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As we previously reported, in November 2018 the Jersey City, New Jersey city council unanimously approved the establishment of a 1% payroll tax paid by employers. The mayor swiftly approved the ordinance. (Ordinance 18-133; EY Payroll Newsflash Vol. 19, #190, 11-28-2018.)

According to information posted by the Jersey City Office of Tax Collector to its website, employers must register for the new payroll tax here.

This tax is paid by employers and is not withheld from wages paid to employees. All private for-profit employers located within Jersey City with a quarterly gross payroll of $2,500 or more are subject to the tax on the wages of non-Jersey City residents.

According to the tax office, employers in zip codes 07302, 07304, 07305, 07306, 07307, 07310, 07311, and 07312 are covered by the ordinance. Employees living within these same zip codes are considered Jersey City residents for the purpose of exclusion.

Services by employees are covered if either:

1. The services are performed within the City of Jersey City or
2. The services are performed outside of the City of Jersey City, but the place from which the services are supervised is in the City of Jersey City

The employer may be required to provide the tax office with written evidence and documentation of the relevant Jersey City residents to be excluded from the payroll tax calculation.

Beginning first quarter 2019, employers are required to file and pay the new tax on a quarterly basis, with the first return and payment due by April 30, 2019. According to the Jersey City tax office, the payment must be received by the due date — payments postmarked on the due date are not considered to be filed timely.

A payroll tax booklet including quarterly returns and payment forms will be posted to the website in the near future.

State legislation allowed for the new payroll tax

AB 4163, enacted by the New Jersey state legislature in mid-2018, allows municipalities with a population of over 200,000 to establish an employer payroll tax of up to 1%. (EY Payroll Newsflash Vol. 19, #109, 6-27-2018.)

Currently, only Newark and Jersey City meet the population requirement; however, Newark already imposes a 1% payroll tax on businesses.

Ernst & Young LLP insights

Several Jersey City employers have sued the City over the new payroll tax. The New Jersey Business and Industry Association (NJBIA) and the Hudson County Chamber of Commerce joined the lawsuit in January 2019. In late 2018, a Hudson County Superior Court judge denied a request for a temporary injunction to halt implementation of the tax. (NJ.com article, 12-14-2018.)

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EY Payroll News Flash