What Items Are Exempt From Sales Tax in New Jersey in 2025?

Understanding Nexus and Tax Collection Rules in New Jersey

Nexus determines whether a business must collect and remit sales tax in New Jersey. Businesses meeting thresholds, such as over $100,000 in annual sales or 200 transactions, are obligated to collect tax. Understanding these rules ensures compliance, whether operating from a storefront, online channels, or through third-party platforms like Amazon.

For more detailed information, refer to the New Jersey Sales Tax Guide.

Nexus Types and Requirements

Type of Nexus	Trigger	Example Scenario	Action Required
Economic Nexus	$100,000+ in annual sales or 200+ transactions	An online retailer sells $150,000 worth of goods to NJ residents in 2023.	Register with NJ Division of Taxation, collect and remit 6.625% sales tax.
Physical Nexus	Office, warehouse, employees, or property located in NJ	A business rents office space in Trenton for client meetings.	Register and collect sales tax regardless of transaction volume.
Hybrid Nexus	Both economic and physical criteria met	A remote seller has inventory in an Amazon NJ warehouse and $120,000 in NJ sales.	Comply with both economic and physical nexus obligations, ensuring all transactions are taxed.
Marketplace Nexus	Sales via platforms like Amazon or Etsy with transactions routed through NJ	Amazon collects and remits taxes for marketplace sales, but the seller handles non-marketplace.	Maintain records of all sales, register if selling via non-marketplace channels into New Jersey.

What is Nexus and Why It Matters

Nexus defines a business’s obligation to collect sales tax in New Jersey. Businesses meeting physical or economic thresholds must comply. For instance, surpassing 200 NJ sales creates nexus for remote sellers. Ignoring obligations risks penalties up to 25% of taxes owed and compounded interest. Compliance protects financial stability and reputation.

Nexus Compliance Consequences

Non-Compliance	Penalty	Example Scenario	Resolution
Failure to register	$100 per month per missed return	A retailer with nexus neglects to register for NJ tax collection.	Register immediately; pay penalties and interest on unpaid taxes.
Late or non-payment	5% penalty per month, up to 25% of unpaid taxes	A business collects but does not remit sales tax.	File overdue returns and remit taxes with penalties and interest.
Audit for unpaid taxes	Retroactive tax collection plus audit penalties	Undisclosed physical nexus found during audit.	Cooperate with auditors; appeal or settle discrepancies.

Economic Nexus vs. Physical Nexus

Economic nexus arises from sales volume or transactions, such as an online business making $150,000 in sales to New Jersey. Physical nexus is triggered by tangible operations, like maintaining a warehouse. Both require compliance to avoid retroactive tax liability, penalties, and additional interest.

Economic vs. Physical Nexus

Criteria	Economic Nexus	Physical Nexus	Example Scenario
Definition	Based on sales volume or number of transactions.	Based on tangible presence or property.	$125,000 in sales from an online store to NJ residents.
Triggers	$100,000+ sales or 200+ transactions.	Office, warehouse, or employees in NJ.	Inventory stored in NJ through Amazon FBA.
Obligation	Register and collect tax for NJ sales.	Same as economic nexus.	Ensure physical and economic nexus rules are satisfied.

Nexus Scenarios: Remote Sellers and Fulfillment by Amazon (FBA)

Remote sellers exceeding $100,000 in sales or 200 transactions to NJ must collect tax. FBA sellers face obligations if inventory is stored in NJ warehouses, even if below economic thresholds. Marketplace facilitators like Amazon handle tax for marketplace sales, but direct-channel sales remain the seller's responsibility.

Additional considerations for industries like film production are covered in Regulations for Film Production Taxes in NJ.

