tractors and trailers
- Newspapers, magazines and periodicals
- Cigarettes and tobacco products
- School textbooks
- Internet access
- Self-storage units
- Live animals
- Room accommodations for nonprofit organizations
- Hypodermic syringes and needles
- American flags
Services that are exempt from sales tax in New Jersey include:
- Professional services like legal, accounting, financial services
- Auto repairs and maintenance
- Employment services and agencies
- Advertising services
- Computer system design services
- Waste collection and disposal
- Business support services
- Education services
So while the general New Jersey sales tax rate is 6.625%, many transactions are exempt and have an effective tax rate of 0%. Always check if a purchase qualifies for exemption before collecting sales tax.
What is restaurant tax in NJ?
In addition to the standard sales tax, New Jersey imposes a tax on prepared food and drinks purchased at restaurants, bars, and other food service establishments. This is known as the restaurant tax or meals tax.
The restaurant tax rate in New Jersey is 7% as of 2024. This 7% tax applies to purchases of prepared food items meant for immediate consumption on-premises or carried out. The tax covers everything from dining at restaurants to getting takeout to buying food from caterers.
However, the restaurant tax does not apply to food that is not meant for immediate consumption, such as grocery items. It functions as a sales tax specifically targeting prepared foods. The restaurant tax is applied on top of the statewide 6.625% regular sales tax.
Obtaining a New Jersey Sales Tax License
The New Jersey Sales and Use Tax Act requires all retailers engaged in business in the state to register for a sales tax license. This includes:
- Businesses located in New Jersey
- Retailers with a physical presence in the state (like warehouses or stores)
- Remote sellers who make a certain amount of sales into New Jersey
To register for a New Jersey sales tax license:
- File Form NJ-REG online or by mail
- The form requests business information including name, address, owners, etc.
- There is no fee to obtain a sales tax license in New Jersey
After approval, the state will issue a New Jersey Certificate of Authority. This sales tax license must be prominently displayed at all business locations.
Sellers who fail to register and collect New Jersey sales tax are subject to penalties. Out-of-state sellers exceeding $100,000 in annual sales into New Jersey or 200+ transactions must register.
Having a New Jersey sales tax license enables businesses to purchase inventory and materials tax-exempt for resale. Vendors must collect a valid New Jersey tax ID or exemption certificate to apply any sales tax exemptions.
Filing New Jersey Sales Tax Returns
Retailers with a New Jersey sales tax license must file regular sales tax returns to report and remit the sales tax collected. The filing frequency depends on the seller’s total tax liability:
- Monthly – If expected annual liability is $500 or more
- Quarterly – If expected annual liability is less than $500
Returns must be filed electronically and payments can be made electronically or by mail. The due dates for New Jersey sales tax returns are:
Monthly: 20th of the following month
Quarterly: - Q1 (Jan-Mar) - April 20 - Q2 (Apr-Jun) - July 20 - Q3 (Jul-Sep) - October 20 - Q4 (Oct-Dec) - January 20
Every sales tax return must report total gross sales, taxable sales, exempt sales, sales tax collected and total tax due. Records of individual transactions should be maintained for at least 4 years in case of an audit.
Allowed New Jersey Sales Tax Deductions
New Jersey sales tax licenses allow businesses to purchase inventory, materials, supplies and services exempt from sales tax by issuing a valid New Jersey exemption certificate. Common exemptions include:
- Purchases for resale
- Raw materials incorporated into finished products
- Packaging and shipping materials
- Items used directly in manufacturing
- Utilities like gas, electric and steam used in production
- Contractor services for building/improving real property
- Farm equipment and machinery
- Commercial trucks, trailers and tractors
Businesses can also deduct sales tax paid to suppliers on exempt transactions when filing their sales tax returns. Proper exemption certificates or proof of tax paid must be maintained.
Penalties for Not Complying with New Jersey Sales Tax Laws
Failing to register for a sales tax license, collect required tax, file returns or remit payments can lead to severe sales tax penalties in New Jersey including:
- Failure to file penalty – 5% of tax due per month up to 25% maximum
- Failure to pay penalty – 5% of tax due
- Insufficient funds penalty – $50 fee for bounced checks
- Failure to register penalty – up to $500 initial penalty and $200 for each additional month not registered
- Fraud penalty – up to 50% of past due taxes
- Repeat late filer penalty – up to 10% of past due taxes
- Underpayment penalty – up to 30% of additional tax assessed
Criminal charges may also apply for egregious tax evasion. It is crucial for all New Jersey businesses to comply fully with sales tax license, collection, filing and payment regulations to avoid substantial penalties.
New Jersey Sales Tax Administration
The New Jersey Division of Taxation administers sales tax collections and enforcement throughout the state. They provide resources to help businesses comply including:
- Educational seminars and webinars on NJ sales tax
- Online tutorials
- Tax bulletins and technical guidance
- Online tax services for filing and account management
The state has 12 regional offices to assist taxpayers and enforce compliance. Support options include:
- Phone assistance from Customer Service Center agents
- Audit and field investigation of businesses
- Prosecution of tax crimes
The state works to enforce sales tax laws evenly across all businesses in New Jersey. By educating businesses on proper compliance, the state aims to achieve high voluntary compliance rates.
Conclusion
New Jersey has one of the highest sales tax rates in the U.S. at 6.625% plus any local sales taxes. The tax applies to retail sales of most goods and some services in the state. Understanding New Jersey sales tax obligations, exemptions, filing procedures and potential penalties is crucial for businesses and consumers.
Use a New Jersey sales tax calculator to estimate the tax on taxable purchases. Consult the New Jersey Division of Taxation’s website for up-to-date information and guidance. Complying fully with sales tax registration, collection, filing and payment regulations can help businesses avoid expensive penalties.
Proper sales tax compliance and planning enables both businesses and consumers to make most of their spending and ensure tax costs are handled properly. This comprehensive guide provides an overview of key aspects of the New Jersey sales tax to help taxpayers fully understand their rights and responsibilities.
FAQs
Is sales tax more in NJ or NY?
The sales tax rate is higher in New Jersey than New York. New Jersey has a statewide sales tax rate of 6.625%, compared to New York’s 4% statewide rate.
However, when combined with local sales taxes, the average sales tax rate is very similar in the two states. The average sales tax in NJ is 6.9% when accounting for county/city rates, while the average sales tax in NY is 8.5%.
So while the statewide rate is higher in New Jersey, the combined state + local rates make the two states reasonably comparable overall for sales tax burdens.
Is there VAT in New Jersey?
No, there is no VAT (value-added tax) in New Jersey. VAT is a type of consumption tax that is very common in Europe but not used in the United States. Sales tax in NJ is an ad valorem tax, meaning it is based on the value of the good purchased.
The only type of VAT in the U.S. is the Michigan Business Tax, which has some VAT components but is not a full VAT. Only the state sales tax exists in New Jersey, unlike the VAT which applies along stages of production.
Are clothes tax free in New Jersey?
No, clothing is not tax-free in New Jersey. Clothing purchases under $175 are tax-exempt in New York, but no such exemption exists in New Jersey. The full 6.625% state sales tax rate applies to clothing purchases in NJ, with no exceptions.
Some specific clothing items may be tax-free in New Jersey if considered protective equipment, such as safety gloves. But regular clothing and shoes are subject to sales tax. Certain exemptions apply for charities and schools. Overall, clothing is still considered a taxable item in the state of New Jersey.
