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New Jersey Set to Tackle Internet Sales Tax

  • Jan 25, 2012 | Susan McLain

In a recent report by Rutgers University, three methods were used to come up with estimates of how much revenue is being left on the table by not requiring internet retailers to collect and remit sales taxes on purchases made by New Jersey residents.

In the first method, “a sales-based approach,” the estimate came to $52 million - $171 million of lost revenue.

In the “…analysis of estimated Use Tax obligations by income level reflected in the NJ-1040 Income tax filing forms,” the estimate came to $158 million for “…out-of-state purchases (including Internet, catalog, phone order sales, and physical purchases made out of state).”

The third method is “an econometric equation measuring the relationship between broadband penetration into New Jersey households and Sales and Use Tax revenues.” This method estimated $608 million “…in foregone Sales and Use Tax revenues.”

In addition to these numbers, the study indicated that additional economic activity could include “…up to 1,440 jobs, up to $44 million in income, and up to $95 million in gross domestic product for the state annually.”

With the 2011-2012 legislative session, the New Jersey legislature has submitted several bills to modify law and ensure the capability to require collection duties of Internet-based retailers. Companion bills S1305 and A2003 have been submitted to the Assembly and Senate as well as S905. The text is primarily the same and both senate bills are sponsored by Senator Lesniak (D).

The basic description of these bills is “Revises sales and use tax to specify certain persons deemed to be sellers and to clarify tax collection responsibilities of certain other persons and agents.”

The Rutgers report was commissioned by the New Jersey Retail Merchants Association (NJRMA), who share the opinion of Mercer Regional Chamber of Commerce President and CEO, Robert Prunetti, that internet businesses should be collecting and remitting sales tax on New Jersey resident purchases.

Currently, New Jersey Governor Christie reported in his FY 2012 Budget Summary that New Jersey has forecasted a sales tax revenue of $8.078 billion for fiscal year 2012. This forecast is greater than any of the previous four years of sales tax revenue.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Susan McLain
Avalara Author Susan McLain
Susan McLain began her career as a technical writer in technology industries such as satellite networking and medical devices. Her skills encompass technical and marketing writing, usability engineering, verification and validation testing and protocol writing, requirements development, business analysis, technical illustration/graphic design and marketing. She has owned her own business providing service to small to medium sized business and in other positions, she has been in project management, documentation and marketing. She is currently the content specialist for Avalara helping to “make sales tax less taxing.”