We all pay taxes on almost everything we consume, whether we’re simply buying a can of soda, dining in our favorite restaurant, or hiring a professional’s services. Try checking your receipt every time you purchase certain goods, and you’ll see how much of your payment was part of the tax. This type of tax is known as a ‘sales tax.

A sales tax is a tax that a state or local government imposes upon the sale of goods and services. Typically, sales taxes are classified according to the stage of business activity they are imposed – whether at the manufacturing stage, wholesale transaction, or retail sale.

In any case, if you’re a seller or consumer residing in New Jersey, do you know which goods and services are taxable in your state? Here is everything you need to know about New Jersey sales tax.

Presently, the sales tax rate in New Jersey is at 6.625 percent, and the specially designated Urban Enterprise Zones rate for qualified businesses is half of the sales tax rate. 

The Sales and Use Tax Act of New Jersey taxes all retail sales of tangible personal property, specified digital products, and particular services unless specifically exempted by the Act. As such, if you run a business that offers taxable goods or services in New Jersey, you must manage the taxes you collect and send them to the proper tax authority.

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New Jersey’s Urban Enterprise Zone (UEZ) program exists to foster economic development among economically distressed cities throughout the State. For sales of tangible personal property within these zones, qualified businesses with a UZ-2 certificate may charge half the regular rate of sales tax.

There are two conditions in place for the qualified UEZ seller to offer this reduced rate:

If you’re wondering how your business can take part in the UEZ Program, here’s what you need to know:

You can refer to this step-by-step instruction for assistance. 

Most food and drinks bought in a food store (supermarket, grocery store, produce market, bakery, etc.) are not subject to Sales Tax, and some items may become taxable if they are sold as prepared food .

Here is a list of taxable and exempt goods under New Jersey Sales Tax:

New Jersey does not impose a sales tax on clothing and footwear for daily use. Clothing includes shoes, socks, underwear, outerwear, hats, gloves, mittens, neckwear, and stockings. Baby blankets, bunting, diapers, diaper inserts, and baby pants are also included. This exemption, however, doesn’t apply to fur clothing, accessories, equipment, sport or recreation equipment, or safety gear (unless the safety gear is needed for the user’s daily work).

Purchases of food and food ingredients that are intended for human consumption are not subject to sales tax. It includes liquids, concentrated solids, frozen, dried, and dehydrated substances. However, certain items aren’t included, like cigarettes, alcoholic beverages, candy, and soft drinks.

Newspaper sales are exempt from New Jersey Sales Tax , and subscription magazines and periodicals are exempt, regardless of whether they are accessed electronically. Magazines sold in single copies are taxable when sold in printed form but are exempt when delivered electronically, and membership magazines are also exempt.

On the other hand, sales of hardback and paperback books, as well as the Bible and other scriptural books, are taxed, no matter how the book is delivered: in hard copy or digitally.

When billed to a New Jersey address, New Jersey taxes retail sales of certain digital products and charges for installing, maintaining, servicing, or repairing those products. A specified digital product is an electronically transferred digital audio-visual work, digital audio work, or digital book.

Streaming services, video programming services (such as video-on-demand television), and broadcasting services, including content to provide such services, are not included in the definition of a digital product.

5. Prescription Drugs and Over-the-Counter Drugs

In New Jersey, prescription and over-the-counter (OTC) drugs do not require sales tax if the label identifies them as drugs, such as a “Drug Facts” panel. The OTC drug exemption does not cover grooming and hygiene products like soap or cleaning solution, shampoo, toothpaste, mouthwash, antiperspirant, suntan lotion, or sunscreen.

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