New Jersey has collected a statewide sales tax since July 1, 1966. The NJ sales tax history runs from an original 3% rate through seven changes to today’s 6.625%, which took effect on January 1, 2018. Along the way the state has both raised and cut the rate, and it has steadily broadened what the tax applies to while keeping groceries, most clothing, and medicine off the list.
Where the Tax Came From
The modern sales tax traces to the Sales and Use Tax Act of 1966, codified at N.J.S.A. 54:32B-1 and the sections that follow.1Justia. New Jersey Code 54:32B-1 – Short Title The legislature passed it during a period of rapid population and economic growth, choosing a consumption-based model that spread the cost of state services across everyone buying taxable goods, rather than leaning harder on income and property taxes.
The same Act created a companion use tax at the matching rate. It applies to goods bought outside New Jersey but used inside it. Without that piece, residents could cross a state line, buy tax-free, and bring the item home. The use tax closed the gap and gave the state a legal basis to reach out-of-state purchases. Every later rate change and base expansion has been built on that 1966 framework.
Every Rate Change Since 1966
The rate has moved seven times. Each shift answered a budget pressure, a political fight, or both.
- 1966 — 3%: The original rate when the Act took effect on July 1.
- 1970 — 5%: The first increase, driven by expanding social programs and inflation.
- 1983 — 6%: Governor Kean signed an increase to stabilize the treasury during a national recession.2The Daily Journal. Local History: States First Sales Tax Retracted Thanks to South Jersey
- 1990 — 7%: Governor Florio pushed the rate to 7% to address a projected multi-billion-dollar deficit. The move drew fierce public backlash.
- 1992 — 6%: The legislature rolled the rate back to 6%, partly in response to that backlash and partly to encourage retail spending.
- 2006 — 7%: Governor Corzine raised the rate back to 7% to cover rising healthcare and pension costs.
- 2017 — 6.875%, then 2018 — 6.625%: A legislative deal tied to the Transportation Trust Fund produced a two-step cut. The rate dropped to 6.875% on January 1, 2017, then to 6.625% on January 1, 2018.3State of New Jersey. Division of Taxation – Rates and Boundaries
The current 6.625% rate is written into N.J.S.A. 54:32B-3 as the permanent rate for sales made on and after January 1, 2018.4Justia. New Jersey Revised Statutes Section 54:32B-3 – Taxes Imposed The Florio episode remains the most dramatic chapter in the sequence: a full percentage point up in 1990, back down two years later.
What the Tax Has Covered Over Time
The base has shifted as much as the rate. In 1966 the economy ran heavily on manufacturing, and the tax leaned on tangible goods. As consumer spending moved toward services, the legislature expanded. N.J.S.A. 54:32B-3 now reaches a long list of services, including maintenance and repair of real property (think professional landscaping or janitorial work, though not major capital improvements), installation and repair of personal property, and telecommunications.4Justia. New Jersey Revised Statutes Section 54:32B-3 – Taxes Imposed Digital products such as downloaded music, e-books, and streaming subscriptions also fall under the tax, a category that did not exist when the Act passed.
Longstanding Exemptions
Several categories have stayed outside the tax base from the early years. Groceries sold for off-premises consumption are exempt, though candy and soft drinks are not.5Justia. New Jersey Revised Statutes Section 54:32B-8.2 – Food Items, Certain, Exemption From Tax Most clothing and footwear for everyday wear is exempt as well, with carve-outs for fur clothing, accessories, and sport or recreational equipment.6Justia. New Jersey Code 54:32B-8.4 – Clothing, Footwear, Exemption From Tax Prescription drugs and over-the-counter medications round out the major consumer exemptions.7New Jersey Division of Taxation. New Jersey Sales Tax Guide – Tax Topic Bulletin SU-4
Urban Enterprise Zones: A Half-Rate Experiment Since 1983
In 1983 the legislature passed the Urban Enterprise Zones Act (N.J.S.A. 52:27H-60) to steer shoppers and investment toward economically distressed cities.8Justia. New Jersey Code 52:27H-60 – Short Title Qualified businesses inside a designated zone charge half the statewide rate. At 6.625%, that works out to 3.3125% at the register.9NJ Division of Taxation. Urban Enterprise Zone The program has had a bumpy legislative history. Some zones have temporarily lost their special status when authorizing laws expired and were not immediately renewed.
Atlantic City’s Separate Rate
Atlantic City runs on its own tax stack. For most taxable retail purchases in the city, a 9% luxury tax applies while the state sales tax drops to a reduced 3.625%, producing a combined 12.625%. Alcoholic beverages sold by the drink carry a 3% luxury tax plus the full 6.625% state rate, for a combined 9.625%. Packaged goods sold at retail carry only the standard 6.625% state rate.10State of New Jersey. Atlantic City Luxury Tax Visitors expecting the statewide figure are often caught off guard by the 12.625% line on a restaurant check or hotel bill.
The Wayfair Shift: Remote Sellers Join the Base
For decades New Jersey could only require a business to collect sales tax if that business had a physical presence in the state. The U.S. Supreme Court’s 2018 decision in South Dakota v. Wayfair changed the rules nationwide, and New Jersey moved quickly. Effective November 1, 2018, remote sellers and marketplace facilitators must register, collect, and remit New Jersey sales tax if they meet either of two thresholds in the current or prior calendar year: more than $100,000 in gross revenue from sales delivered into New Jersey, or 200 or more separate transactions delivered into the state.11State of New Jersey. New Jersey Sales Tax Remote Sellers Frequently Asked Questions
Once a remote seller crosses either threshold, the collection obligation runs for the rest of that year and the full following calendar year. The revenue threshold counts all sales delivered into New Jersey, including sales of exempt items, which catches sellers who assume their nontaxable products keep them below the line. Marketplace facilitators such as Amazon and Etsy carry the collection responsibility for third-party sales made through their platforms, shifting the compliance burden off individual small sellers. That remote-seller expansion is the most recent major change in the tax’s six-decade run, and together with the 2018 rate cut it defines where the system sits today.