Nexus Scenarios

Scenario	Trigger	Example	Compliance Steps
Remote Seller	$100,000+ in NJ sales or 200+ transactions.	An Etsy seller completes 250 NJ transactions in 2023.	Register, collect, and remit 6.625% NJ sales tax at the applicable sales tax rate.
FBA Seller	Inventory stored in NJ warehouse.	Amazon stores a seller’s goods in Robbinsville, NJ.	Confirm storage locations, register for NJ nexus, and collect tax on non-marketplace sales.
Marketplace Facilitator	Sales via platforms like Amazon or Etsy.	Marketplace handles taxes on all facilitated sales into NJ.	Maintain records; ensure proper compliance for direct and other non-marketplace transactions.

FAQs

New Jersey sales tax FAQs cover non-taxable items like groceries, exemptions for resale, and the lack of sales tax on most clothing. Clear examples simplify compliance for businesses.

What items are non-taxable in New Jersey?

Groceries, prescription drugs, and unprepared food are exempt. A $50 purchase of milk, bread, and eggs incurs no sales tax. For more examples of exemptions, consult the Livingston NJ Sales Tax Guide.

What is sales tax exempt in NJ?

Unprepared food, clothing, prescription medication, and certain medical devices are exempt. Purchasing $100 of diabetic supplies is tax-free.

Is there no sales tax on clothes in New Jersey?

Yes, most clothing is exempt, except for specific items like protective gear for sports. A $200 purchase of winter coats is tax-free, but $50 on football helmets is taxable.

New Jersey Sales Tax: Taxable vs. Exempt Items

eCommerce businesses in New Jersey must distinguish between taxable and exempt items. For example, selling $200 of unprepared groceries online incurs no tax, but adding a $15 deli sandwich makes that portion taxable. SaaS companies offering subscription-based digital tools are tax-exempt unless classified as taxable services under specific criteria.

Taxable vs. Exempt Items

Category	Taxable Examples	Exempt Examples	Notes
Groceries	Pre-packaged meals, deli sandwiches	Fresh fruits, vegetables, and milk	Prepared foods are taxable; unprepared groceries are exempt.
Clothing	Sports equipment, protective gear	Jackets, socks, baby diapers	Most clothing is exempt, but safety gear is taxable.
Medical Supplies	Grooming items like toothpaste	Prescription drugs, insulin, crutches	Applies to prescribed medical devices and medications.
Digital Products	E-books, single-copy periodicals	Subscription-based digital magazines	Streaming services are not taxable; digital downloads generally are.

What Items Are Exempt from Sales Tax in New Jersey?

An eCommerce retailer selling $100 in diapers and $50 in prescription medications incurs no sales tax. However, selling $75 of taxable vitamins alongside exempt medical supplies requires careful recordkeeping. SaaS businesses offering downloadable software may also be exempt unless their services include taxable features.

Commonly Exempt Items

Category	Examples	Conditions for Exemption	Taxable Exceptions
Unprepared Food	Milk, bread, fresh fruits	Must be for personal consumption	Prepared food and beverages like soda
Clothing	T-shirts, sneakers, diapers	Not for specialized use	Sports uniforms, safety equipment
Medical Supplies	Insulin, crutches, prosthetics	Prescribed by a doctor	Over-the-counter grooming products
Digital Subscriptions	E-magazines, academic resources	Subscription-based only	Single-copy downloads like e-books

New Jersey Sales Tax Exemption List for Retailers and eCommerce

An eCommerce store selling $500 of school uniforms remains exempt from tax, but adding $50 worth of accessories like belts makes that portion taxable. Similarly, a digital SaaS platform offering subscription-based e-magazines avoids taxes, while single-use downloads remain taxable.

Retail and eCommerce Exemptions

Item Category	Exempt Examples	Taxable Examples	Special Notes
Groceries	Bread, fresh fruits, unprepared foods	Deli sandwiches, pre-packaged meals	Taxable if prepared or heated by the seller.
Clothing	Jeans, winter coats, baby clothing	Sports helmets, ski boots	Protective gear designed for sports is taxable.
Medical Supplies	Prescription glasses, mobility aids	Electric toothbrushes	Only prescribed items are exempt.
Digital Products	Subscription e-magazines	Single e-books, music downloads	Exemption applies to subscriptions only.

