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New Jersey Savvy Shoppers Know About Use Tax

  • Feb 5, 2015 | Gail Cole

 Shop in NJ malls and you pay sales tax. Shop in other states and you owe NJ use tax.

What’s the best way to get taxpayers to remit use tax? Perhaps flattery.

The New Jersey Department of the Treasury Division of Taxation is reminding “savvy” shoppers—those who buy items online and through mail order—to pay use tax when “taxable goods and services are purchased out-of-State for use in New Jersey and sales tax is not collected or sales tax is collected at a lower rate than New Jersey’s 7% rate of tax.” New Jersey has no local sales and use taxes.

The Division of Taxation goes on to say that “it is the responsibility of the New Jersey resident to submit use tax” on taxable goods purchased in a state with a lower rate of sales tax or from a remote vendor not required to collect sales tax. Several examples are provided, including the following:

  • A New Jersey resident purchases a computer from a retail website and does not pay sales tax at the point of sale. Use tax is due on the purchase price, plus any shipping charges.
  • A New Jersey resident purchases a software update and downloads it onto a home computer. No NJ sales tax is charged. Use tax is due.
  • A New Jersey resident travels to New Hampshire (a state without sales tax) and purchases a table for his home in NJ. Use tax is due.

For items purchased in a state with a rate of tax lower than the New Jersey rate, New Jersey generally “will allow a credit for the amount of tax paid to that state.” The following example is provided to illustrate the point:

  • “On a trip to Maine a New Jersey resident purchases an antique desk for $4000 and pays the 5% Maine sales tax of $200. The purchaser owes the additional 2%, or $80, as New Jersey use tax.”

Use tax is not due if a New Jersey resident pays sales tax in a state with a rate equal to, or higher than, the rate in New Jersey.

Prove it

New Jersey use tax should be reported on the New Jersey Resident Income Tax Return (Form NJ-1040), and remitted along with income tax.

Taxpayers should keep receipts to document out-of-state purchases and remote (online, mail order, etc) purchases. “If you are unable to document specific purchases that are subject to use tax, a chart based on income ranges is provided in the return instructions.” Additional information is provided on The Savvy Shopper.

Simplify sales and use tax management in New Jersey and other states. Learn more.

photo credit: IMG_1084 via photopin (license)

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.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.