NJ Sales Tax ID: Everything You Need to Know
A NJ sales tax ID, also known as a Certificate of Authority, is a requirement of every business in this state.3 min read
A NJ sales tax ID, also known as a Certificate of Authority, is a requirement of every business in this state. You will need this ID to legally collect sales taxes and must prominently display your ID in your business.
Getting a New Jersey Resale License
If your business purchases items and then sells those items to other people, you can avoid taxes on your purchased items by acquiring a New Jersey resale certificate. The most important step in obtaining your resale certificate is registering your business, which must be done with the New Jersey Division of Taxation.
Once your registration is complete, you will have to fill out some paperwork before you will be given your certificate. After your paperwork has been approved and your certificate issued, you will not need to pay sales tax on the items you purchase for your business with the intent to resell. Your customers, on the other hand, will still need to pay sales tax for their purchases.
To acquire your resale certificate, follow these five simple steps:
- Register your business online, by mail, or in person with the Secretary of State of New Jersey.
- Get an Employer Identification Number (EIN) from the IRS.
- Use your EIN to register with the New Jersey Department of Revenue so that you can pay and collect required taxes. Your EIN will serve as your New Jersey business tax ID.
- When purchasing items intended for resale, complete Sales Tax Form ST-3.
- Sign your resale certificate, which will then be valid for 90 days.
New Jersey Sales Tax
Two different taxes in New Jersey are related to sales. First is the normal sales tax, which is imposed on sales made in New Jersey. The sales tax applies to the sale of personal property, certain digital items, and enumerated services.
The second New Jersey tax related to sales is the use tax. This tax applies to sales of services or goods that will be used in New Jersey that were not charged the sales tax or were charged a sales tax rate lower than the rate in New Jersey.
Nexus Requirements in New Jersey
Whether out-of-state sellers are required to collect the New Jersey use tax is a complicated issue, and can depend on both state and federal regulations. In terms of federal regulations, the use tax will need to be connected if it can be proven that there is a connection between New Jersey and the sale.
If there is a connection between the sale and the state, the next step will be to decide if the seller actually conducts business in New Jersey. The State of New Jersey requires that retailers that conduct business in the state collect both use and sales tax. Unfortunately, the state has not provided a clear definition of what counts as doing business.
Generally, however, a few groups of sellers are required to collect these taxes, including:
- Those selling tangible property.
- Those receiving amusement charges.
- Those that operate a hotel.
- Anyone selling telecommunication services.
In New Jersey, a seller is considered someone whose business is physically located in New Jersey or a business that has an agent in the state that makes sales. If your business is physically located in New Jersey, and you sell items subject to taxes, you must collect sales tax when an item you sell is delivered in New Jersey or a service you provide takes place in New Jersey.
Local Tax in New Jersey
Fourth class cities in New Jersey have the right to charge a local tax on certain types of retail sales. Currently, Atlantic City is the only city in New Jersey that imposes this local tax.
The local tax is covered by the person making the purchase. Sellers are not allowed to cover this tax nor advertise to purchasers that they will cover this tax. Local taxes only apply within the territory of the city. If a sale takes place outside of the limits of the city in question, the local tax cannot be imposed. These local taxes can be imposed on nonresidents if the sale took place inside the limits of the city or a service was provided within the city.
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