How Sales Tax Exemptions in New Jersey Impact Your Business

A grocery eCommerce store selling $10,000 of fresh produce avoids charging tax, but $5,000 in pre-packaged meals requires accurate tax application. A SaaS company offering exempt subscription services must monitor upgrades or add-ons to ensure proper tax categorization, taking advantage of NJ business tax exemptions on New Jersey tax-free products where applicable.

Business Impact of Exemptions

Business Type	Key Exemption Benefits	Compliance Requirements	Examples
Grocery Stores	Increased appeal to cost-conscious buyers	Accurate categorization of taxable items	Milk is exempt; canned soda is taxable.
Clothing Retailers	Broader market reach	Differentiate general clothing vs. sports gear	Jackets are exempt; football helmets are taxable.
eCommerce Platforms	Competitive pricing for exempt items	Collect and validate exemption certificates	Selling diabetic supplies tax-free.

Taxability of Grocery, Drug, and Household Items

Selling $200 worth of bread and milk online incurs no tax, but adding $50 of laundry detergent requires tax on the taxable portion. eCommerce platforms should implement automated tools to separate taxable and exempt items in mixed orders.

Grocery, Drug, and Household Taxability

Category	Exempt Examples	Taxable Examples	Special Conditions
Groceries	Bread, milk, fresh fruits	Pre-packaged salads, heated foods	Exemption applies only to unprepared food.
Drugs	Insulin, prescribed medications	Vitamins without prescriptions	Over-the-counter drugs labeled as “Drug Facts” are exempt.
Household Items	Paper towels for personal use	Laundry detergents, cleaning sprays	Personal-use paper products are exempt; cleaning items are not.

How to Register and Stay Compliant with New Jersey Sales Tax

Registering for New Jersey sales tax involves understanding the process for obtaining a seller’s permit, maintaining compliance, and navigating streamlined registration options for multi-state operations. eCommerce and SaaS businesses must also monitor compliance when acquiring or selling businesses.

See how compliance solutions stack up: Kintsugi vs Avalara vs Vertex: Best Sales Tax Solutions.

Steps to Obtain a Seller’s Permit

To obtain a New Jersey seller’s permit:

1. Visit the New Jersey Division of Revenue Website: Complete the online application with details about your business.
2. Provide Required Information: Include business name, address, EIN, start date, projected monthly sales, and product descriptions.
3. Complete Registration: The application is free, but errors or missing information may delay processing.
4. Post Permit Publicly: Display the seller’s permit at your physical or digital point of sale.

For example, an eCommerce retailer projecting $15,000 in monthly taxable sales can register in minutes. Once approved, they can legally collect and remit New Jersey’s 6.625% sales tax.

Streamlined Sales Tax Registration (SST)

New Jersey participates in the SST program, simplifying multi-state sales tax registration. Businesses can register in multiple states simultaneously through the SST portal. For additional insights into sales tax and economic incentives, visit NJ Economic Development Sales Tax Info.

For example, a SaaS company selling in New Jersey, New York, and Pennsylvania can use SST to streamline compliance instead of registering in each state separately.

Compliance for Acquiring a Business

When acquiring a business in New Jersey:

1. Update Ownership Records: Notify the NJ Division of Revenue with the new owner’s details.
2. Check for Existing Liabilities: Review the business's outstanding tax obligations to avoid inheriting penalties.
3. File a Final Return: Ensure the previous owner files all due returns before transferring ownership.

For instance, an eCommerce company buying a New Jersey-based competitor should verify there are no unreported sales tax liabilities that could lead to penalties, understand the applicable sales tax rate to ensure compliance, and be familiar with NJ online sales tax rules. Proper due diligence ensures a smooth transition and ongoing compliance.

Your Guide to Filing and Remitting New Jersey Sales Tax

Filing and remitting New Jersey sales tax requires understanding deadlines, penalties, and processes for periods with no sales. Accurate and timely filings ensure compliance and help businesses avoid penalties.

