Thanks to changing laws, more and more online sellers are having to collect and pay sales tax in states other than where their business is based. In this post I’ll cover the most common examples of when online sellers have to register as a business in New Jersey and collect sales tax from customers. If your business doesn’t fit into one of the following examples and you’re unsure how to comply, your best bet is to consult with a tax professional.
You’re an online seller but you don’t live in New Jersey
If your business is based in any state other than New Jersey and you don’t have an employee, contractor, goods in a warehouse or some other business tie to New Jersey (i.e. “sales tax nexus” in New Jersey) then that means you’re not required to register your business with the state and you don’t have to collect sales tax on items being shipped to customers in New Jersey.
You live and/or operate your business in New Jersey
If you’re like a lot of online sellers, where you live where you operate your business are one in the same. If you’re an online seller living in New Jersey shipping from home then you are required to register your business with the state. By registering you are obligated to collect sales tax on taxable items shipped to addresses in the state. I’ll talk about how much to collect a little later in the post.
You’re an online seller living out-of-state using a fulfillment service
This is a really common example we see at TaxJar. This is when an online seller lives in one state but has inventory being stored or warehoused in another state. That’s considered inventory nexus – a presence in a state that means you’re required to register and collect sales tax in that state where your inventory is being stored and shipped to customers. The most common example is when online sellers use Fulfillment By Amazon (FBA).
As of this writing, there are two Amazon fulfillment centers in New Jersey: in Robbinsville (Mercer County) and Avenel (Middlesex County.) If you use FBA, or any other fulfillment service that stores and ships your items from New Jersey, then you have nexus in New Jersey and you have to collect sales tax on items shipped to addresses in New Jersey.
To find out if you have Amazon FBA items stored in New Jersey, you can pull this Amazon report or login to your TaxJar account and look for the brown Amazon badge next to the state of New Jersey.
Collecting sales tax from your customers
How much sales tax to collect is thankfully not as complicated in New Jersey as it is in other states like Washington or New York. That’s because New Jersey’s rules are simple: collect 7% on every transaction regardless of where it’s being shipped from or where it’s being delivered (in the state). So, for example, you live and operate your business in Trenton and are shipping an order to Morristown. The correct sales tax rate to charge on that transaction is 7%. Easy, right?
New Jersey does not impose a local tax on top of the 7%. That’s why the rate is the same on every transaction, regardless of origin or destination.
Filing sales tax in New Jersey
If you need to file a sales tax return in New Jersey, TaxJar has your back. You can now enroll in AutoFile for the state of New Jersey and we’ll automatically file your sales tax return for you! Find out more at TaxJar.com.
Summary: if you have nexus charge 7%
The two most common ways to have nexus in New Jersey is to either operate your business there or store/warehouse your inventory in the state. If you do have nexus, register your business with the state and collect 7% sales tax on every transaction that is delivered to an address within the state.
Have any questions about selling online and doing business in New Jersey? Let’s talk in the discussion section below.
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