Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
How Different New Jersey Taxes Affect Your Business
Author: Scarinci Hollenbeck, LLC
Date: March 30, 2017
Key Contacts
Back
In its 2016 New Jersey Small Business Profile, the U.S. Small Business Administration Office of Advocacy said there were 820,303 small businesses in the Garden State.
Owning a small business comes with numerous benefits. Between the independence, flexibility, power and personal fulfillment, it’s an opportunity to put all of your energy into something you’re truly passionate about. With so much power, however, there are tax implications that need to be recognized. This is especially critical in New Jersey, as the state has the highest property taxes in the nation, according to NJ.com. Beyond property tax, business owners in the Garden State should understand how other taxes can affect them.
Income tax
What are some of the biggest mistakes made among business owners? Those involved with income tax, according to New Jersey Business Magazine. Ryan Malone, the principal at Flackman, Goodman & Potter, LLP, said some businesses find it challenging to pay income taxes without borrowing, especially when they’re rapidly expanding.
“Many new small business owners will ‘reinvest’ in their business’ capital equipment using the cash from operations, leaving the potential for a situation where there isn’t enough cash to pay the tax on the profits,” he said. “The new business owner sees this as money spent. However, it doesn’t all reduce taxable income at the time it was spent.”
Our advice: Always budget and calculate your monthly income tax.
Property tax
As a business owner, you must understand how your property taxes are determined. According to the New Jersey State League of Municipalities, there are six basic factors. Those include:
- Market value.
- The cost of municipal and county programs and services.
- Costs of local public schools.
- Availability of other revenues to cover costs.
- The presence of tax-exempt properties in your municipality.
- The total value of all taxable proprieties in your municipality.
At some point, many business owners may consider renovations or additions on their current building to grow their business, accommodate more customers and increase the overall worth of the company. This makes the property more valuable, which then increases the property tax. Business owners need to keep this in mind when making such renovations, as it will impact spending and staying within their budget.
Sales tax
Business owners have a responsibility to collect sales tax. It’s a personal liability that will impact the business as a whole. Ronald J Ruggeri, principal of Cranford-based MSPC Certified Public Accountants and Advisors, P.C., told New Jersey Business Magazine that nearly 90 percent of audits in the state arise due to issues with sales tax. Neglecting to collect and report sales tax at the point of sale can negatively impact the business.
“The state knows there’s a lot of money to be made from collecting sales tax,” he explains. “The audit can be very intrusive, and since there’s no statute of limitations on sales tax, they can go back as far as they’d like.”
Use tax
New Jersey issues a use tax on goods purchased out-of-state or online that in-state business owners didn’t pay sales tax on or they paid sales tax on at a lower rate than they would have if they had made the purchases in New Jersey. Therefore, if you’re making any business transactions while you’re traveling or if you’re shopping online to find the best prices or largest inventory, it’s critical you’re saving receipts or keeping track of your purchases otherwise, according to what Vinay Navani, a certified public accountant, shared with The Star-Ledger.
“Let’s say you go to Staples and buy office supplies. You go to the cash register and they charge you sales tax,” he said. “If you order something online, that vendor may not have a location in New Jersey and so they don’t have to remit sales tax. But then the obligation flips and now you have to pay use tax to the state.”
If you don’t keep track of these out-of-state or online purchases, you’ll be impacted in the event of an audit. Otherwise, the inspection should run smoothly.
Gas tax
Last October, Governor Chris Christie signed a bill to raise the gasoline tax 23 cents per gallon – the state’s first tax increase on gas since 1988, according to NJ.com. By raising the gas tax, drivers are expected to pay more to fuel their cars – which impacts business owners who rely on drivers to deliver goods. Business owners will feel the impact as they reallocate budgets, setting aside more funds to make up for the gas tax.
It’s not always easy running a business, but company owners can reduce stress and negative impact by complying with New Jersey tax regulations. Therefore, if you have any questions regarding New Jersey taxes or if you would like to discuss the matter further, please contact me, Amy Van Fossen, at 201-806-3364.
- Practices: Tax, Trusts & Estates
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Does Your Homeowners Insurance Provide Adequate Coverage?
