Purchasing a vehicle in New Jersey involves understanding various regulations, and sales tax is a significant aspect to consider. While sales tax is generally applicable, New Jersey law provides several exemptions that can significantly reduce the cost of your vehicle purchase. This guide, tailored for car buyers, dealerships, and anyone involved in vehicle transactions, clarifies the exemptions from sales tax on cars in New Jersey, ensuring you’re well-informed and prepared.
Understanding New Jersey Car Sales Tax Exemptions
New Jersey offers specific sales tax exemptions on vehicle purchases, aiming to support various sectors and circumstances. To claim these exemptions, it’s essential to visit a New Jersey Motor Vehicle Commission (MVC) agency and provide the necessary documentation. For exemptions not listed, direct inquiries can be made to the MVC Sales Section of the New Jersey Division of Taxation. Let’s explore the key exemptions:
Exemptions Based on Purchaser or Vehicle Use
1. Non-Resident Vessel Purchasers:
This exemption applies specifically to vessels (boats). If you are not a resident of New Jersey and will not be using the vessel in any employment, trade, or business within the state, you are exempt from sales tax.
2. Governmental and International Entities:
Vehicles acquired by the following entities are exempt from sales tax:
- The Federal government or any of its agencies.
- The State of New Jersey, its agencies, or political subdivisions.
- The United Nations or any international organization where the United States is a member.
3. Vehicles for Specific Uses:
Several vehicle types and uses qualify for sales tax exemption:
- Farm Vehicles: Vehicles used directly and exclusively for farm product production or sales are exempt. This supports the agricultural sector in New Jersey.
- School Buses: School buses used for transporting students are exempt, easing the financial burden on educational institutions.
- Recycling Equipment: This exemption encourages environmental sustainability by exempting recycling equipment.
- Repossessed Vehicles: Vehicles repossessed by financial institutions are exempt from sales tax to facilitate their resale.
- Used Mobile Homes: Purchases of used mobile homes are exempt, providing affordable housing options. Note that this does not include travel trailers, campers, or recreational vehicles.
- Limousines: The exemption for limousines may cater to specific business or transportation service needs.
- Low Speed Vehicles (LSVs): LSVs certified by the New Jersey Department of Environmental Protection (NJDEP) are exempt, promoting eco-friendly transportation options.
- 100% Zero Emission Vehicles (ZEVs): Initially fully exempt, ZEVs are subject to a changing tax rate. It’s crucial to note that from October 2024 through June 2025, a reduced tax rate of 3.3125% applies to ZEV sales. Starting July 1, 2025, ZEV sales will be taxed at the standard New Jersey sales tax rate. An Exempt Use Certificate is required to claim this exemption.
- Resident Service Members: Resident service members stationed outside New Jersey may defer sales tax payment until the vehicle is brought to New Jersey upon release from active duty. A Letter of Deferment from the Division of Taxation is necessary to claim this deferral.
- Tax-Exempt Organizations: Organizations holding a 9-digit exemption number from the New Jersey Division of Taxation are exempt from sales tax on vehicle purchases.
4. Leasing and Rental Companies:
Vehicles purchased by leasing or rental companies from non-registered vendors are exempt, provided the company is registered for New Jersey sales tax. This streamlines transactions within the rental and leasing industry.
5. Inherited Vehicles:
Vehicles acquired by an heir, legatee, or trust beneficiary are exempt, acknowledging vehicle transfer through inheritance.
6. Out-of-State Purchases by Non-Residents:
If a vehicle was purchased, titled, and registered in another state while the purchaser was a non-resident of New Jersey, it is exempt from New Jersey sales tax when brought into the state.
7. Commercial Fishing and Party Boats:
Vessels used for commercial fishing or as party boats (carrying over six passengers and subject to annual inspection) are exempt, supporting maritime businesses. For detailed guidance, refer to the NJ Division of Taxation website regarding sales and use tax for boats and vessels.
8. Commercial Trucks and Heavy Vehicles:
This exemption targets commercial transportation:
- Commercial trucks, truck tractors, trailers, or semi-trailers registered in New Jersey are exempt if they meet specific criteria:
- Having a Gross Vehicle Weight Rating (GVWR) exceeding 26,000 pounds as specified by the manufacturer.
- Operated actively and exclusively for interstate freight carriage under an Interstate Commerce Commission certificate or permit.
- Registered as farm vehicles under N.J.S.A. 39:3-24, 25 with a GVWR over 18,000 pounds.
Special Conditions for Sales Tax Exemptions
Certain situations require special attention to qualify for sales tax exemptions:
- Used Mobile Homes: As mentioned, used mobile homes are exempt, but this specifically excludes travel trailers, campers, and recreational vehicles.
- Resident Service Members: To defer tax, service members must obtain a Letter of Deferment from the Division of Taxation. Without this letter, sales tax must be paid at the time of titling.
- Disabled Veterans: Disabled veterans who receive funds from the Veterans Administration to purchase a vehicle are exempt from sales tax, offering crucial support for veterans.
- Financial Institutions: Banks, leasing companies, insurance companies, and other financial institutions taking vehicle title due to repossession, insurance loss, or lien addition are exempt, unless the vehicle is retained for the organization’s own use. A sales tax-satisfied stamp with the appropriate exemption number is required.
- Gifts: When a vehicle is gifted, the sales price should be noted as “GIFT.” Any alterations or inconsistencies may necessitate additional documentation as required by the Motor Vehicle Commission.
Further Resources
For more detailed information and specific scenarios, refer to the Motor Vehicle Casual Sales Notices provided by the New Jersey Division of Taxation.
Navigating sales tax exemptions in New Jersey can appear complex, but understanding these categories is crucial for potentially reducing vehicle purchase costs. By identifying applicable exemptions and preparing the necessary documentation, purchasers can ensure compliance and maximize savings.
