Purchasing a vehicle often comes with the added cost of sales tax, and New Jersey is no exception. However, there are several situations and types of vehicles that are exempt from sales tax in the Garden State. If you believe you qualify for an exemption, it’s essential to understand the rules and how to claim it. To claim your exemption, you generally need to visit a New Jersey Motor Vehicle Commission (MVC) agency. For exemptions not listed here, it’s advisable to contact the MVC Sales Section of the New Jersey Division of Taxation directly at [email protected].
This guide will delve into the various sales tax exemptions available in New Jersey for vehicles, ensuring you are well-informed and prepared when purchasing your next car.
New Jersey Sales Tax Exemptions for Vehicles
New Jersey provides several specific exemptions from sales tax on vehicle purchases. These exemptions cater to a range of circumstances, from the type of purchaser to the vehicle’s intended use. Here’s a breakdown of the key exemptions:
Exemption #1: Non-Resident Vessel Purchasers
This exemption is specifically for boat 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 may be exempt from sales tax on the vessel.
Exemption #2: Governmental and International Organizations
Vehicles acquired by the following entities are exempt from 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
This broad exemption covers a variety of vehicle types and specific uses:
- Farm Vehicles: Vehicles used directly and exclusively in 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: Sales of used mobile homes are exempt. Note: This exemption does not extend to used travel trailers, campers, or recreational vehicles.
- Limousines: Limousines are exempt from sales tax.
- Low Speed Vehicles (LSVs): LSVs certified by the New Jersey Department of Environmental Protection (NJDEP) Commissioner may be exempt. Link to NJDEP
- 100% Zero Emission Vehicles (ZEVs): These vehicles require an Exempt Use Certificate to claim exemption.
- Important Note: Be aware that the sales tax on zero-emission vehicles is subject to change. From October 2024 through June 2025, a reduced tax rate of 3.3125 percent applies. Starting July 1, 2025, ZEVs will be taxed at the standard New Jersey sales tax rate.
- Resident Service Members: Specific conditions apply to resident service members stationed out-of-state (see “Special Conditions” below).
- Tax-Exempt Organizations: Vehicles purchased by organizations holding a 9-digit exemption number from the New Jersey Division of Taxation are exempt.
Exemption #4: Leasing or Rental Companies
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.
Exemption #5: Inherited Vehicles
Vehicles acquired by an heir, legatee, or trust beneficiary are exempt from sales tax.
Exemption #7: Out-of-State Purchases by Non-Residents
If you purchased, titled, and registered a vehicle in another state while you were a non-resident of New Jersey, the vehicle may be exempt from New Jersey sales tax.
Exemption #8: Commercial Fishing and Party Boats
Vessels used for commercial fishing or as party boats (carrying more than six passengers and subject to annual inspection) are exempt. For detailed guidance, refer to the NJ Division of Taxation website on Sales and Use Tax for Boats and Vessels.
Exemption #9: Commercial Trucks and Heavy Vehicles
Certain commercial vehicles registered in New Jersey are exempt if they meet specific criteria:
- Vehicles with a Gross Vehicle Weight Rating (GVWR) exceeding 26,000 pounds as specified by the manufacturer.
- Vehicles operated actively and exclusively for interstate freight transport under a certificate or permit from the Interstate Commerce Commission.
- Farm vehicles registered under motor vehicle statute (N.J.S.A. 39:3-24, 25) with a GVWR over 18,000 pounds.
Special Conditions for Sales Tax Exemptions
Several special conditions can affect sales tax exemptions. It’s crucial to understand these nuances:
- Used Mobile Homes: As mentioned earlier, the exemption applies only to used mobile homes and not to other types of 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 might be able to defer sales tax payment. This deferment lasts until the vehicle is brought into New Jersey upon your release from active duty. You must obtain a Letter of Deferment from the Division of Taxation and present it when titling the vehicle. If you don’t have the letter, 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 title due to repossession, insurance loss, or lien addition are exempt from sales tax, unless the vehicle is kept for the organization’s own use. A sales tax-satisfied stamp with the relevant exemption number is required.
- Gifts: When a vehicle is gifted, the sales price should be noted as “GIFT.” The Motor Vehicle Commission may request additional documentation if the gift information appears altered or questionable.
Claiming Your Sales Tax Exemption
To claim a sales tax exemption, you will generally need to visit a New Jersey Motor Vehicle Commission (MVC) agency. Ensure you bring all necessary documentation to support your exemption claim, such as exemption certificates, letters of deferment (for service members), or organizational exemption numbers. For specific requirements related to your exemption, it is best to contact the New Jersey Division of Taxation or visit the MVC website.
For further information and updates, you can refer to the Motor Vehicle Casual Sales Notices on the New Jersey Division of Taxation website.
Understanding sales tax exemptions can save you a significant amount when purchasing a vehicle in New Jersey. By knowing the categories and conditions for exemption, you can ensure you are not paying unnecessary taxes and navigate the purchase process smoothly.
