Online shopping in New Jersey will become a bit more expensive under new tax law
Online purchases will likely get more expensive.
Following a landmark U.S. Supreme Court decision earlier this year that said states can collect sales tax from online retailers, New Jersey will do just that. Some online purchases will become more expensive but brick-and-mortar retailers will get a competitive boost.
Gov. Phil Murphy signed a bill Thursday to allow the state to collect more in online taxes starting Nov. 1. It is expected to be a boon for the cash-strapped state, with $212 million in additional sales tax revenue projected this year and even more in future years, according to the Murphy administration.
Prior to the high court’s June ruling in South Dakota v. Wayfair, New Jersey and other states were prohibited from requiring online retailers to collect and remit sales tax if they didn’t have a physical presence in the state.
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That meant if a New Jersey resident were to have gone online and purchased a $1,000 camera from a company based solely in New York, that company would not have been required to collect New Jersey’s 6.625 percent sales tax, or $66.25, on the order.
But South Dakota succeeded in getting that rule thrown out, and New Jersey’s new law mirrors the one from South Dakota that was endorsed by the Supreme Court. It requires remote sellers to collect and remit sales tax if they have annual in-state sales exceeding $100,000 or complete 200 transactions.
It also requires online marketplaces like Amazon, eBay and Etsy to collect sales tax on orders they facilitate regardless of the value or amount of the orders.
Most of the country’s top 20 online retailers collected taxes in nearly all states even before the Wayfair decision, but many smaller operations and sole proprietors did not. Those enterprises will be harder hit by the new law in New Jersey and similar efforts to boost sales tax collections elsewhere.
Assemblyman John Burzichelli, D-Gloucester, a bill sponsor, said the law will bring in much-needed revenue for the state and help provide parity between brick-and-mortar businesses and online marketplaces.
“New Jersey-based businesses have to abide by the sales and use tax law, and so should any company who does substantial business in the state,” he said in a statement Thursday.
At a legislative hearing on the committee last week, Carol Katz, a lobbyist representing Ebay, chafed at the lack of a sales threshold for online marketplaces to collect sales tax on orders through their sites.
“If I have a website that sells pens, and I sell $75,000 worth of pens, I may not have to remit the tax,” Katz said. “But if I go onto an eBay or an Amazon or another marketplace facilitator and I sell one pen, they have to collect the tax from that initial sale. So that’s a disincentive to use the marketplace facilitator and we think it’s really not fair.”
A 2017 report by the federal Government Accountability Office estimated that New Jersey stands to gain between $216 and $351 million a year — or about 2 to 3 percent of total sales tax collections — from its new ability to collect online sales tax. Other estimates put the figure higher.
Online sales are growing at roughly three times the rate of total retail sales. All told, consumers do about 10 percent of their shopping online, a share that’s expected to swell in the future.