New Jersey Enacts New Employer Payroll Tax

New legislation allows any municipality in New Jersey with a population of 200,000 or more to impose an employer tax. The bill is applicable to any city meeting the population requirements and would allow for a maximum of a 1% tax on an employer’s total payroll. The bill was specifically aimed at Jersey City even though the new law applies to any municipality fitting the population requirement.

Newark, with a population of approximately 282,000, already has a payroll tax in effect. Jersey City’s population is roughly 264,000. New Jersey’s next most populous city, Paterson, has a population of around 147,700 and would therefore not qualify for the new payroll tax.

The new payroll tax law allows New Jersey municipalities to impose a payroll tax on businesses of up to 1% of wages. Municipalities may adjust the rate of the employer payroll tax imposed as long as it does not exceed one percent. Municipalities adopting the new employer payroll tax may exempt the definition of covered payroll remunerations paid to the employees who are residents of the municipality.

The new employer payroll tax became effective immediately after Governor Murphy enacted the bill with his signature on July 24, 2018. Revenue deriving from the payroll tax are required to be used towards the funding of schools if the municipality imposing the tax meets the median household income of $55,000 or more.

For more information, please see the NJ Assembly Bill No. 4163.

Thank you for choosing Paylocity as your Payroll Tax partner. Should you have any questions please contact your Paylocity Account Manager.

 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.