In New Jersey, most purchases are subject to the state’s 6.625 percent sales tax. Items sold in New Jersey’s 32 Urban Enterprise Zones are subject to 3.1 percent sales tax, and items in certain categories, such as clothing, aren't subject to any sales tax.
In New Jersey, resale certificates are issued by the State of New Jersey Division of Taxation.
When an individual makes a purchase with the intention of reselling the item, he can make the purchase without paying sales tax by completing Form ST-3 with the purchase. This is because as a licensed business owner, he's expected to collect sales tax and file it accordingly with the New Jersey Department of Taxation.
A reseller can only obtain a New Jersey reseller permit if he has a registered business. Otherwise, he must pay sales tax on every nonexempt purchase he makes.
To register a business in New Jersey, the prospective reseller must:
- Obtain a federal employer identification number (EIN) from the Internal Revenue Service (IRS).
- File business formation paperwork with the New Jersey Department of the Treasury unless the business is a sole proprietorship or a general partnership.
- Register the business as a taxable entity using form NJ-REG.
Registering a business grants the company a tax ID and guarantees that it receives the correct tax returns and notices each year. It also grants the business owner the right to collect sales tax.
It doesn't matter which type of business the reseller operates; if she purchases items that are ultimately resold to her customers, she needs an NJ resale certificate. This document permits her to collect sales tax.
Antique and secondhand dealers are one category of entrepreneurs who make many purchases with the plan to resell them, but they're not the only ones. Contractors often have to buy parts and materials for the jobs they complete, artisans similarly have to purchase materials that are ultimately sold to their clients and service providers also have to obtain NJ resale certificates when the materials they purchase are passed on to their clients. Even retail owners who sell new items need New Jersey reseller permits to circumvent sales tax when operating their businesses in New Jersey.
A few examples of business owners who can't use resale certificates to avoid paying sales tax on materials are:
- Professional cleaners purchasing the supplies they use to clean clients’ homes.
- Contractors purchasing tools to be used to complete jobs.
- Caterers and restaurant owners purchasing food. In New Jersey, unprepared foods aren't subject to sales tax.
The New Jersey reseller permit is officially known as Form ST-3. The ST-3 form for NJ business owners is issued by the New Jersey Department of Taxation and can be obtained online. In Form ST-3, the reseller must provide the following information:
- The business name and address.
- The items being purchased with the certificate.
- The reason why the purchase is exempt from sales tax.
- New Jersey Tax ID or, if the business is registered outside New Jersey, the EIN or out-of-state business registration number.
If the buyer uses a paper copy of this certificate, he must sign it. The completed ST-3 form for New Jersey business owners remains with the seller after the transaction. The seller is legally required to keep every ST-3 form she handles for four years following its use.
Obtaining an NJ resale certificate allows a buyer to make a purchase without paying sales tax because it's assumed the buyer will then resell the item and collect sales tax from its buyer. But, sometimes, items intended for resale never actually change hands. When this is the case, the buyer is required to pay sales tax on the item she purchased with the intent to resell it.