Filing Requirements and Deadlines

Businesses must file sales tax returns based on assigned schedules: monthly, quarterly, or annually. For example, a business collecting over $30,000 in sales tax annually files monthly, with payments due by the 20th of the following month. Quarterly filers report by April, July, October, and January. Filing electronically is mandatory, either online or through NJ’s EZ File System.

For superior compliance strategies, see Why Kintsugi Outperforms Avalara & TaxJar in Tax Compliance.

Late Filing Penalties and Discounts

Late filing incurs a 5% penalty on unpaid tax per month, capped at 25%, plus interest. For instance, a $10,000 unpaid tax balance for three months adds $1,500 in penalties. While New Jersey offers no early filing discounts, filing on time avoids unnecessary financial strain.

Filing When There Are No Sales

Even with no taxable sales in a period, businesses must file a "zero" return. For instance, an eCommerce seller with $0 in NJ sales during Q1 must still submit their quarterly return by April 20 to avoid penalties or audits. Filing keeps accounts active and compliant.

Tax Rules for Shipping, Handling, and Special Services in New Jersey

Understanding New Jersey's tax rules for shipping, handling, and related services, including referencing a sales tax exemption guide for NJ, helps businesses stay compliant and avoid penalties. Specific guidelines determine when charges are taxable or exempt.

Taxable vs. Non-Taxable Shipping Charges

Shipping Scenario	Tax Treatment	Examples	Notes
Shipping for Taxable Goods	Taxable	Electronics, clothing, prepared food	Shipping charges for goods subject to sales tax are taxable.
Shipping for Exempt Goods	Exempt	Milk, bread, prescription drugs	Charges for shipping exempt goods are not taxable.
Mixed Shipments	Allocated	Groceries and taxable goods in one shipment	Tax applies to the taxable portion of shipping fees (e.g., $10 charge split proportionally).

Example Calculation:

• Order: $200 (60% taxable, 40% exempt)
• Shipping Charge: $10
• Taxable Portion: 60% of $10 = $6 taxable shipping charge.

Handling Fees and Their Tax Implications

Handling fees follow the taxability of the associated goods. For taxable goods, handling charges are taxed; for exempt goods, they are not. Combining shipping and handling charges into a single line item for taxable goods makes the entire charge taxable.

Refer to NJ Legislative Bill S183 on Sales Tax for recent updates impacting handling and shipping tax rules.

Handling Scenario	Tax Treatment	Examples	Notes
Handling Fees for Taxable Goods	Taxable	Electronics, taxable items	A $5 handling fee for a $50 taxable item incurs tax on $55.
Handling Fees for Exempt Goods	Exempt	Prescription drugs, unprepared groceries	Fees for handling exempt goods are not subject to sales tax.
Combined Shipping & Handling	Fully Taxable (if goods are taxable)	Bundled charges for taxable items	If shipping and handling are combined, the entire charge is taxable.

Example Calculation:

• Order: $100 taxable item with $5 handling fee
• Taxable Amount: $105 (entire amount is taxable).

Let Kintsugi Handle Your New Jersey Sales Tax Exemptions Automatically

Kintsugi Feature	Benefit	Example Use Case
Automatic Classification	Ensures accurate tax categorization.	An eCommerce store selling groceries and prepared food categorizes unprepared groceries as exempt.
Real-Time Updates	Reflects the latest tax regulations.	Adjusts tax rules automatically when New Jersey modifies exemption policies for SaaS services.
Mixed Shipment Management	Allocates shipping charges accurately.	For an order with $500 exempt groceries and $200 taxable prepared food, allocates shipping fees proportionally.

Example Use Case with Kintsugi

• Order: $500 groceries (exempt), $200 prepared food (taxable).
• Shipping: $15 charge.
• Kintsugi Process:
  • Exempts the $500 grocery portion.
  • Taxes the $200 prepared food at 6.625%.
  • Allocates shipping: $9 exempt, $6 taxable.

Kintsugi simplifies compliance for eCommerce and SaaS businesses. Discover why Kintsugi leads in compliance: Kintsugi vs Avalara: Smarter Tax Compliance Choice.