New Jersey EV buyers to pay sales tax on vehicle purchases for first time since 2004

Drivers in New Jersey who purchase an electric vehicle will—for the first time since 2004—have to pay sales tax on the transaction. 

The return of the EV sales tax comes on the heels of the July 2024 introduction of a new annual electric vehicle fee of $250 in addition to the existing vehicle registration fee. The new fee is considered to be a road-use fee, and the funds it brings in will ostensibly be used for road and bridge repairs and improvements. 

The return of the tax is taking place just as more and more drivers are opting for EVs in the Garden State. 

“Personal vehicles have long represented a significant portion of the sales tax base, and with new registrations of EVs approaching 10% of new vehicle registrations, it is responsible to acknowledge these vehicles as a regular part of the market,” the office of Governor Phil Murphy said when the legislation was passed in June. 

While buyers of gasoline- and diesel-powered automobiles in the state have had to pay a 6.625% sales tax, EV owners have been exempt as part of the Drive Green NJ program. 

Legislation enacted by the New Jersey legislature in January 2004 created a sales tax exemption for individuals or companies purchasing “zero-emission vehicles,” which the legislation defined as “battery-powered or fuel cell-powered vehicles pursuant to the California Air Resources Board zero emission standards for the model year.” 

The 2003 legislation also created a similar sales tax exemption for electric medium- and heavy-duty trucks that went first into effect on March 21, 2021, some 17 years after the exemption for electric passenger cars went into effect. 

The state will not be collecting the full 6.625% sales tax on EVs right away. Instead, it plans to let the blow fall by degrees and levy half of the current tax rate, or 3.3125%, through June 30, 2025, after which the full rate will be charged. 

Based on information obtained from the non-partisan Office of Legislative Services, the phase-out of the sales tax exemption is expected to bring in $75 million in new revenue for the budget’s general fund during the 2025 fiscal year, which ends on June 30. 

Source: New Jersey Department of Environmental Protection 

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