New Jersey Withholding Requirement for Construction Contractor Services

(Effective January 1, 2007)

Under Chapter 85, P.L. 2006, all persons and businesses, other than governmental entities, homeowners, or tenants, maintaining an office or transacting business in New Jersey and making a payment for services rendered to resident unregistered, unincorporated contractors or nonresident unregistered, unincorporated contractors must deduct and withhold from the payment a tax equal to 7 % of the amount paid.

The purpose of Chapter 85, P.L. 2006 is to ensure that the income taxes of resident and nonresident persons engaged in businesses are properly withheld and paid over to the State of New Jersey pending the filing of a New Jersey Gross Income Tax or Partnership Return. The Act takes effect immediately, but applies to payments made on or after January 1, 2007.

All persons and businesses include those that own real estate and contract with unregistered, unincorporated contractors for repair and construction services to buildings (rental properties, investment properties, etc.) not deemed as their principal residences.

For more information, please visit the State of New Jersey Division of Taxation website.

Additional information of interest for construction contractors:
EisnerAmper’s Real Estate Development & Construction Group 

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