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What Is Subject To Sales Tax In New Jersey?

We all pay taxes on almost everything we consume, whether we’re simply buying a can of soda, dining in our favorite restaurant, or hiring a professional’s services. Try checking your receipt every time you purchase certain goods, and you’ll see how much of your payment was part of the tax. This type of tax is known as a ‘sales tax.

A sales tax is a tax that a state or local government imposes upon the sale of goods and services. Typically, sales taxes are classified according to the stage of business activity they are imposed – whether at the manufacturing stage, wholesale transaction, or retail sale.

In any case, if you’re a seller or consumer residing in New Jersey, do you know which goods and services are taxable in your state? Here is everything you need to know about New Jersey sales tax.

New Jersey Sales Tax

Presently, the sales tax rate in New Jersey is at 6.625 percent, and the specially designated Urban Enterprise Zones rate for qualified businesses is half of the sales tax rate. 

The Sales and Use Tax Act of New Jersey taxes all retail sales of tangible personal property, specified digital products, and particular services unless specifically exempted by the Act. As such, if you run a business that offers taxable goods or services in New Jersey, you must manage the taxes you collect and send them to the proper tax authority.

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Sales Tax For Urban Enterprise Zones

New Jersey’s Urban Enterprise Zone (UEZ) program exists to foster economic development among economically distressed cities throughout the State. For sales of tangible personal property within these zones, qualified businesses with a UZ-2 certificate may charge half the regular rate of sales tax.

There are two conditions in place for the qualified UEZ seller to offer this reduced rate:

  1. The buyer must place the order in person at the seller’s business location in the zone.
  2. The seller must deliver the goods from its place of business in the zone, not from a different location.

If you’re wondering how your business can take part in the UEZ Program, here’s what you need to know:

  • Must be registered in New Jersey
  • Certified by the UEZ Program
  • Comply with New Jersey’s tax laws
  • Located within the 32 designated zones

You can refer to this step-by-step instruction for assistance. 

Taxable and Exempt Goods Under New Jersey Sales Tax

Most food and drinks bought in a food store (supermarket, grocery store, produce market, bakery, etc.) are not subject to Sales Tax, and some items may become taxable if they are sold as prepared food.

Here is a list of taxable and exempt goods under New Jersey Sales Tax:

1. Clothing and Footwear 

New Jersey does not impose a sales tax on clothing and footwear for daily use. Clothing includes shoes, socks, underwear, outerwear, hats, gloves, mittens, neckwear, and stockings. Baby blankets, bunting, diapers, diaper inserts, and baby pants are also included. This exemption, however, doesn’t apply to fur clothing, accessories, equipment, sport or recreation equipment, or safety gear (unless the safety gear is needed for the user’s daily work).

2. Food and Food Ingredients 

Purchases of food and food ingredients that are intended for human consumption are not subject to sales tax. It includes liquids, concentrated solids, frozen, dried, and dehydrated substances. However, certain items aren’t included, like cigarettes, alcoholic beverages, candy, and soft drinks.

3. Newspapers, Magazines, and Books

Newspaper sales are exempt from New Jersey Sales Tax, and subscription magazines and periodicals are exempt, regardless of whether they are accessed electronically. Magazines sold in single copies are taxable when sold in printed form but are exempt when delivered electronically, and membership magazines are also exempt.

On the other hand, sales of hardback and paperback books, as well as the Bible and other scriptural books, are taxed, no matter how the book is delivered: in hard copy or digitally.

4. Specified Digital Products 

When billed to a New Jersey address, New Jersey taxes retail sales of certain digital products and charges for installing, maintaining, servicing, or repairing those products. A specified digital product is an electronically transferred digital audio-visual work, digital audio work, or digital book.

Streaming services, video programming services (such as video-on-demand television), and broadcasting services, including content to provide such services, are not included in the definition of a digital product.

5. Prescription Drugs and Over-the-Counter Drugs

In New Jersey, prescription and over-the-counter (OTC) drugs do not require sales tax if the label identifies them as drugs, such as a “Drug Facts” panel. The OTC drug exemption does not cover grooming and hygiene products like soap or cleaning solution, shampoo, toothpaste, mouthwash, antiperspirant, suntan lotion, or sunscreen.

Claims For Refund Of Sales Tax

  1. Refunds Requested by Individuals from Sellers. If the seller charged and collected the wrong amount of New Jersey Sales Tax, the buyer may ask the seller for a refund of the Sales Tax paid. If the buyer can’t get the tax back from the seller, they can ask the Division of Taxation for a refund.
  2. Refunds Requested by Individuals From the Division of Taxation. To get a refund from the Division, a buyer must fill out a Claim for Refund (Form A-3730) within four years of when the Sales Tax was paid. To back up their claim, people must explain and submit supporting documents. Documentation includes copies of invoices, receipts, and proof that taxes have been paid.
  3. Refunds Requested by Businesses From the Division of Taxation. Businesses that incorrectly collected or paid Sales Tax to the State on their monthly remittance statement (Form ST-51) can only fix the mistake on their quarterly Sales Tax return (Form ST-50) if they find out about it within the same calendar quarter.

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