Sales Tax Transition Rules

The New Jersey sales and use tax rate decreases from 7% to 6.875% beginning January 1, 2017. Effective January 1, 2018, the rate is further reduced to 6.625%. On and after January 1, 2017, but prior to January 1, 2018, sellers authorized to charge the 50% reduced rate are required to charge and collect Sales Tax at the rate of 3.4375% on all qualifying taxable sales.

The UEZ status of five municipalities — Bridgeton, Camden, Newark, Plainfield, and Trenton  —  is set to expire at the end of 2016. Assembly Bill 4189 (3R) would extend the duration of the first five designated UEZs for two additional years. The Bill also specifies permissible use of UEZ funds and requires the Commissioner of Community Affairs to review and issue a report on the UEZ program. The bill has passed both Houses but awaits Governor Christie’s signature. The Governor conditionally vetoed an attempt by the Legislature earlier this year to extend the first five designated UEZ designations.

The New Jersey Division of Taxation has announced transition rules for the sales tax rate reduction from 7% to 6.875% beginning January 1 2017.

The rules apply to taxable transactions that begin before January 1, 2017, and are completed on or after January 1, 2017, but before January 1, 2018.

  • If the tangible personal property or specified digital products are sold and delivered before January 1, 2017, the seller must collect tax at the rate of 7%.
  • If taxable services are rendered before January 1, 2017, the seller must collect tax at the rate of 7%.
  • If the tangible personal property or specified digital products are sold before January 1, 2017, but the tangible personal property or specified digital products are delivered on or after January 1, 2017, but before January 1, 2018, the seller must collect tax at the rate of 6.875%.
  • If taxable services are sold before January 1, 2017 but the services are rendered on or after January 1, 2017, but before January 1, 2018, the seller must collect tax at the rate of 6.875%.

These rules apply whether or not payment has been made in whole or in part prior to delivery.

Analogous transition rules, announced to account for the July 15, 2006 tax increase from 6% to 7%, address specialized transactions, such as the taxation of room occupancy, admission charges, building materials, personal property leases and rentals. See: http://www.state.nj.us/treasury/taxation/pdf/vendorletter.pdf

 


James B. Evans, Jr., J.D., LL.M., CPA is a shareholder in the firm and earned his J.D. degree at the Rutgers University School of Law – Camden and his LL.M in Taxation at New York University .He is admitted to practice before the United States Tax Court, is a member of the Bar of the State of New Jersey, and is a member of the Camden County Bar Association, the New Jersey Bar Association and the American Bar Association. Mr. Evans’ particular areas of concentration include state taxation, corporate taxation and business planning. He lectures regularly in the area of taxation and accounting.