Sales Tax Exemptions in New Jersey
In general, churches are exempt from income tax, property tax, and sales tax. However, state and local exemptions vary. New Jersey churches may be exempt from property tax but must pay sales tax on purchases. To buy goods tax-free for resale or as business materials, they can use a New Jersey Sales Tax Exemption Form.
Exempt Items from Sales Tax in New Jersey
What items are exempt from sales tax in New Jersey? Some items are exempt from sales tax in New Jersey, such as most clothing, prescription drugs, and groceries. Gasoline purchases are exempt from sales tax, but subject to a gasoline excise tax.
In Salem County, the sales tax rate is lowered to 3.5%, half the statewide rate. Qualified businesses in designated Urban Enterprise Zones can also charge 3.5% sales tax on certain items. However, most of New Jersey charges 6.625% sales tax on retail sales of goods and some services.
To make tax-exempt purchases for resale or business use, companies must submit a New Jersey Sales Tax Exemption Certificate form. Sellers must collect exemption certificates from buyers to apply tax exemptions on otherwise taxable sales.
The New Jersey use tax rate mirrors the sales tax rate. It applies to goods purchased without paying sales tax, when used or consumed in-state. Use tax returns are due by the 20th of the following month.
Additional local sales taxes apply in tourist counties like Atlantic City and Cape May. But most of New Jersey only charges the standard statewide sales tax.
Property Tax Exemption for Religious Organizations in New Jersey
To qualify for a property tax exemption, a religious organization must include a building that is actually used for the exempt religious purpose. The state also allows an exemption for occupied parsonages.
New Jersey state law provides property tax exemptions for certain religious organizations. To apply for exemption, an organization must submit an application to the local tax assessor. The ecclesiastical abstention doctrine has caused ambiguity within the property tax exemption and has led many courts to make determinations on a case-by-case basis.
If a religious organization uses its property for non-religious purposes, those portions may not be exempt from taxes. In California, religious institutions are only partially exempt from property taxes.
The New Jersey Tax Court refused to allow an exemption for a commercial property under construction for a new religious use. The Court found the limited use of the property did not meet requirements for an exemption. At issue was whether the property was available for services without a certificate of occupancy.
Among other things, most states provide exemptions from local property taxes for religious institutions. However, if the property is used for other purposes, like a bookstore, those portions may be subject to taxes. Indeed, other institution types are also exempted in many cases, but churches have their own separate status.