Cliff's Notes

New Jersey Sales & Use Tax

New Jersey Division of Taxation ! Technical Services Activity About New Jersey Taxes
Technical
Services
Rev. 4/08
What is Use
Tax?
The New Jersey Sales and Use Tax Act (N.J.S.A. 54:32B-1 et seq.) provides for use tax to be imposed
when taxable goods and services are purchased for use in New Jersey but sales tax was not collected by the
retailer in the state of purchase or was collected at a rate less than the New Jersey sales tax rate.
When sales tax is not collected at the time of purchase or is collected at a rate less than the current New
Jersey sales tax rate of 7%, the purchaser is liable for use tax to New Jersey.
Examples of when use tax is due:
• Taxable goods and services are purchased out of State for use in New Jersey and no sales tax is
collected. The purchaser owes use tax.
• Taxable goods and services are purchased out of State for use in New Jersey and sales tax is collected at
a lower rate than New Jersey’s. The purchaser owes use tax. See Reciprocity below.
• Items of inventory that were purchased tax-free with a resale certificate are used by the purchaser (e.g.,
are given away as part of a promotion). The purchaser owes use tax.
Out-of-State Purchases Received Outside New Jersey. When taxable goods and services are purchased
and received in another state and sales tax is paid to that state, New Jersey will allow a credit against the
use tax due, provided that the other state allows a similar credit for sales tax paid to New Jersey. If the sales
tax rate in a reciprocating state is equal to, or greater than, New Jersey’s 7% tax rate, no use tax is due.
If the sales tax rate in the state where the purchase is made is less than New Jersey’s, use tax is due at the
rate of 7%. However, if the other state has sales tax reciprocity with New Jersey, a credit for the sales tax
paid there is allowed against the use tax due. For example, if the out-of-State purchase was for $100 and the
sales tax rate was 4%, the purchaser paid $4 in sales tax. The New Jersey use tax is $7 (7% × $100), less a
credit for the $4 already paid, for a use tax due of $3.
Out-of-State Purchases Delivered to New Jersey. When taxable goods and services are purchased in
another state and delivered to New Jersey for use in New Jersey, no credit is allowed for sales tax paid to
the other state. Use tax is due at the rate of 7% of the purchase price, including delivery charges.
Purchases Made in a Foreign Country. When taxable goods and services are purchased in a foreign
country, no credit is allowed for sales tax paid to the foreign country, regardless of whether the purchaser
takes possession of the items there or has them delivered to New Jersey. Use tax is due at the rate of 7% of
the purchase price, including delivery charges.
When taxable tangible personal property or digital property is purchased from an out-of-State business and
the buyer takes possession of it in New Jersey, the seller will collect New Jersey sales tax if registered to do
business in this State. In that case, no use tax is due. On the other hand, an out-of-State business that is not
registered in New Jersey cannot legally collect New Jersey sales tax. If taxable merchandise is purchased
from an out-of-State business that does not charge New Jersey sales tax, it does not mean that tax isn’t due,
but rather that the seller is not authorized to collect it. In such instances, the purchaser is required to remit
use tax directly to New Jersey.
Reciprocity
Imposition of
Use Tax
Registered
Businesses

November 10, 2009 - Posted by Cliff's Notes Blog | 1