You may be cheating on your taxes each year without even trying.

Couple Out Shopping
Fuse, ThinkStock

If your holiday travels take you beyond New Jersey's borders, you may be tempted to do some shopping in states where the sales tax is either lower than the rate in New Jersey, or in states like Delaware on New Hampshire where there is zero sales tax on items purchased.

But did you know you still owe the tax on that item at New Jersey's rate? And if you don't claim these purchases, you're subject to fines and penalties.

"For ordinary individuals who are accustomed to buying sales-free online or just by crossing a border, they often don't know that the tax remains," said Verenda Smith, deputy director of the Federation of Tax Administrators.

That's right — the law applies to online sales as well, as long as the business you utilize does not have a physical presence in the Garden State.

"It's like cheating on your taxes in a small way," Smith said. "There are a good number of people who do the right thing and want to be good citizens and they do pay that tax."

In New Jersey, there's a spot devoted to "use tax calculation" on your yearly tax return (2016 form pictured below). A resident could also fill out a form that allows them to remit payment during the course of the year.

NJ1040 form
NJ1040 form

A study conducted a few years ago by the New Jersey Retail Merchants Association revealed that about 1 percent of residents actually declared a purchase in this section, according to association president John Holub.

"Knowing you were subject to fines and penalties if you got audited, I think you'd have a lot more people declaring something on that line," Holub said.

A spokesman for the New Jersey Department of the Treasury said if a taxpayer is identified as delinquent, the taxpayer will receive a letter seeking payment and interest on the amount due. Failure to comply would result in penalties.

According to Smith, states are more likely to nab an individual who's gaming the system by making large or bulk purchases from a cheaper-taxed state, rather than someone who happened to purchase a couple toys at a department store while visiting the in-laws.

"This obviously is a policy that's very difficult to police and something that needs to be updated," Holub added. "Tax policy needs to reflect the 21st century marketplace, and clearly, I think, this shows that it doesn't."

Holub said there's at least an easy fix for online purchases nationwide; one can be required to enter their home ZIP code when making a purchase, and the corresponding tax would be applied.

Because most articles of clothing and footwear are exempt from sales tax in New Jersey, the state does attract shoppers from nearby states with less friendly rates. They, too, would be on the hook for the tax rate of their home state.

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Contact reporter Dino Flammia at

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