Should you collect sales tax in New Jersey?
Sales tax is levied on retail selling tangible personal property to your customers, including leasing or renting. However, you will collect the sales tax if you determine the nexus in New Jersey. A nexus is a presence that may come physically or economically.
A physical nexus is typically created when your business has a New Jersey store, warehouse, or office. An economic nexus is intertwined when you cross paths with threshold limits as already stipulated by the state. These thresholds can be on revenue or some other transactional basis.
Let’s explore if your business has a Physical nexus in New Jersey.
A physical nexus is integrated when your business is engaged in the following in New Jersey:
- Selling tangible personal property in New Jersey.
- Maintaining, occupying, or using a place of business or an office in New Jersey.
- Employing or retaining any contractor, including an agent, representative, or salesman, by whatever name called, engaged in activities relating to selling, delivering, installing, or taking business orders.
- You have a stock of goods in New Jersey.
You may also refer to the New Jersey Revenue Department advisory to know more about business activities that may create a physical nexus within the state.
Constituting an Economic Nexus in New Jersey?
Suppose you are a remote seller (i.e., one who doesn’t have a physical presence in the state), and your business sales in New Jersey exceed $100,000 or have made 200 or more transactions during the current or previous calendar year. In that case, you must comply with and register under sales tax rules.
Click here for official guidance.
How can you Register for Sales tax in New Jersey?
You must apply online at the New Jersey registration portal to get a sales tax permit in New Jersey.
Additionally, before applying for a new tax account number, make sure you have the following information handy:
- FEIN and Social Security numbers of all officers, partners, or owners.
- Address details (physical and mailing).
- Business incorporation dates in New Jersey.
- Contact information.
- Nature of business.
- NAICS Code.
For more information, click here.
Is your product or services liable to Sales tax in New Jersey?
Tangible Property: Sales tax in New Jersey is imposed primarily on the retail sale of tangible personal property, such as Furniture, giftware, toys, etc.
Services: In New Jersey, sales tax is charged on many services, such as cleaning, telecommunication services, storage service charges, pest control treatment, etc. For more information, click here (pg. 14).
Digital Product: New Jersey charges sales tax on digital products. So, you must collect the sales tax if you sell digital products such as software, streaming services, e-books, etc. Here is what New Jersey says about digital transactions.
SAAS: SAAS is software that allows users to connect to the cloud and use it over an internet connection. It is non-taxable in New Jersey. Click here for the guidance issued by the state on SAAS.
The state provides certain exemptions from the sales tax levy, such as food for home consumption, prescription drugs, manufacturing equipment, etc. To see all information on exemptions, please click here.
How should you collect and calculate state taxes in New Jersey?
Collecting and computing accurate sales tax to be remitted to the state may involve stratospheric efforts, especially when you are not New Jersey-based. The sales tax is destination-based in New Jersey, which means you must collect taxes on tangible property sold to buyers based in New Jersey.
Complexities are involved where you have a business nexus, even if not in the state. Any default may lead to severe concerns, penalties, or fines by the state. That is what TaxDo is here for you! Our specialized sales tax calculator and professional services will simplify your job and lighten your compliance burden.
New Jersey has a base sales tax rate of 6.625% and no local tax rates.
Below is the simple formula you can use to calculate your sales tax collection on each merchandise sold:
Sales Tax collectible = Sale value * (6.625%)
Do you need to collect sales tax on Shipping Charges?
If non-taxable items are sold, shipping charges associated with such a sale are not subject to sales tax. However, when the sale includes taxable and non-taxable items, shipping charges need to be apportioned relatively between the taxable and non-taxable parts of the sale. Accordingly, sales tax applies to the taxable portion of the sale. For official guidance, click here.
How should you file sales tax in New Jersey?
E-file: You can e-file your return using EZ File Systems. The ST-51 form is used for monthly returns, whereas the ST-50 is filed for quarterly returns.
Payments along with returns are also to be remitted. EZ file Systems are used to make online payments. The state accepts payments through checks, EFT, credit cards, etc. Visit the New Jersey Revenue Department website for more information or contact us with any doubts.
Even if your sales tax liability is zero, you must file the return to avoid penalty or interest.
Filing frequencies and due dates
Based on your reported sales tax or estimated taxable sales, the New Jersey Department of Revenue assigns you a filing frequency, which can be Monthly or Quarterly. Quarterly frequency is assigned when your sales tax collections are below $500.
According to your filing frequency, the due date for filing sales tax would be the 20th Day of the month following the relevant reporting period.
Note: If the due date is a holiday or weekend, the next business day will be considered the final due date. Use the New Jersey official website link to learn about due dates and filing frequencies.
Are there any fines or penalties for default when filing or paying sales tax?
The state levies a penalty of 5% of sales tax due for late filings subject to a maximum of 25%. You will also be charged interest on unpaid tax at the prime rate plus 3% p.m., compounded annually. Go through the comprehensive guide of penalties and interest issues by the New Jersey Department of Revenue.
However, assigning your tax burden to TaxDo would not result in you paying any penalty or interest. We will adhere to the due dates.
Sales tax holiday in New Jersey
The New Jersey sales tax holiday applies to specific computers and back-to-school items. For 2024, it will start on 24 August (12:01 a.m.) and end on 2 September (11:59 p.m.). For detailed information on the sales tax holiday, refer to the New Jersey Revenue Department advisory here.