New Jersey Sales Tax Guide
Chapter 1: An introduction to New Jersey sales tax management
Sales tax is a tax paid to a governing body (state or local) for the sale of certain goods and services. First enacted in the United States in 1921, sales tax dates back to ancient Egyptian times where paintings depict the collection of tax on commodities. New Jersey first adopted a general state sales tax in 1966. Since that time, the rate has risen to 7. In the second quarter of 2015, the Division of Taxation reported $3,385,832 in revenue from taxes on general sales and gross receipts; 28.9% of total New Jersey state taxes.
As a business owner selling taxable goods or services, you act as an agent of the state of New Jersey by collecting tax dollars from purchasers and passing it along to the state and local tax authority. This is an important point worth emphasizing. Any sales tax collected from residents belongs to the Division of Taxation. As a business owner, it is your responsibility to manage the taxes you collect to remain in compliance with state laws and avoid penalty and interest payments.When does New Jersey sales tax need to be collected?
In New Jersey, sales tax is collected on the sale of tangible goods and some services. The tax is collected by the seller and remitted to state and local tax authorities. The seller acts as a pseudo-tax collector.Do I need to collect sales tax in New Jersey?
To better understand whether you need to collect sales tax in New Jersey, we've created a simple three step checklist you can use to get a better feel for your New Jersey tax situation:
- Do I have nexus in New Jersey?
- Am I selling taxable goods or services to New Jersey residents?
- Is my buyer required to pay sales tax?
If the answer to all three of the questions above is "Yes", then you are required by the Division of Taxation to collect, file, and remit sales tax.Does sales tax accept out-of-state resale certificates?
Yes! At the time of publication, the Division of Taxation is accepting out-of-state resale certificates.What happens if I don't collect any sales tax?
If you meet the criteria for collecting sales tax (nexus in New Jersey and selling taxable goods or services to taxable residents) and choose not to collect sales tax, you will be held responsible for the tax due. As such it is extremely important that you set up tax collection at the point of sale. Attempting to contact customers to collect sales tax after the fact is time consuming and unlikely to be fruitful.Is New Jersey a Streamlined Sales Tax (SST) state?
At this time, New Jersey is a full member of the Streamlined Sales Tax (SST) Agreement.What state sourcing rules apply to New Jersey?
New Jersey is a destination-based state. Destination-based states are those where the transaction location is defined as the customer delivery location rather than the shipping location of the business. As a seller in New Jersey, this means you are responsible for applying the sales tax rate determined by the ship-to address on all taxable sales.