New Jersey proposes 10% tax on AI computer processing

New Jersey Assemblyman Anthony S. Verrelli introduced A. 5676, a companion to S. 4712. The bill would impose a 10% tax on the value of computer processing used to develop and operate certain AI systems. The tax falls on the processor, whether a third-party provider or an AI business (or its affiliate) processing internally. Taxable value is based on the market value of the tokens used. For third-party processors, the value equals the token count multiplied by the processor’s per-token billing rate. For internal processing, the Division of Taxation would approve a valuation methodology. The tax also reaches out-of-state processing, apportioned to the share attributable to AI services used, or intended for business use, in New Jersey.

The bottom line: The bill has not been decided yet. If the bill passes, you must keep detailed records of your token usage and report and pay the tax quarterly. AI companies and cloud providers serving New Jersey customers should track the bill and review how they measure processing tied to New Jersey.