New York State Tax

New York Start Ups and Tax

One of the first things that a person should understand prior to starting a business is what the tax implications will be for their company. Of course, a business will be subject to the federal income taxes and federal employment taxes; but state taxation is often more complex. This is because states income and employment taxes may need to be collected and remitted even when the business is not actually located in the state. For start up businesses in and around the state of New York, there are several key things to understand about New York state taxes.

For a business that is located in New York, the first consideration is how the company is organized. A sole-proprietorship is not required to pay separate New York income taxes. All business income and expenses will be included on the individual's own personal income tax return. If the business is organized as a partnership, each partner will include their share of the company's income and expenses on their personal return. In New York City, both a sole-proprietorship and partnership may be subject to an additional tax, the New York City unincorporated business tax. For a company that chooses to incorporate, there are several different options including an S or C corporation. This corporation election is filed directly with the federal government, but will also affect the way state taxes are paid. In New York, a business that is operating as an S corporation (also referred to a small business election) is also required to file a similar form with the state. To obtain an state employer identification number from New York state, the business is required to file for a federal EIN, the state tax department will than automatically process and assign an EIN.

For businesses that have employees, including owners who function as employees, there are additional payroll related filings for the state. These include unemployment insurance, wage reporting and withholding tax. A company that is incorporated and located outside the state of New York may still be required to file certain payroll taxes with New York if any of the employees reside in the state.

Most businesses in New York will also be required to collect and remit sales and use tax for goods sold or services provided. The sales tax will depend on the specific location of the company since each county in the state uses its own sales tax rate. There are also certain types of business like cigarette re-sellers and car rental companies that will be required to pay an additional, specific sales tax on these items. Any business that operates certain types of vehicles that will use the highways in New York state will also be required to pay a highway use tax.

Fortunately, there are also a number of tax incentives offered in New York to encourage new business to enter the State. One of the most common of these was the Empire Zone (EZ) incentive. This offered a variety of tax credits and reductions available to companies that were located in a designation EZ zone. These are usually more depressed or economically-struggling areas. By choosing to start a business in one of these zones, an owner experienced significant tax savings.

The Empire Zone incentive scheme has been replaced by the Excelsior Jobs Program. This program is, for the most part, out of reach of small businesses as it requires that businesses in the specified industries create at least 10 new jobs. In some industries the requirement is 150-300 new jobs.

Finally, New York state has a number of bookkeeping requirements. These require businesses to accurately keep track of sales made, taxes collected and paid, and a variety of employee related information. Having complete and accurate records will enable the business to remit the correct amount of taxes and allow the state to perform an efficient audit when necessary.

Start up and small businesses in New York may find the following resources beneficial: