New Jersey Sales Tax and Surcharges for COVID-19
The New Jersey Division of Taxation issued a notice on the taxation of surcharges for COVID-19 precaution and prevention costs. Some sellers are imposing additional fees on customer invoices for COVID-19 related cost. These additional charges may be termed a COVID-19 Fee, Coronavirus Fee, PPE Fee, Sanitation Fee, Cleaning Fee or similar characterization. New Jersey sales tax is imposed on the surcharge if the associated product or service sold is subject to the State’s sales tax.
The Division explained that a separately stated surcharge is part of the sales price of the underlying product or service. If the service or product is not subject to sales tax, the COVID-19-related surcharge is also not subject to sales tax. If the transaction is for a service or product subject to sales tax, the COVID-19-related surcharge is subject to tax.
The Division offered several clarifying examples:
- A restaurant adds a “COVID-19 Fee” to a customer’s bill for meals and beverages for the cost of personal protective equipment and sanitation supplies used by employees. The surcharge becomes part of the sales price even if it is separately itemized. Because meals and beverages are subject to New Jersey sales tax, the COVID-19 Fee is also taxable.
- A hair salon adds a “Coronavirus Fee” to a customer’s bill for a haircut and color services for the additional costs of personal protective equipment and sanitation supplies used by employees. Because the haircut and color services are not subject to sales tax, the associated Coronavirus Fee, even if separately stated, is also not subject to tax.
- Similarly, a dentist adds a “PPE Fee” to a patient’s bill to cover the costs of personal protective equipment used by employees. Dental services are not subject to New Jersey sales tax. The associated PPE Fee, even if separately stated, is also not taxable.