I know it will definitely be on the Federal return, my question is in regards to whether the gain is taxed on the state level as well, or if were excluded since they are a filing a NJ-1040NR and all of the income is earned outside of NJ
I don't give legal or tax advice, but I do give my opinions.
It does not matter where you live or where a property is, if you sell it for a gain there will be cap gains to be paid unless you can reduce them or eliminate them. It would be on the federal tax form for sure since you never lived in it 2 of the last 5 years. Talk to your tax man/woman.