By: Cassandra Bartole
For most New Jersey Business owners, New Jersey assesses a tax on sales of most tangible personal property, specified digital products, and certain services unless specifically exempt under New Jersey law. This article will cover the most important aspects of New Jersey’s sales tax rules:
What Items are Taxable in New Jersey?
Most things that we purchase have a sales tax. In New Jersey, the sales tax rate is 6.625%. You may notice that sales tax is being charged at the bottom of your receipt the next time you go shopping. Items that are subject to sales tax in New Jersey are physical items such as automobiles, furniture, fixtures, and meals bought at restaurants.
Are Services Subject to Sales Tax in NJ?
In New Jersey, there are also many services that are subject to sales tax. These would include primarily both maintenance services and repair services including lawn maintenance, auto repairs, snow removal, and telecommunications.
What Items Are Not Taxed in New Jersey?
Although there are many taxable items in New Jersey, there are also many items that are tax exempt. These items include unprepared food, clothing, some professional and personal services, and real estate sales, to name a few.
Sales Tax on Labor
For contractors, if the work they have done is an exempt capital improvement (such as installing a new heating system or installing new kitchen cabinets) they do not charge sales tax on the labor portion of the bill, but if the work is repairs or maintenance then the contractor charges sales tax on the labor portion of the bill.
In some situations, the difference between a repair and a capital improvement is the extent of the work that is done. For example, replacing a few loose bath tiles or a portion of a leaky roof is a repair to the existing property. However, replacing all the tiles or the entire roof with an upgraded or improved materials would be an exempt capital improvement.
Sales Tax on Labor outside of New Jersey
For contactors where sale and installation outside of New Jersey occur, they do not collect New Jersey sales tax on the installation charges.
Sales Tax for Customers Outside of New Jersey
For most sales tax is due in the state where the customer takes possession or delivery of the items they purchased. According to the state of New Jersey, any tangible property serviced or repaired in New Jersey and delivered to the purchaser outside of New Jersey is exempt from New Jersey sales tax. If a business is located outside of New Jersey but makes sales within New Jersey they are required to register with New Jersey and charge/collect New Jersey sales tax on taxable items delivered to customers in the state of New Jersey.
New Jersey Sales Tax on Online Purchases
The 6.625% tax rate for sales tax in New Jersey also applies for online sales.
The above article is meant to provide guidance on sales tax but is certainly not inclusive of all aspects of New Jersey sale tax. We strongly encourage our readers to read more around New Jersey sales tax through the following publications: