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NJ Economic Nexus Takes Effect November 1

New Jersey’s response to the South Dakota v.Wayfair ruling has resulted in Governor Murphy signing A-4496 as an additional provision of its Sales and Use Tax Act. A-4496 corrected those issues originally resulting in the Governor’s conditional veto on August 27 of A-4261 and delaying the originally planned start date for economic sales tax nexus. The new law mirrors South Dakota’s, establishing that out-of-state remote vendors that make 200 or more “separate transactions” in a calendar year or have “gross revenue from the sale of tangible personal property, specified digital products, or taxable services” exceeding $100,000 will need to collect remit the state’s 6.625 percent sales tax on their enumerated sales subject to tax. New Jersey’s implementation of its economic nexus law appears to reflect the standards as determined by the U.S. Supreme Court in its ruling in Wayfair in its entirety.

Additional language in the bill imposes new duties on “marketplace providers, ” defined as one who “facilitates a retail sale of tangible personal property, specified digital products, or taxable services” by providing a platform for sellers and best exemplified through vendors such as Amazon and eBay Inc. Those “providers” that by virtue of their platforms provide marketing, payment processing, and third-party logistics will result in establishing nexus for similarly situated entities as well, and will require the collection and remittance of taxes on behalf of sellers through their platform. The bill does, however, exempt application of the law to online travel agencies to collect or pay sales or hotel taxes effectuating New Jersey sales.

The law will take effect November 1 as of the date of this publication, but Withum notes that A-4496 provides that New Jersey’s tax director may choose to suspend or delay collection by up to 180 days to ensure accurate implementation of the new rules.

Author: Stephen Basiaga, JD, LLM, Manager  |  sbasiaga@withum.com

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