Until the South Dakota v. Wayfair, Inc. (2018) decision, only those businesses with a verifiable physical tie, or nexus, in a state needed to charge and remit sales tax there. This nexus could take the form of a physical storefront, office, warehouse, or set of employees, and rarely applied to online businesses who had established a sales presence. In fact, the terms “nexus” and “sufficient physical presence” were interchangeable.
The dawn of household internet and the boom in online sales that shortly followed it caused many states to reassess the way state taxes were applied. Some states passed laws redefining nexus as a physical or economic tie, suggesting that online sellers should charge and remit state sales taxes in the states in which they frequently did business. However, most of these laws were not enforced until recently.
With the Wayfair decision, the Supreme Court overturned the strict definition of physical nexus in favor of adding economic nexus to the circumstances in which states can require state sales tax. Sellers were now subject to state laws dictating revenue or transaction thresholds for requiring state sales tax. However, changes to state laws were enacted individually and neither the thresholds nor the effective dates are uniform.
Which States Have New or Updated Laws
As mentioned, some states had existing laws regarding economic nexus, and with the Wayfair decision, many of those began enforcing the new rules. States also passed new laws in the wake of the decision, and others made changes to take effect in the future. In all, 31 states have or will enact new requirements, and changes to New Jersey online sales tax rules are among them.
You can find Avalara’s complete list of all 31 states with new or upcoming economic nexus laws here.
eCommerce Sales Tax Rules in New Jersey
New Jersey is one of the many states that made changes to existing eCommerce state sales tax rules, and these became effective November 1, 2018. The new law states that, in order to collect sales tax online in New Jersey, a business must reach only one of the following two thresholds:
- Revenue of more than $100,000
- Two hundred or more separate transactions
Thresholds in New Jersey are independent of one another. For example, if a business performs 200 or more separate transactions, it is required to charge and remit state taxes regardless of revenue. In the same way, a business with $100,000 or more in revenue needs to charge state sales tax even if it has fewer than 200 transactions.
Do I Need to Charge Sales Tax on My Website?
You will need to charge sales tax on your website if you sell a tangible product, digital product, or services in New Jersey and meet one of the thresholds above. Keep in mind, however, that other states may have different thresholds, or may have effective dates different from New Jersey’s. To stay up to date and ensure your business remains compliant, consider arming yourself with a tax professional like Avalara.
Disclaimer: The information in this blog post is provided for general informational purposes only and should not be construed as legal advice from Forix or Avalara.