Sales Tax in New Jersey: Everything You Need to Know

What is Sales Tax?

Sales tax is a consumption tax levied on the sale of goods and services. In New Jersey, the sales tax rate is 6.625%. This means that for every $100 you spend on taxable items, you will pay $6.63 in sales tax.

What is Taxable?

Most goods and services purchased in New Jersey are subject to sales tax. This includes:

• Clothing
• Food
• Beverages
• Appliances
• Electronics
• Furniture
• Services (such as haircuts, car repairs, and dry cleaning)

What is Exempt from Sales Tax?

The following items are exempt from sales tax in New Jersey:

• Food purchased for home consumption
• Prescription drugs
• Medical devices
• Educational materials
• Utilities
• Repairs to real property

How is Sales Tax Collected?

Sales tax is collected by retailers at the point of sale. The retailer will add the sales tax to the price of your purchase, and you will pay the total amount. Retailers are required to file sales tax returns with the New Jersey Division of Taxation on a monthly or quarterly basis.

What are the Different Sales Tax Rates in New Jersey?

The 6.625% sales tax rate is the general rate that applies to most goods and services. However, there are some special sales tax rates that apply to certain items, such as:

• 3.5% for food and beverages purchased for home consumption
• 5% for clothing and footwear
• 7% for hotel rooms

What are the Consequences of Not Paying Sales Tax?

If you fail to pay sales tax, you may be subject to penalties and interest charges. The Division of Taxation may assess a penalty of up to 25% of the unpaid tax, plus interest on the unpaid tax. You may also be required to pay the costs of collection.

Tax Filing Calendar

The following table shows the sales tax filing due dates for 2023:

Sales Tax Audits

The Division of Taxation may audit your business to verify that you are complying with the sales tax laws. An audit may be conducted on a random basis or if the Division of Taxation has reason to believe that you are not reporting all of your sales or are not paying the correct amount of sales tax.

Common Mistakes to Avoid

Here are some common mistakes that businesses make when it comes to sales tax:

• Failing to register for a sales tax permit
• Not collecting sales tax on all taxable sales
• Not filing sales tax returns on time
• Not paying the correct amount of sales tax

Conclusion

Sales tax is an important source of revenue for the state of New Jersey. It is important for businesses to understand the sales tax laws and to comply with them. Failure to comply can result in penalties and interest charges.