New York State Tax

New York Sales Tax

Many people believe that New York has an astronomical sales tax rate and this is partially true, especially when considering that Manhattan and the surrounding boroughs (The Bronx, Brooklyn, Queens, and Staten Island) collect almost nine percent in sales tax. The nearby states of New Jersey and Pennsylvania have sales tax rates of only seven and six percent, respectively. For businesses in the state of New York, it is important to understand the laws regarding their responsibilities for collecting and remitting sales taxes to the state.

The New York Department of Taxation and Finance defines sales tax as collectible for any "retail sales of certain tangible personal property and services." This is a fairly broad description, but the tax code does provide more detailed information and a number of examples of items that are considered taxable. In addition to the expected goods, other taxable items include: gas, electric, refrigeration, steam and phone services; hotel occupancy; and food or beverages that are sold/consumed in a restaurant/bar or provided by a catering company. The code also specifically excludes a number of items. For example, most items that would be considered necessities (medical care, food for at home consumption, prescription and over-the-counter medication, and education) are exempt from sales tax. Items that are purchased for resale or for use in a manufacturing process are also tax-free, but the purchaser will need to provide a valid exemption certificate. Certain nonprofit agencies are allowed to make purchases free of sales tax, but they will also need to provide proof of their exemption. Certain items are also subject to additional taxes. These include car rentals (six additional percent), certain entertainment (five additional percent) and parking fees in New York City (taxed at 10 3/8%).

When a business initially opens in the state of New York, it is required to register with the State. Failing to register can result in fines of $200 per day, up to $10,000, for every day the business operates without a valid registration. The business is responsible for understanding the applicable rates for the goods or services provided. The tax due must be collected at the time of the sale and remitted to the government by the filing due date. The filing deadlines are annually, quarterly, or monthly depending on the volume of sales and taxes collected. Typically, the higher the expected sales, the more frequently sales tax must be remitted. Businesses are also required by the state to keep adequate records of sales. This allows for a sales tax audit to be completed effectively and efficiently if one is needed. A business can incur additional fines and penalties if it is determined that their records are inadequate.

The state considers the burden to be on the retailer when determining the correct tax rates and filing deadlines. Ignorance of the laws will not result in any leniency in the tax bills and fines. Fortunately, the state does provide a great deal of information on their website and in their offices. Because the tax guides are written in plain English, a business owner does not need to be an expert to read and understand the rules. However, if clarification is required, consulting with a tax accountant familiar with New York laws is highly recommended.

Businesses in New York may find the following to be of interest: