US New Jersey non-resident sales tax threshold reform

New Jersey Considers Changes to Sales Tax Economic Nexus Rules

Remote or out-of-state e-commerce sellers may have to register with Department of Revenue only if sales about US$100,000

The New Jersey Legislature is deliberating Senate Bill 3604, a proposal to simplify the state’s sales tax economic nexus rules by eliminating the 200-transactions threshold. This change, expected to take effect in 2025, would alter how remote sellers and corporations establish economic nexus in the state. If enacted, the bill would mark a significant update to New Jersey’s sales and use tax framework, in effect since 1 November 2018.

South Dakota vs Wayfair 2018 Supreme Court ruling launched the concept of ‘economic nexus’ meaning the act of just selling to local consumers from out of state could trigger in-state sales tax obligations for non-resident sellers.

Background on New Jersey Sales and Use Tax

New Jersey’s sales and use tax system requires remote sellers and corporations to collect and remit sales tax if they meet specific economic nexus thresholds. Currently, economic nexus is established if, during the current or prior calendar year, a remote seller:

• Has over $100,000 in gross revenue from sales of tangible personal property, specified digital products, or taxable services delivered into New Jersey; or
• Completes 200 or more separate transactions of tangible personal property, specified digital products, or taxable services delivered into New Jersey.

For the corporation business tax (CBT), the same dual threshold applies: corporations are subject to CBT if they surpass $100,000 in receipts from sources within New Jersey or conduct 200 or more separate transactions delivered to customers in the state.

Proposed Changes under S3604

Senate Bill 3604 seeks to streamline these thresholds by eliminating the 200-transactions rule. If enacted, the only requirement for establishing economic nexus for sales tax purposes would be exceeding $100,000 in gross sales. The change would also apply to the CBT, removing the transaction threshold from its criteria.

The bill is set to take effect on the first day of the second month following its enactment, with an anticipated implementation in 2025. While the full fiscal impact of the bill remains uncertain, the Office of Legislative Services estimates that it would reduce New Jersey’s annual sales tax collections by no more than $6,625 per affected remote seller.

Implications for Remote Sellers and Businesses

The proposed changes align with a broader trend among states to simplify their economic nexus rules, reducing compliance burdens for businesses while maintaining a revenue threshold to ensure significant economic activity is taxed. By adopting S3604, New Jersey would join the growing number of states relying solely on revenue thresholds to define economic nexus.

If passed, these updates will likely affect remote sellers, corporations, and their tax compliance strategies, particularly for businesses that rely on high transaction volumes but generate less revenue. Remote sellers and corporations should stay informed about the bill’s progress and prepare to adjust their sales tax and CBT compliance practices accordingly.

US Economic nexus on sales tax following South Dakota vs Wayfair

South Dakota vs Wayfair 2018 Supreme Court ruling launched the concept of ‘economic nexus’ meaning the act of just selling to local consumers from out of state could trigger in-state sales tax obligations for non-resident sellers. Previously, the ‘phyiscal nexus’ test was the sole test, which meant only if there were staff, retail or storage sites in state would sales tax apply.

Since the 2018 ruling, some 40 states have followed South Dakota and imposed both financial and transaction number thresholds. See table below.

US Sales Tax rates and selling thresholds