Your home is likely your greatest asset, which is why it is so important to adequately protect it. Homeowners insurance protects you from the financial costs of unforeseen losses, such as theft, fire, and natural disasters, by helping you rebuild and replace possessions that were lost While the definition of “adequate” coverage depends upon a […]
Author: Jesse M. Dimitro
Understanding the Importance of a Non-Contingent Offer
Making a non-contingent offer can dramatically increase your chances of securing a real estate transaction, particularly in competitive markets like New York City. However, buyers should understand that waiving contingencies, including those related to financing, or appraisals, also comes with significant risks. Determining your best strategy requires careful analysis of the property, the market, and […]
Author: Jesse M. Dimitro
Fred D. Zemel Appointed Chair of Strategic Planning at Scarinci & Hollenbeck, LLC
Business Transactional Attorney Zemel to Spearhead Strategic Initiatives for Continued Growth and Innovation Little Falls, NJ – February 21, 2025 – Scarinci & Hollenbeck, LLC is pleased to announce that Partner Fred D. Zemel has been named Chair of the firm’s Strategic Planning Committee. In this role, Mr. Zemel will lead the committee in identifying, […]
Author: Scarinci Hollenbeck, LLC
Novation Agreement Process: Step-by-Step Guide for Businesses
Big changes sometimes occur during the life cycle of a contract. Cancelling a contract outright can be bad for your reputation and your bottom line. Businesses need to know how to best address a change in circumstances, while also protecting their legal rights. One option is to transfer the “benefits and the burdens” of a […]
Author: Dan Brecher
What Is a Trade Secret? Key Elements and Legal Protections Explained
What is a trade secret and why you you protect them? Technology has made trade secret theft even easier and more prevalent. In fact, businesses lose billions of dollars every year due to trade secret theft committed by employees, competitors, and even foreign governments. But what is a trade secret? And how do you protect […]
Author: Ronald S. Bienstock
What Is Title Insurance? Safeguarding Against Title Defects
If you are considering the purchase of a property, you may wonder — what is title insurance, do I need it, and why do I need it? Even seasoned property owners may question if the added expense and extra paperwork is really necessary, especially considering that people and entities insured by title insurance make fewer […]
Author: Patrick T. Conlon
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
How Different New Jersey Taxes Affect Your Business
Author: Scarinci Hollenbeck, LLC
In its 2016 New Jersey Small Business Profile, the U.S. Small Business Administration Office of Advocacy said there were 820,303 small businesses in the Garden State.
Owning a small business comes with numerous benefits. Between the independence, flexibility, power and personal fulfillment, it’s an opportunity to put all of your energy into something you’re truly passionate about. With so much power, however, there are tax implications that need to be recognized. This is especially critical in New Jersey, as the state has the highest property taxes in the nation, according to NJ.com. Beyond property tax, business owners in the Garden State should understand how other taxes can affect them.
Income tax
What are some of the biggest mistakes made among business owners? Those involved with income tax, according to New Jersey Business Magazine. Ryan Malone, the principal at Flackman, Goodman & Potter, LLP, said some businesses find it challenging to pay income taxes without borrowing, especially when they’re rapidly expanding.
“Many new small business owners will ‘reinvest’ in their business’ capital equipment using the cash from operations, leaving the potential for a situation where there isn’t enough cash to pay the tax on the profits,” he said. “The new business owner sees this as money spent. However, it doesn’t all reduce taxable income at the time it was spent.”
Our advice: Always budget and calculate your monthly income tax.
Property tax
As a business owner, you must understand how your property taxes are determined. According to the New Jersey State League of Municipalities, there are six basic factors. Those include:
- Market value.
- The cost of municipal and county programs and services.
- Costs of local public schools.
- Availability of other revenues to cover costs.
- The presence of tax-exempt properties in your municipality.
- The total value of all taxable proprieties in your municipality.
At some point, many business owners may consider renovations or additions on their current building to grow their business, accommodate more customers and increase the overall worth of the company. This makes the property more valuable, which then increases the property tax. Business owners need to keep this in mind when making such renovations, as it will impact spending and staying within their budget.
Sales tax
Business owners have a responsibility to collect sales tax. It’s a personal liability that will impact the business as a whole. Ronald J Ruggeri, principal of Cranford-based MSPC Certified Public Accountants and Advisors, P.C., told New Jersey Business Magazine that nearly 90 percent of audits in the state arise due to issues with sales tax. Neglecting to collect and report sales tax at the point of sale can negatively impact the business.
“The state knows there’s a lot of money to be made from collecting sales tax,” he explains. “The audit can be very intrusive, and since there’s no statute of limitations on sales tax, they can go back as far as they’d like.”
Use tax
New Jersey issues a use tax on goods purchased out-of-state or online that in-state business owners didn’t pay sales tax on or they paid sales tax on at a lower rate than they would have if they had made the purchases in New Jersey. Therefore, if you’re making any business transactions while you’re traveling or if you’re shopping online to find the best prices or largest inventory, it’s critical you’re saving receipts or keeping track of your purchases otherwise, according to what Vinay Navani, a certified public accountant, shared with The Star-Ledger.
“Let’s say you go to Staples and buy office supplies. You go to the cash register and they charge you sales tax,” he said. “If you order something online, that vendor may not have a location in New Jersey and so they don’t have to remit sales tax. But then the obligation flips and now you have to pay use tax to the state.”
If you don’t keep track of these out-of-state or online purchases, you’ll be impacted in the event of an audit. Otherwise, the inspection should run smoothly.
Gas tax
Last October, Governor Chris Christie signed a bill to raise the gasoline tax 23 cents per gallon – the state’s first tax increase on gas since 1988, according to NJ.com. By raising the gas tax, drivers are expected to pay more to fuel their cars – which impacts business owners who rely on drivers to deliver goods. Business owners will feel the impact as they reallocate budgets, setting aside more funds to make up for the gas tax.
It’s not always easy running a business, but company owners can reduce stress and negative impact by complying with New Jersey tax regulations. Therefore, if you have any questions regarding New Jersey taxes or if you would like to discuss the matter further, please contact me, Amy Van Fossen, at 201-806-3364.