2020 may bring more parking taxes in New Jersey
Many parking fees are already subject to the state sales tax in New Jersey. Due to the recent enactment of Assembly Bill 5070, certain municipalities can now impose an additional local parking tax.
Existing taxes on parking
State sales tax already applies to numerous charges to garage, park, or store a motor vehicle, including valet parking services. However, fees for the following are excluded from sales tax:
- Employee parking (when provided by an employer or at a facility owned or operated by the employer)
- Municipal parking
- Parking fees at Atlantic City casino hotels
- Charges to garage, park, or store a motor vehicle when the fees are subject to tax under any other law or ordinance (e.g., a municipal parking tax)
- Residential parking (parking provided to the occupants of a residence)
Details about the current policy and above exceptions are available in the New Jersey Division of Taxation’s Publication ANJ-23 and Tax Notes: Parking, Storing, or Garaging a Motor Vehicle.
New municipal taxes on parking
AB 5070 authorizes any municipality with a population of 100,000 or more to impose a mass transit access parking tax of 3.5% on fees to park, garage, or store motor vehicles. Qualifying municipalities that adopt a parking tax may require parking facilities to accept credit cards. Population is to be determined by the most recent American Community Survey five-year estimate by the United States Census Bureau.
The 3.5% tax is in addition to an existing 7% surcharge municipalities may collect under C.40:48C-1.6, and the 15% tax they may collect under C.40:48C-6. Since parking taxes can add up, AB 5070 authorizes residents of the municipality to apply for a discount of up to 8%. To qualify for the discount, the resident’s vehicle must be:
- Individually owned by the applicant
- Registered to the applicant’s primary residence (in the municipality)
- Parked in a long-term rented space for at least one month
- Used only for personal, noncommercial purposes
Charges to park on the premises at a private one- or two-family dwelling are exempt from the 3.5% municipal parking tax.
Residents of the municipality are always exempt from the full 3.5% parking tax, but how the exemption is applied varies depending on the duration of the parking: Fees for short-term parking must be charged to residents, who may then apply for a full rebate; fees for long-term parking shouldn’t be charged if the resident displays proof of residence. (That will be fun for parking businesses to manage.)
Revenue generated by the tax may be used only to fund or finance budgeted capital improvements for pedestrian access to mass transit stations, such as bridges, elevators, escalators, platforms, tunnels, and walkways. Yet if there’s an excess of revenue in a fiscal year after all budgeted projects are completed, any remaining revenue may be used to fund projects that will improve the quality of life within the municipality.
The measure takes effect immediately.
To learn more about sales tax in the Garden State, check out our New Jersey sales tax guide.
The 2021 sales tax changes report: midyear update
Your guide to navigating the complicated world of tax compliance and preparing for the future
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