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New Jersey Division of Taxation Issues Sales Tax Guidance on Taxability of COVID-19 Surcharges



August 10, 2020

The New Jersey Division of Taxation issued guidance on July 24, 2020 on the application of sales tax on surcharges related to the COVID-19 pandemic.

Many businesses have added COVID-19 surcharges to customers’ invoices to offset some of the costs of conducting business during the pandemic. These cover additional costs such as protective equipment or cleaning supplies. The surcharges – which are variously referred to as a COVID-19 fee, coronavirus fee, PPE fee, sanitation fee, cleaning fee, etc. – may be subject to sales tax.

Pursuant to the definition of “sales price” provided in N.J.S.A. 54:32B-2(oo)(1), New Jersey considers the surcharge part of the total sales price as “a charge by the seller necessary to complete the sale.” Thus, the sales tax on a COVID-19 surcharge follows the taxability of the good or service being sold. If the good or service being sold is subject to sales tax, the separately stated COVID-19 surcharge is also subject to sales tax. If the good or service being sold is not subject to sales tax, the COVID-19 surcharge is similarly not subject to sales tax.

New Jersey has provided a few examples: a “COVID-19 Fee” included on a customer’s restaurant bill would be subject to sales tax, as meals and beverages are a taxable good. On the other hand, a “PPE Fee” added to a patient’s bill at a dentist’s office would not be subject to sales tax, as dental services are not taxable.

Taxpayers with any questions regarding the application of sales tax on COVID-19 surcharges should reach out to Mazars USA LLP for further guidance.

HAROLD HECHT
MANAGING DIRECTOR
+1 646.225.5953
harold.hecht@mazarsusa.com

SETH RABE
MANAGING DIRECTOR
+1 375.6877
seth.rabe@mazarsusa.com

KATIE MASSEY
SENIOR
+1 212.375.6679
katie.massey@mazarsusa.com

 




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