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

By Harold Hecht, Seth Rabe and Katie Massey

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

 

 



Disclaimer of Liability

The information provided here is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation.

Mazars USA LLP is an independent member firm of Mazars Group.


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Disclaimer of Liability

The information provided here is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation.

Mazars USA LLP is an independent member firm of Mazars Group.







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