Use Tax is owed by New Jersey residents and businesses that buy products out of state, online, or via the mail, and then bring
the products to New Jersey or have them shipped here for their use. When you buy a taxable item or service in New Jersey, the seller
collects New Jersey Sales Tax from you on the purchase. But if you buy the same item or service from a company located in another state, you
may have to pay Use Tax to New Jersey, even if the out-of-state seller claims your purchase is tax free or collects sales tax for another jurisdiction.
Why Would You Owe Use Tax?
You owe Use Tax if you bought a taxable item or service outside of New Jersey and:
- You didn’t pay sales tax of any kind, or
- You paid sales tax to another jurisdiction at a rate lower than New Jersey’s.
What Is The Use Tax Rate?
The Use Tax rate is the same as our Sales Tax rate:
- 7% on purchases made between July 15, 2006, and December 31, 2016 (See rate chart.)
- 6.875% on purchases made in 2017 (See rate chart.)
How Do You Calculate Use Tax?
You calculate the Use Tax by using the New Jersey Sales Tax rate effective at the time of purchase. See the rates above.
- If you paid no sales tax of any kind on a taxable purchase from an out-of-state company, then the purchase is taxed at the State’s full Sales Tax rate in effect at the time.
Example 1: New Jersey resident Gabriel bought $1,000 in taxable goods before January 1, 2017, from the catalog of an out-of-state company that collected no sales taxes on the purchase. Seven percent (7%) was the Sales Tax rate in effect at the time of purchase.
This is the Use Tax calculation for the purchase:
$1,000 x 0.07 (7% New Jersey Sales Tax rate due at the time) = $70.00 (Amount of Use Tax owed to New Jersey)
- If you paid sales tax on an out-of-state purchase, but the amount paid to the out-of-state jurisdiction was less than New Jersey would have collected in tax on the purchase, then you owe Use Tax. To calculate New Jersey Use Tax on purchases on or after January 1, 2017, do the following:
Multiply the purchase price (including delivery charges) before tax by the New Jersey Sales Tax Rate in effect at the time. This gives you the amount of tax that would have been charged if the purchase had been made in New Jersey. Then subtract the amount of sales tax paid out of state from the New Jersey figure. This will be the amount of Use Tax you owe to New Jersey.
Example 1: New Jersey resident Selena went online after January 1, 2017, to buy $1,000 in taxable goods from an out-of-state seller that collected 6% in sales taxes for jurisdictions outside New Jersey. The seller did not collect New Jersey taxes.
This is the Use Tax calculation for the purchase:
New Jersey Sales Tax due at the time: $1,000 x 0.06875 (6.875%) = $68.75
Out-of-state sales tax collected: $1,000 X 0.06 (6%) = $60.00
$68.75 - $60.00 = $8.75 (Amount of Use Tax owed to New Jersey)
How Do You Pay Use Tax?
You can pay Use Tax using Form ST-18B (Annual Business Use Tax Return) if your business:
- Didn’t sell taxable goods or services or lease taxable property to others in 2016,
- Averaged less than $2,000 in annual Use Tax liability in 2013, 2014, and 2015, and
- Owes Use Tax for 2016.
If you do not meet the criteria above you cannot use Form ST-18B, and you must change your business registration to include a quarterly/monthly Sales Tax filing.
You may report and pay any Use Tax due for purchases made in 2016 when filing your 2016 New Jersey Resident Income Tax Return
(Form NJ-1040). Please keep receipts to document your purchase or, if you don’t know the exact amount of your purchase, use Worksheet H found in the NJ-1040 instructions.
If you do not file a New Jersey Income Tax Return, or you would like to pay Use Tax soon after you take possession, you can remit Use Tax using Form ST-18.
For purchases made in 2017, use the current ST-18 form.
For purchases before January 1, 2017, use the prior year ST-18 form.
Common Situations in Which You Might Owe Use Tax:
Example: You purchase taxable office equipment and supplies from an out-of-state seller for use at your New Jersey place of business. The out-of-state seller is not registered with New Jersey and did not charge you Sales Tax. New Jersey Use Tax is due.
Example: On a trip to Delaware, you purchase a couch and do not pay sales tax on the purchase. New Jersey Use Tax is due.
Example: On a trip to Maine, you purchase an antique desk for $4,000 and pay the 5.5% Maine Sales Tax. Because New Jersey’s tax rate is higher than Maine’s, you owe Use Tax for the difference between taxes paid in Maine and what you would have paid had you purchased the item in New Jersey.
Example: You buy a computer online from a business that does not collect New Jersey Sales Tax, and it is delivered to you in New Jersey. You owe Use Tax based on the New Jersey Sales Tax rate at the time of the purchase.
Example: You send a watch to an out-of-state seller for repair services. The seller charges for the repair services but does not charge Sales Tax and ships the watch back to you in New Jersey. Use Tax owed is the cost of this repair service plus any charges for shipping and handling, times the New Jersey Sales Tax rate in effect at the time of the purchase.
More information is available in our publications, ANJ-7, Use Tax in New Jersey and ANJ-10, Out-of-state Sales. Information on mail-order and Internet purchases can be found in publication S&U-5, Making Mail-Order and Internet Sales.