The New Jersey Division of Taxation has issued new guidance that may impact how businesses handle sales tax on imported goods. In its May 20, 2025 advisory, Sales Tax Treatment of Tariff Markups, the Division clarified that federal tariffs imposed on goods brought into the U.S. must be included in the taxable sales price in New Jersey—even if those tariffs are listed as separate line items on customer invoices. Martin D. Hauptman, Esq., Partner in Mandelbaum Barrett PC’s Tax, Trusts, and Estates Practice Group, explains that this guidance is a reminder that any charge necessary to place a product into the hands of a buyer—including tariffs—forms part of the taxable “receipt” under state law.
Tariffs Are Not Exempt from Sales Tax
While some businesses have treated tariff-related charges as separate and potentially non-taxable, New Jersey makes clear that these costs are taxable when associated with the sale of tangible personal property. Just like shipping, handling, or installation charges, tariffs are considered part of the total sales price subject to tax—even if they are itemized.
Why This Matters for Importers and Retailers
This clarification may come as a surprise to importers and retailers who have structured their billing practices to reflect tariff costs as pass-through charges. For businesses already navigating a complex international supply chain and tight margins, treating tariffs as taxable could affect pricing strategies and tax compliance obligations.
Retailers and wholesalers, particularly those that deal in high-volume or high-value imported goods, must take a closer look at how tariffs are handled in their invoicing systems and whether those amounts are properly factored into the total taxable price. Misalignment between business practices and the Division’s interpretation could lead to costly audit adjustments, especially for companies with multi-year exposure.
Next Steps for Compliance
Businesses that include tariff markups in their pricing models should take immediate steps to review their current sales tax practices. This includes assessing how tariff charges are being displayed on invoices and whether sales tax is being calculated on the full amount paid by the customer. In many cases, point-of-sale and accounting systems may need to be updated to ensure compliance with the Division’s clarified position.
Additionally, it is important for businesses to consult with tax professionals to evaluate whether past practices have created any potential exposure. If tariffs have been excluded from the sales tax base in prior periods, there may be a risk of underpayment that should be proactively addressed. Legal and accounting advisors can assist in reviewing transactional history and determining whether remedial actions, such as voluntary disclosure or amended returns, are appropriate.
For more information on tariffs and sales tax, you can reach Martin D. Hauptman at mhauptman@mblawfirm.com or 973-243-7912.