Selling an auto dealership in New Jersey just got more expensive — and more complicated.

As of July 10, 2025, changes to New Jersey’s so-called “Mansion Tax” have shifted the burden of this transfer tax onto the seller. A new tiered rate system also raises the stakes for high-value transactions. If you're planning to sell real estate, whether it’s a showroom, service facility or dealership lot, you’ll want to understand what these changes mean for your next closing.

Background: A Misnamed Tax

New Jersey adopted the Mansion Tax in 2004 as a way to tap revenue from real estate transactions valued over $1 million. Despite its nickname, the tax applies to more than luxury homes. Its reach extends to Class 4A commercial real estate, which includes auto dealerships, office buildings and retail centers, as well as certain Class 3A farm parcels with residential buildings.

Historically, the buyer paid a flat 1 percent fee at closing. The amendment to the law dramatically alters both who pays and how much.

What’s New?

Two major changes were signed into law on June 30:

1. The Seller Now Pays
Previously, buyers footed the bill for New Jersey’s Mansion Tax. No longer. Sellers are now on the hook for the entire amount.

2. Higher Tax Rates for Larger Transactions
Sales over $1 million now fall into a sliding scale of tax rates:

• $1M–$2M: 1%
• $2M–$2.5M: 2%
• $2.5M–$3M: 2.5%
• $3M–$3.5M: 3%
• $3.5M+: 3.5%

A Narrow Window for Refunds

If you signed a purchase agreement before July 10 and the deed is recorded by November 15, you may qualify for a partial refund. Specifically, sellers in this situation can apply to recoup any amount paid above the original 1 percent rate. This applies only if the contract was fully executed before the new law took effect.

What It Means for Dealerships 

Whether you're selling a single rooftop or a regional portfolio, the revised tax law raises your closing costs and may affect deal terms. The increased tax rate applies to the full sale price, not just the amount above $1 million, which means the added cost can be significant.

If you're exploring a sale or are already in the midst of a transaction, now is the time to run the numbers, review your timing and consider whether these changes impact your overall strategy.

With sellers now footing the bill, it’s wise to address the tax early in negotiations — particularly when high-value dealership properties are involved.

If you have questions about this alert, please contact Seth L. Dobbs at sdobbs@foxrothschild.com, Joseph S. Aboyoun at jaboyoun@foxrothschild.com, John Iorio at jiorio@foxrothschild.com or any member of Fox Rothschild's Automotive Practice Group.

This information is intended to inform firm clients and friends about legal developments, including the decisions of courts and administrative bodies. Nothing in this alert should be construed as legal advice or a legal opinion. Readers should not act upon the information contained in this alert without seeking the advice of legal counsel. Views expressed are those of the author(s) and not necessarily this law firm or its clients. Prior results do not guarantee a similar outcome.