Every person or company engaged in a business, trade, or profession in New Jersey (other than as an employee), must register with the State for tax purposes. Retailers doing business in the State are required to collect sales taxes and remit them to the State. Each retailer obtains authority to collect sales taxes through a Certificate of Authority issued by New Jersey’s Division of Taxation. This Certificate must be prominently displayed at each retailer’s place of business.
However, some organizations can obtain exempt status for purchases, meaning that they do not need to pay sales taxes. These organizations must obtain an exemption certificates and must present them to retailers when purchasing goods and/or services that are generally subject to sales tax. The retailers must then keep the physical certificates for at least four years after the date of the transaction, and make them available for inspection by the Division of Taxation if it should request.
Exemption certificates are for specific uses, and may be in the form of a Resale Certificate, an Exempt Use Certificate, an Exempt Organization Certificate, or a SSUTA (Streamlines Sales and Use Tax Agreement) Exemption Certificate.
New Jersey Sales tax should also not be collected when the retailer is selling a product to a governmental entity, such as the State of New Jersey or any of its agencies, the federal government, the United Nations, or an international organization of which the United States is a member. However, as with exempt organizations, the retailer still must maintain proof of the exempt status. In this case, that proof may exist in a government purchase order, an official contract with the government entity, an order that was received on official government letterhead, or payment through a government check or payment from the United States of America directly. This does not necessarily include orders from or payments by a government employee who is later reimbursed by the government; it refers to transactions directly with the government.
Typically, foreign diplomats and consular personnel residing the in United States are also exempt from sales tax. These officials receive either a personal sales tax exemption card which is issued to an individual only, or a mission tax exemption card which is issued for a entity or group such as an embassy or consulate.
Also, when items are sold and delivered out of State , originating in New Jersey, they are not subject to New Jersey sales tax. However, the seller may be required to collect sales taxes for the non-New Jersey state where the purchaser takes possession or delivery of the item.
If a business or organization seeks to obtain exempt status to avoid the payment of sales tax, it must be approved by the Division of Taxation to receive an exempt certificate. The exemption covers rentals and purchases of goods, equipment, motor vehicles, meals, admissions, hotel and motel rooms, and services as long as the goods and/or services are directly related to the organization’s business or purpose.
Organizations may qualify to obtain exempt status if they are non-profit entities formed for certain, limited purposes. For instance the following nonprofit organizations may obtain tax exempt status: exclusively religious, charitable, educational, or scientific entities; groups formed for the prevention of cruelty to children or animals; volunteer emergency response services such as fire departments, emergency medical services or other rescue or first aid squads; veterans organizations; and parent-teacher associations.
It is important for both organizations who seek exempt status and retail businesses who sell to exempt organizations to be aware of the requirements for and rules governing exempt entities. McLaughlin & Nardi, LLC’s attorneys are experienced with advising and representing a wide range of businesses on various matters related to sales tax from litigation, to regulatory compliance, to tax consequences and planning. To learn more about what we may be able to do to help, please visit our website or contact one of our New Jersey lawyers by e-mail or telephone at (973) 890-0004.