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The 2024 New Jersey Use Tax
7.00%
2024 New Jersey state use tax
The NJ use tax only applies to certain purchases
The New Jersey use tax is a special excise tax assessed on property purchased for use in New Jersey in a jurisdiction where a lower (or no) sales tax was collected on the purchase.
The New Jersey use tax should be paid for items bought tax-free over the internet, bought while traveling, or transported into New Jersey from a state with a lower sales tax rate.
The New Jersey use tax rate is 7%, the same as the regular New Jersey sales tax. Including local taxes, the New Jersey use tax can be as high as 0.000%.
What exactly is the New Jersey use tax?
The New Jersey Use Tax is a little-known tax that complements the regular New Jersey sales tax to ensure that purchases made outside of New Jersey are not exempt from the New Jersey sales tax.
Instead of taxing the sale of tangible property which takes place outside of New Jersey's jurisdiction (and thus cannot be taxed), the New Jersey Use Tax taxes the use or consumption of tangible property bought in other jurisdictions with a lower sales tax rate and brought back into New Jersey.
How Do I Calculate How Much Use Tax I Owe?
If you made any purchases online or outside of New Jersey for which you paid less then New Jersey's 7% in sales tax, you are responsible for paying New Jersey a use tax on those purchases equal to 7% of the total purchase price less any sales taxes already paid to other jurisductions.
Example 1: If $100 worth of books is purchased from an online retailer and no sales tax is collected, the buyer would become liable to pay New Jersey a total of $100 × 7% = $7.00 in use tax.
Example 2: If a $10,000 boat is purchased tax-free and then brought into a jurisdiction with a 5% sales tax rate, the buyer would become liable to pay New Jersey a total of (7% - 5%) × $10,000 = $700.00 in use tax.
Example 3: If $1,000 worth of goods are purchased in a jurisdiction with a 8% sales tax rate, no use tax is owed to New Jersey because the foreign jurisdiction's sales tax rate is greater then or equal to New Jersey's 7% sales tax.
How do I pay the New Jersey use tax?
In many states, an optional field for remitting use tax is included in the state income tax return. A use tax return form may also be available on the New Jersey Department of Revenue website for calculating and paying use tax.
Above: Example use tax field on a state income tax return
Use tax is a self-assessed tax with a very low public awareness rate, and as a result states have a very hard time enforcing use tax compliance. Only about 1.6% of taxpayers pay use tax each year, remitting an average of $69 in use taxes on total purchases averaging $929. [1]
Government studies have shown that a large percentage of use tax payments are made as the result of an audit or under the threat of an audit. If unpaid use tax is discovered by a New Jersey tax audit, significant underpayment fees and interest may apply.
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