Jersey City, NJ, Adopts 1% Payroll Expense Tax

On November 20, 2018, Jersey City council members approved Ordinance 18-133 that, effective January 1, 2019, imposes a 1% payroll tax on employers for the benefit of Jersey City schools.

Employers will be required to file and pay the new tax on a quarterly basis. This is a tax on the employer’s payroll expense, not a withholding tax on employees. Employers with a quarterly gross payroll less than $2,500 are exempt from the payroll tax.  Exempt Employers also include:

•  The government of the United States
•  The State of New Jersey, or a County, municipality, school district or special district of the State
•  An interstate agency
•  An agency or instrumentality of any entity enumerated in subsection above
•  Any insurance company formed by authority of another State or foreign country, subject to the provisions of N.J.S.A. 17:32-15
•  Charitable Organization, as defined in Ordinance 18-133.

Employers will pay the 1% tax on the employers’ quarterly payroll, defined in the ordinance as an amount equal to the total remuneration paid by an employer to employees which is subject to federal income tax withholding for:

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 Ordinance also provides that an employer will incur no payroll tax relative to its Jersey City-resident employees. The employer must provide the city with written evidence and documentation of the relevant Jersey City resident to be excluded from the payroll tax calculation.

What’s Next

The Jersey City Tax Collector is currently developing forms and processes for payment of the tax which will be due for its first installment on April 30, 2019.  The Tax collector currently only plans to accept traditional forms of payment with no electronic options currently available.

At present, Paylocity is able to calculate the tax on behalf of employers and is awaiting further information from the Jersey City Tax collector’s office to determine the support required for filing and paying this new tax.

As further information becomes available we will post additional updates.

Thank you for choosing Paylocity as your Payroll Tax and HCM partner.

This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.