New Jersey Sales Tax on Doc Fees is Effective July 1, 2017

Finally, a formal notice has been issued by the New Jersey Division of Taxation which confirms that beginning July 1, 2017 state auditors will be checking to determine that dealerships are collecting Sales Tax on Doc Fees charged in connection with motor vehicle retail sales transactions. As you may be aware, Doc Fees are already taxable in a retail lease transaction.

Although this issue was first raised in a dealership audit last year, the basis for the taxability of all Doc Fees dates back to when the Streamlined Sales & Use Tax Act was first enacted. A notice has now been issued by the Division to New Jersey dealers informing them of the taxability of Doc Fees in retail motor vehicle sales.

The Division of Taxation decided that this policy will be enforced by their auditors on a prospective basis, starting July 1, 2017 (with the change to be codified in a regulation, at some point in the future).

The basis for assessing Sales Tax on a Doc Fee is a change that was made to the definition of selling price in October 2005. That definition requires that Sales Tax be charged without any deduction for “charges by the seller for any services necessary to complete the sale.”

Charges by the seller for any services necessary to complete the sale have been interpreted to include items like online motor vehicle processing fees and Doc Fees. If your dealership plans to revise its buyers’ orders, then you should move the Doc Fee and any online processing fees to be included in the taxable sale line.

Previous Post

Next Post