Is Clothing Taxable in New Jersey?

If you own a retail store, understanding the concept of sales tax is essential for running your business. While the United States has no national sales tax, each state and municipality has its own implications.

So if your store is located in New Jersey, being familiar with the taxability of the items or services you sell will be valuable come tax season. Since retailers are also responsible for collecting these taxes at the point of sale, your business can run smoothly and remit them with minimal complications.

What is the sales tax on clothing in New Jersey?

Sales tax is a type of consumption tax for goods and services at the point of sale. Clothing is considered tangible personal property, so it’s subject to tax in New Jersey.

The current tax rate for the state is 6.625%, and some items of clothing that are for human use are considered taxable, including:

• Fur clothing (i.e. jackets, vests, boots, neck wraps)
• Protective equipment for sports and recreational use
• Sports and recreational clothing and footwear
• Accessories (i.e. belts, backpacks, cosmetics, watches, umbrellas)

For the complete list of taxable clothing items, you can refer to New Jersey’s Official Tax Guide here.

What is the sales tax on clothing in New Jersey?

Sales tax is a type of consumption tax for goods and services at the point of sale. Clothing is considered tangible personal property, so it’s subject to tax in New Jersey.

The current tax rate for the state is 6.625%, and some items of clothing that are for human use are considered taxable, including:

• Fur clothing (i.e. jackets, vests, boots, neck wraps)
• Protective equipment for sports and recreational use
• Sports and recreational clothing and footwear
• Accessories (i.e. belts, backpacks, cosmetics, watches, umbrellas)

For the complete list of taxable clothing items, you can refer to New Jersey’s Official Tax Guide here.

Who pays sales tax in New Jersey?

Every retailer that sells taxable clothing is required to pay sales tax to the government. In the event that a retailer fails to collect sales tax, the purchaser owes a 6.625% Use tax to the state of New Jersey. 

This usually happens when items are purchased online, by mailF order, or out of state. But if the taxable item is delivered to a New Jersey address, they’re subject to pay the Use Tax depending on the price of the item (including shipping costs).

New Jersey has also established Urban Enterprise Zones in some economically distressed cities in the State. Businesses that are qualified to have UZ-2 certificates can charge sales tax at half of the regular rate on tangible personal properties that are qualified for the reduced rate. The only catch is the purchaser will have to place their order in your physical store.

Are laundry services subject to sales tax in New Jersey?

Since most clothing items are tax-exempt in New Jersey, laundering, dry cleaning, tailoring, weaving, and pressing services are also exempt on exempted clothing items.

But keep in mind that the above services are taxable for items not worn on the body, including:

• Carpets
• Draperies
• Blankets
• Comforters
• Tablecloths and linens
• Table napkins
• Bed linens
• Hospital linens

How do I calculate New Jersey sales tax?

Since the retailer is responsible for calculating and collecting sales tax from the purchaser, it’s important to be familiar with the process. To calculate the sales tax of an item, the formula you need to keep in mind is to multiply the sales tax rate by the total amount of sales (including shipping cost, if applicable).

Sales tax = total amount of sales x sales tax rate

For instance, if a customer purchases a taxable clothing item worth $500 in New Jersey, the sales tax they’ll need to pay is $33.125.

Can you claim a refund for sale taxes?

If your retail store charges an incorrect amount of sales tax, the purchaser can request a refund directly from your establishment. Additionally, if they fail to recover the amount from your store, they can request a tax refund directly from the Division of Taxation.

If your business has overpaid its sales tax for the quarter, you can also request a refund by filing Form A-3730. To claim the amount, you must have records of any canceled sales, returns, or uncollected receipts to prove your claim to the state.

But in case your business has collected or paid an incorrect amount of sales tax on your monthly remittance statement, you can still correct the mistake on your quarterly sales tax return. Just make sure you file it within the same quarter, otherwise, you‘ll need to file an amended quarterly report for the period.

Looking for a trusted CPA?

Whether you have more questions on sales tax or just want to ensure your business’ taxes are in order, Lear & Pannepacker has a team of professionals to assist you. Whether with bookkeeping, tax planning, or business advisory, their licensed CPAs are equipped to help you. For questions or inquiries, contact their team now to book an appointment.