A recent Rutgers University study commissioned by the New Jersey Retail Merchants Association (NJRMA) finds that out-of-state, on-line-only businesses are exploiting a tax code loophole and it is costing New Jersey jobs and tens of millions of dollars. With the holiday shopping season in full swing, Garden State companies want the playing field leveled.

NJRMA president John Holub says, “In 2009 we’re estimating that the state of New Jersey lost out on about $170 million and projecting out to 2015 that’s going to be in excess of $300 million that the state will lose out on in lost tax revenue.”

Holub says the state lost a ton very recently in just one day. He explains, “The results are in for Cyber Monday and it was a record-breaker. There’s projections that sales increased over 20% over last year and this highlights more than ever the unfair advantage that online-only retailers have over bricks and mortar retailers and that’s the advantage of not collecting the (State) sales tax.”


The NJRMA is calling for a change in the tax code that would require out-of-state, on-line-only companies to collect New Jersey’s 7% state sales tax. Holub says this is not a tax hike. Currently on-line companies that do not have an actual physical presence in the State, but sell goods to New Jersey consumers aren’t required to collect the tax. The buyer is already responsible for paying the sales tax by itemizing purchases on their tax forms. Holub says most people don’t know they’re required to pay the sales tax so most don’t do it.

“Out-of-state, on-line-only retailers have an unfair 7% competitive advantage over in-state bricks and mortar retailers,” says Holub. “The playing field must be leveled. Main Street’s retailers are struggling to survive. Consumers are being exposed to an unmet tax liability and if audited they could be subject to fines and penalties.”

The study concludes that if the tax loophole is closed it could result in almost $400 million in sales returning to in-state retailers, adding over 1,400 jobs, $44 million in personal income and $95 million in gross domestic product for New Jersey every year.

Will Irving, one of the report’s authors says, “The State of New Jersey is losing significant tax revenue to out-of-state, on-line-only retailers and that number will likely continue to grow as e-commerce transactions increase.”

Harvey Finkel, owner of the Clinton Book Shop in Hunterdon County says, “I can’t compete with these online giants that don’t collect sales tax. I’m losing more and more business every day and my store won’t survive if we don’t end this massive loophole for these out-of-state, on-line-only retailers.”