Navigating the world of car sales can be complex, especially when it comes to taxes. In New Jersey, like many other states, sales tax is a part of purchasing a vehicle. However, the Garden State offers several exemptions that could save you money. If you’re wondering whether you might be eligible to skip out on sales tax when buying a car in NJ, you’ve come to the right place.
This guide breaks down the categories of vehicles and purchasers that are exempt from sales tax in New Jersey. To claim these exemptions, it’s essential to visit a Motor Vehicle Agency. For exemptions not listed here, you should contact the MVC Sales Section of the New Jersey Division of Taxation directly at [email protected].
NJ Sales Tax Exemptions Explained
New Jersey provides a number of sales tax exemptions for vehicle purchases, catering to various situations and types of buyers. Here’s a detailed look at these exemptions:
Exemption #1: Non-Resident Vessel Purchases
This exemption applies specifically to boat or vessel purchases. If you are not a resident of New Jersey and will not be using the vessel in connection with any employment, trade, or business within the state, you are exempt from sales tax on the vessel.
Exemption #2: Governmental and International Organizations
Vehicles acquired by the following entities are exempt from New Jersey sales tax:
- The Federal government or any of its agencies.
- The State of New Jersey, including its agencies or political subdivisions.
- The United Nations or any international organization where the United States is a member.
Exemption #3: Specific Vehicle Types and Uses
A broad range of vehicles qualify for exemption under this category, depending on their use or type:
- Farm Vehicles: Vehicles used directly and exclusively for the production or sale of farm products.
- School Buses: Buses used for transporting school children.
- Recycling Equipment: Equipment specifically designed for recycling purposes.
- Repossessed Vehicles: Vehicles acquired through repossession.
- Used Mobile Homes: (See special conditions below). Note that this does not extend to travel trailers, campers, or recreational vehicles.
- Limousines: Luxury vehicles used for transportation services.
- Low Speed Vehicles (LSVs): Certain low-speed vehicles certified by the New Jersey Department of Environmental Protection (NJDEP).
- 100% Zero Emission Vehicles (ZEVs): These vehicles may require an Exempt Use Certificate. It’s important to note that a reduced tax rate of 3.3125 percent may apply to zero-emission vehicles from October 2024 through June 2025. After July 1, 2025, standard sales and use tax rates will apply as per the “Sales and Use Tax Act.”
- Resident Service Members: (See special conditions below).
- Tax-Exempt Organizations: Vehicles purchased by organizations holding a 9-digit exemption number from the New Jersey Division of Taxation.
Exemption #4: Leasing or Rental Company Purchases
If a leasing or rental company, registered for New Jersey sales tax, purchases a vehicle from a non-registered vendor, the purchase may be exempt from sales tax.
Exemption #5: Inheritance and Trust Acquisitions
Vehicles acquired by an heir, legatee, or trust beneficiary as part of an inheritance are exempt from sales tax.
Exemption #7: 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 NJ sales tax.
Exemption #8: Commercial Vessels
Vessels used for commercial fishing or as party boats (carrying more than six passengers and subject to annual inspection) are exempt. For more detailed guidance, refer to the NJ Division of Taxation website on Sales and Use Tax for boats and vessels.
Exemption #9: Certain Commercial Vehicles
Specific commercial vehicles registered in New Jersey can be exempt, including:
- Commercial trucks, truck tractors, trailers, or semi-trailers with a Gross Vehicle Weight Rating (GVWR) exceeding 26,000 pounds as specified by the manufacturer.
- Vehicles operated actively and exclusively for interstate freight carriage under an Interstate Commerce Commission certificate or permit.
- Farm vehicles registered under N.J.S.A. 39:3-24, 25 with a GVWR over 18,000 pounds.
Special Conditions for Sales Tax Exemptions
Certain exemptions come with specific conditions that need to be met:
- Mobile Homes: The exemption for used mobile homes does not include used travel trailers, campers, or recreational vehicles.
- Resident Service Members: If you are a New Jersey resident service member stationed outside of NJ and purchase a vehicle out of state but intend to title it in New Jersey, you may defer sales tax payment until the vehicle is brought into NJ after your active duty release. A Letter of Deferment from the Division of Taxation is required. If this letter isn’t presented at titling, sales tax must be paid.
- Disabled Veterans: Disabled veterans who receive funds from the Veterans Administration to purchase a vehicle are exempt from sales tax.
- Financial Institutions: Banks, leasing companies, insurance companies, and other financial institutions taking vehicle titles due to repossession, insurance loss, or lien addition are exempt from sales tax unless the vehicle is for the organization’s own use. A sales tax-satisfied stamp with the relevant exemption number is needed.
- Gifts: For vehicles gifted to another person, the sales price should be noted as “GIFT.” Any alterations or changes to this documentation may require additional verification by the Motor Vehicle Commission.
Further Resources
For more information, you can check the Motor Vehicle Casual Sales Notices provided by the NJ Division of Taxation.
Understanding sales tax exemptions can make a significant difference when purchasing a vehicle in New Jersey. By knowing these exemptions, you can ensure you’re not paying more than necessary and take full advantage of the savings available to eligible buyers. Always verify the latest regulations and your eligibility with the New Jersey Motor Vehicle Commission or the Division of Taxation to ensure compliance and accurate information.
