Not a wage tax
Why do people confuse Newark's payroll tax with a wage tax?
The confusion arises because most city-level taxes on wages are deducted from the employee's paycheck. When people hear "Newark has a payroll tax," they assume it works like Philadelphia's wage tax or NYC's income tax. It does not. The Newark payroll tax is an employer-side cost, similar to the employer portion of FICA. The employer calculates 1% of the wages paid to employees who work within Newark city limits and remits it to the city. The employee's gross and net pay are unaffected.
This distinction matters for job seekers comparing offers. A position in Newark does not come with a personal income tax deduction like a position in Philadelphia or NYC would. The employer bears the cost, which may indirectly affect hiring budgets or compensation levels, but it is not visible to the employee.
How does the employer calculate and pay the tax?
Employers with employees who physically work within Newark city limits must register with the city and file payroll tax returns. The tax is calculated as 1% of the total taxable wages paid to Newark-based employees for each reporting period. The employer files and pays directly to the City of Newark. There are minimum thresholds and exemptions for very small businesses or certain categories of employers — check the city's tax office for current details.
Self-employed individuals working in Newark may also be subject to the payroll tax on their own compensation, effectively paying both the employee and employer equivalent. The specifics depend on the city's ordinance and how self-employment income is treated.
Does New Jersey have other local income taxes?
New Jersey is generally not a local-income-tax state. The state charges its own graduated income tax (1.4% to 10.75%), but most NJ municipalities do not add a local income or payroll tax. Newark's employer payroll tax is an exception, not the norm. This is why it surprises employers who relocate to or expand within Newark.
Jersey City also has a payroll tax structure. Other NJ municipalities may have variations. But the dominant pattern in New Jersey is: state income tax yes, local income tax no. Newark breaks that pattern with the employer-side payroll tax.
How does this compare to other employer-side local taxes?
Newark's model is similar to San Francisco's approach (where the tax is also employer-side) but different from most East Coast cities. Philadelphia, NYC, and Ohio cities all tax the employee directly. Denver's OPT has both employee and employer portions but is a flat per-person charge. Newark's 1% is percentage-based but employer-only, making it somewhat unique in the eastern US.
For workers, the practical takeaway is simple: if you work in Newark, no local tax is deducted from your paycheck. Your employer pays 1% of your wages to the city, but that does not reduce your take-home pay directly.
How does Newark compare to other cities for worker take-home pay?
Because Newark's payroll tax is employer-only, a Newark worker's take-home pay is affected only by federal tax, New Jersey state tax and FICA. Compare this to nearby NYC where residents pay 3%+ in city income tax, or Philadelphia where workers pay 3.4%+ wage tax. A $90,000 earner in Newark keeps roughly $2,700 to $3,400 more per year in take-home pay compared to the same salary in Philadelphia or NYC, purely because of the local tax difference.
This employer-only model is one reason some businesses and workers prefer Newark over NYC. The employer bears the 1% cost (which may affect overall compensation budgets), but the individual worker sees a cleaner paycheck with no city-level deduction.
What if you are self-employed in Newark?
Self-employed individuals working in Newark may be subject to the payroll tax on their own compensation. As both the "employer" and "employee" of their own business, they may owe the 1% on self-employment income earned within Newark. The exact treatment depends on the city's ordinance and how your self-employment entity is structured. Contact the City of Newark tax office for specific guidance on self-employment obligations.
This is one area where the "employer-only" label can be misleading for sole proprietors and independent contractors. While a W-2 employee pays nothing, a self-employed worker may have a different obligation.
Which employers must register for the Newark payroll tax?
The payroll tax applies to any employer with employees performing services within Newark city limits, regardless of the employer's headquarters location. A company based in Hoboken, Morristown or anywhere else in New Jersey that stations workers at a Newark office owes the tax on those Newark-based wages. Certain qualifying nonprofits and governmental entities may be exempt from the tax under the city's ordinance, but exemptions are narrow. Employers establishing a new presence in Newark should contact the City of Newark tax office to register before their first payroll cycle. Failing to register and remit the tax can result in penalties and accrued interest.
What taxes does a Newark employee actually see on their paystub?
A W-2 employee working in Newark sees only standard state and federal deductions on their paystub: federal income tax at the applicable bracket rate, New Jersey state income tax (graduated from 1.4% to 10.75%), FICA contributions (Social Security at 6.2% plus Medicare at 1.45%, totaling 7.65%), and NJ unemployment and temporary disability insurance contributions. There is no line item for any Newark city tax. For employees comparing offers between Newark and a city with a local wage tax such as Philadelphia, this absence translates directly into higher take-home pay from the same gross salary.
Questions
Newark payroll tax FAQ
Does the Newark payroll tax come out of my paycheck?
No. The Newark payroll tax is paid entirely by the employer. It does not appear as a deduction on your paystub. Your gross and net pay are not directly affected. The employer pays 1% of your wages to the City of Newark as a business cost.
How much is the Newark payroll tax?
The rate is 1% of taxable wages paid to employees working within Newark city limits. This is calculated and paid by the employer, not the employee.
Does Newark have a city income tax that I pay as an employee?
No. Newark does not have an employee-side city income tax. The payroll tax is the city's mechanism for taxing employment activity, and it falls on the employer. This is different from cities like Philadelphia or NYC where employees pay a direct city tax.
Do other New Jersey cities have payroll taxes?
Most NJ municipalities do not have a local payroll or income tax. Newark's is an exception. Jersey City also has a payroll tax structure. The dominant pattern in New Jersey is state income tax only, without local additions.
Does the employer payroll tax indirectly affect my salary?
Potentially, but indirectly. The 1% increases the employer's cost of employing workers in Newark, which could theoretically affect hiring budgets or salary offers. However, you will not see it as a line-item deduction and it does not reduce your gross or net pay.
What taxes ARE deducted from my paycheck if I work in Newark?
Your paycheck deductions include federal income tax, New Jersey state income tax (graduated from 1.4% to 10.75%), and FICA (Social Security and Medicare at a combined 7.65%). You also contribute to NJ unemployment and temporary disability insurance. No city or local tax is deducted. Newark's 1% payroll tax is paid by your employer separately and does not reduce your take-home pay.
Are all Newark employers required to pay the payroll tax?
The payroll tax applies to employers with employees who perform services within Newark city limits. Most private employers are covered. Certain categories such as qualifying nonprofits and governmental entities may be exempt under the city ordinance. Employers new to Newark should register with the city tax office to determine their obligation. The determining factor is where the work is physically performed, not the employer's headquarters location.
- Sources: City of Newark · NJ Division of Taxation · Newark Municipal Code.
- Last updated July 31, 2026
← Back to the full salary calculator · Related: New Jersey tax · SF payroll tax · Local income tax guide · Salary after taxes