Online business tax seminar held at MPL
By GWEN OREL
You already know not to buy clothes in New York, with its high sales tax.
In New Jersey, there is no sales tax on clothes.
But did you know that if you buy a television in Delaware, where the sales tax is low, you still need to pay New Jersey tax?
It’s called “use tax,” and it means that since you’re planning to use the TV in New Jersey, it’s taxable.
For that pair of shoes you bought out of state, it may not matter.
But if you’re an online business it could matter a lot.
On Monday, Jan. 29, two representatives from the New Jersey Division of Taxation, Tilesha McCall and Solange Pimentel, led a free seminar for online businesses.
The seminar included such topics as reporting business income, understanding sales and use tax, online businesses and New Jersey sales tax. About 15 people attended. Some of those present have online businesses already; some are starting them now, selling greeting cards, packaging and cat clothing.
This seminar was the last of three held at the library. The division’s website was recently updated, and a schedule of events is posted at www.state.nj.us/treasury/taxation.
The thing to bear in mind about online businesses, they said, is that even if your business is online, you’re a New Jersey business if you conduct business here, or maintain a place of business here, or have employees here.
And, she said, products are taxable unless the law says they’re not.
There are many specificities in the code — so many that, Pimentel said: “Don’t make logic of it. The law is the law.”
Sales and use tax publications are all online, and include publications for veterinarians, for auto repair shops, for vending machines, for limousine services and many more.
ANJ-27, for specified digital products, is of particular interest to online business. “ANJ” stands for “About New Jersey.”
The rule of thumb is that if something is a digital version of a real product, like books and CDs, it’s probably taxable. Services are not.
Just as products are taxable unless the law says they aren’t, services are exempt unless the law says they aren’t, McCall said. Services include such things as instruction and laundering.
Food preparation is a special case: to be not taxable, the food must be not prepared, meaning it does not have two ingredients mixed together, and is not heated, and does not come with utensils.
“Basically, the state wants you to eat and wear clothes,” McCall said. Luxury items, including specific gear for sports, however, are taxed.
Taxes are collected only by the final or end user: so a business that buys items to resell can get a certificate of exemption, and collect taxes from the customer.
“Taxes are on gains,” McCall said. “On what you’re selling, not on what you buy.”
Online businesses must also contact the states to which they may be shipping, and determine what taxes apply.
All of the exemption forms are online except the ST-5, for nonprofit organizations. Those have to be approved, she said.
Quarterly returns need to be filed by all businesses, except for seasonal businesses. First-quarter taxes are due on April 20.