What Items Are Exempt from Sales Tax in New Jersey? A Complete Guide

Introduction

New Jersey is known for its 6.625% state sales tax, but did you know that many everyday items are exempt from this tax? Whether you’re a New Jersey resident looking to save money on essential goods or a business owner navigating tax exemptions, understanding what is and isn’t taxed can be crucial for managing expenses and staying compliant.

In this guide, we’ll break down the key sales tax exemptions in New Jersey, including clothing, groceries, capital improvements, and gifts. With a clear understanding of these exemptions, you’ll be able to save on your everyday purchases and ensure that your business is following the rules.

What Are Examples of Tax-Exempt Items in New Jersey?

In New Jersey, several categories of items and services are exempt from sales tax. Some common exemptions include:

Clothing and Footwear (most everyday wear)
Unprepared Groceries and Food Items
Prescription and Over-the-Counter Medications
Medical Equipment and Devices
Newspapers and Magazines
Capital Improvements (in specific cases)
Certain Professional Services (e.g., legal, financial)

Let’s take a closer look at each category.

Is There No Sales Tax on Clothing in New Jersey?

Yes, New Jersey is one of the few states that doesn’t charge sales tax on most clothing and footwear. This exemption includes most types of everyday wear, such as shirts, pants, dresses, and shoes. However, there are exceptions:

Fur clothing – Sales tax is applied to fur coats and other fur items.
Sporting equipment – Items like cleats, helmets, and certain protective gear (e.g., work gloves or safety boots) are taxable.
Custom tailoring services – While the clothing itself is tax-free, services like custom tailoring may still be taxable.

Are Groceries Taxed in NJ?

No, most unprepared food items are exempt from sales tax in New Jersey. Tax-free items include:

Fresh fruits and vegetables
Meat, poultry, and dairy products
Bread, cereals, and snacks
Canned and packaged goods

However, there are some exceptions:

Prepared meals – Hot foods or food sold for immediate consumption (e.g., takeout meals) are taxable.
Alcoholic beverages – Alcohol is always taxed in New Jersey.
Candy and soft drinks – These can be taxable depending on their ingredients.

Are Capital Improvements Exempt from Sales Tax in NJ?

Yes, capital improvements are generally exempt from sales tax in New Jersey, but only under specific conditions. The work must meet the following criteria:

It must be a permanent improvement that increases the value of the property (e.g., installing a new roof, central air conditioning, or a new driveway).
The homeowner must provide the contractor with a completed Certificate of Capital Improvement (Form ST-8).

However, repairs and maintenance, such as replacing a water heater or fixing a door, are generally taxable.

What Gifts Are Non-Taxable in New Jersey?

In New Jersey, whether or not a gift is taxable depends on the type of gift itself, rather than the fact that it’s a gift. Tax-free gifts include items that are already exempt from sales tax, such as:

Clothing
Groceries
Books and newspapers

On the other hand, gifts such as electronics, jewelry, and toys are taxable. Also, monetary gifts, like cash or gift cards, are not subject to sales tax—though there may be federal gift tax rules to consider for large amounts.

How to Claim a Sales Tax Exemption in New Jersey

Sales tax exemptions in New Jersey vary depending on whether you are an individual shopper or a business entity. Here’s how you can ensure you receive the correct exemption:

For Individuals

Most sales tax exemptions for consumers are automatically applied at the point of sale. This means that when you purchase tax-exempt items—such as clothing, groceries, prescription medications, or newspapers—you do not need to take any additional action.

However, there are a few key things to keep in mind:

If you are charged sales tax on a tax-exempt item, check your receipt and ask the retailer for a refund. Retailers may occasionally misclassify products, especially in cases where taxable and non-taxable items are similar.
Some products have partial exemptions based on their ingredients or use. For example, while most groceries are tax-free, certain beverages and candy may be taxable depending on their ingredients.

For Businesses or Specific Services

Businesses and service providers that qualify for a sales tax exemption must submit the appropriate exemption certificate to their suppliers. The type of certificate required depends on the nature of the exemption:

ST-3 Resale Certificate – Used by businesses that purchase goods for resale. This prevents sales tax from being charged on wholesale purchases, ensuring that tax is only collected when the product is sold to the final consumer.
ST-4 Exempt Use Certificate – Used by organizations that purchase products for specific exempt uses, such as manufacturing or research.
ST-5 Exempt Organization Certificate – Used by non-profit organizations, charities, and religious institutions that qualify for a tax exemption.
ST-8 Certificate of Capital Improvement – Used by contractors performing tax-exempt capital improvements on real estate. Homeowners must provide this certificate to contractors to ensure that labor costs are not taxed.

Steps to Properly Claim a Business Sales Tax Exemption

Determine Eligibility: Make sure your business qualifies for the exemption and that the product or service you are purchasing falls under the exemption rules.
Complete the Correct Form: Download the necessary sales tax exemption certificate from the New Jersey Division of Taxation website. Fill it out completely and accurately.
Provide the Certificate to the Seller: Submit the completed exemption certificate to your supplier at the time of purchase. Retailers and wholesalers will not automatically apply exemptions without this documentation.
Maintain Proper Records: Keep copies of all exemption certificates and related documentation for at least four years, as required by law. If audited, you must prove that your exempt purchases were legitimate.
Ensure Compliance: If you improperly claim an exemption, you may be liable for unpaid sales tax, penalties, and interest. Always verify that your purchases qualify under the exemption rules.

Conclusion

New Jersey’s sales tax exemptions help residents save on essential goods and services like clothing, groceries, medical items, and capital improvements. Consumers can shop strategically by understanding what’s tax-free, while businesses should ensure compliance by correctly applying the rules.

To make your shopping and business operations even smoother, download our NJ Sales Tax Exemption Cheat Sheet or consult a tax expert for advice on how to stay compliant.