Is NJ a destination tax state?
In others, sales tax is based on the location of the buyer and the destination of the sale (destination-based sourcing). New Jersey generally uses destination-based sourcing.
Major origin-based states include Texas, Pennsylvania, Ohio, Virginia and California. Most states and Washington, D.C., are destination-based requiring you to apply sales tax at the location of the customer.
The exit tax that a departing New Jersey resident must pay is really just an estimated capital gains tax. At the time of sale, either 8.97% of the net gain (the $135,000) or 2% of the total sales price ($500,000) is held as an estimated capital gains tax, whichever is higher.
Origin-sourced sales are taxed where the seller is located, while destination-sourced sales are taxed at the location where the buyer takes possession of the item sold. As a seller, it is important to know whether you are located in an origin-sourced state or a destination-sourced state.
These businesses are required to charge and collect New Jersey Sales Tax on taxable items delivered to customers in this State. Jersey. When a customer purchases a gift in New Jersey and arranges with the seller to deliver the gift to an out-of-State recipient, generally no New Jersey Sales Tax is due.
New Jersey assesses a 6.625% Sales Tax on sales of most tangible personal property, specified digital products, and certain services unless specifically exempt under New Jersey law.
In a destination-based state, sales tax is collected based on the buyer's location. That means you collect sales tax based on your customer's state and local tax rates. You also remit the tax to your customer's state and locality. Destination state = Buyer location's tax rate.
If you remain a New Jersey resident, you'll need to file a GIT/REP-3 form (due at closing) which will exempt you from paying estimated taxes on the sale of your home.
Where the “NJ Exit Tax” Came From. New Jersey originally passed this legislation under the guidance of former Governor Jim McGreevy. At the time, the objective was to ensure that anyone moving out of state could not do so without first paying taxes on income gained from the sale of their home.
Nope. When it comes to the so-called exit tax, your age does not matter. The exit tax is really an estimated tax, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.
What is destination state?
Destination state means any state, territory, foreign country, or sovereign nation.
In theory, California is considered a modified origin-based state (or a “hybrid-origin” state), which means that for in-state sellers, the state, county, and city taxes are calculated based on the location of the seller or ship-from address (origin-sourcing), while district taxes are calculated based on the location of ...
In some states, sales tax rates, rules, and regulations are based on the location of the seller and the origin of the sale (origin-based sourcing). In others, sales tax is based on the location of the buyer and the destination of the sale (destination-based sourcing). Florida generally uses destination sourcing.
Sales Tax Paid less than 6.625% - If you purchased an item out of state and you paid sales tax less than the 6.625% rate in New Jersey, you must calculate the difference in sales tax and report the difference on your return.
When it comes to destination-based eCommerce transactions, the location where your customer takes possession of the product is considered the point of sale. In this case, the customer takes possession of the product at her shipping address. So you, the seller, would charge her sales tax based on her shipping address.
This commonly happens when purchases are made online, by phone or mail order, or outside the State. If the items are delivered to a New Jersey address, the purchaser must pay Use Tax based on the purchase price, including any delivery/shipping charges.
There are five states with no general statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.
| State | State Tax Rate | Max Local Tax Rate |
|---|---|---|
| New Jersey (d) | 6.625% | 3.31% |
| New Mexico (b) | 4.875% | 4.06% |
| New York | 4.00% | 4.88% |
| North Carolina | 4.75% | 2.75% |
New Jersey sales tax details
The New Jersey (NJ) state sales tax rate is 6.625%. Unlike many states, NJ does not allow the imposition of local sales tax—the entire state has a single rate.
Destination-based sales taxes mean you use the tax rate of the destination of the product or service. The customer is the destination. The tax rate you apply to the sale must be the local rate where the buyer is located or where the product is headed.
Is New York a destination sales tax state?
New York is a destination-based sales tax state. So if you live in New York, collecting sales tax can be a bit complicated.
Florida is a destination-based sales tax state. So if you live in Florida, collect sales tax at the sales tax rate of the address where you ship your product.
The New Jersey exit tax, explained
When you sell a home in New Jersey, you're required to pay taxes on any sales profits. This is true whether your home is a principal residence, second home, or investment property.
The expatriation tax provisions under Internal Revenue Code (IRC) sections 877 and 877A apply to U.S. citizens who have renounced their citizenship and long-term residents (as defined in IRC 877(e)) who have ended their U.S. resident status for federal tax purposes.
In order to close your sales tax permit in New Jersey, you will need to complete the New Jersey Change Tax/Employer Registration Records Form REG-C-L.
