Sales Tax State Activity Update - April 2005

Is VoIP Taxable in New Jersey?

Voice over Internet Protocol (VoIP) delivers voice services using Internet infrastructure. This leaves many states wondering how to tax this communications hybrid.

New Jersey Sales and Use Tax Act imposes tax on receipts from every sale of interstate or intrastate telecommunications charged to an address in New Jersey.

Telecommunications is broadly defined as the act or privilege of originating or receiving messages or information through any kind of one-way or two-way communication.

Whether voice over Internet services are viewed as voice transmission or as data transmission, the service falls within the Sales and Use Tax Act's definition of telecommunications.

By this definition, VoIP service is subject to New Jersey sales tax for all customer service addresses in New Jersey.

(New Jersey Division of Taxation, Notice, Issued 2/23/05)

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