Throughout 2022, New York State reported collecting a stunning $22.1 billion in sales taxes. That's a 12.7%, or $2.5 billion, increase compared to last year. One reason sales tax collections are increasing is because the price of goods and services is increasing, making the taxes higher, too. What's more, state tax agencies have been much stricter when it comes to hunting down non-compliant businesses.
Whether you currently sell goods or services in New York State or plan to in the near future, it's paramount that you learn more about the state's sales and use tax laws and how they'll apply to your situation. Neglecting your responsibility to understand New York sales taxes could have serious consequences that threaten your financial security and freedom. It is even possible to face criminal charges if you willingly neglect to collect and submit sales taxes in New York.
This guide is designed to help you learn everything you need to know about the sales and use tax in New York and how to make sure you remain compliant with the law. To get help now, use TaxCure to search for a New York-based tax pro who has experience with sales tax in this state.
Currently (as of 7/23), the New York sales tax rate stands at 4% plus the local tax rate in the jurisdiction where you make your purchase. On top of that, if your sales are made within the Metropolitan Commuter Transportation District (MCTD), then you'll need to apply an additional 0.375% to the sale.
For example, the sales tax rate in Rochester, NY is 8%. This is the state sales tax of 4% plus Monroe County's 4% sales tax. Rochester does not impose a city sales tax.
For in-person sales, you should charge the tax rate in the local area where the item is being sold. But for delivered or mailed goods, you should charge the sales tax rate applicable in the recipient's location, which could differ from the tax rate where your physical building is located.
You can use the state's jurisdiction and rate lookup tool by putting your address into the generator. Punch in an address, and the generator will tell you the combined state and local sales tax rate for that area.
Keep in mind that local sales taxes can change. When they do, that information will be posted on New York’s Department of Taxation and Finance website.
Businesses must collect New York sales tax when they meet any of these conditions:
Under these guidelines, almost all marketplace providers and sellers who make significant business transactions in New York State will need to collect and submit sales taxes on those transactions. Under the law, services like electrical repairs, maintenance, lawn care, computer repair, car repair, dog grooming, and more are all taxable. These laws extend to wholesalers, manufacturers, and at-home businesses that sell services.
Before making taxable sales, a business must first get a Certificate of Authority from the Tax Department. This important certificate gives your business the authority to make sales in New York state and carries the obligation of collecting sales tax. Once you receive this certificate, you can be penalized if you don't uphold your sales tax obligations.
In general, New York State will consider you to have a physical nexus if you own an office, place of business, warehouse, or personal property in the state that you use for your business. You're also considered to have a physical nexus in New York if you have employees in the state or you deliver merchandise in New York in your own vehicles.
Recent changes to New York law also make it possible for you to have a nexus in New York, even if it's only economic and not physical. You have a nexus in New York if you make more than $500,000 a year in gross revenue from sales in the state and make at least 100 or more transactions within a year in New York. You must meet both of those conditions.
New York sales tax returns are due within 20 days after the end of the reporting period. Most businesses have to file monthly, meaning all sales tax filings must be completed by the 20th of the following month or the next possible business day.
Business owners who collect $3,000 or less only need to file an annual sales tax return. The due date for this crucial document, Form ST-101, is March 20th every year. Some vendors file quarterly, which means they have four due dates throughout the year: June 1, September 1, December 1, and March 1. Those are the due dates for the first, second, third, and fourth quarters, respectively.
How often you file mostly depends on how much tax you collect. If the amount of taxes you collect changes drastically, it's important to revisit your filing frequency status to determine if you need to file more or less often based on your new numbers.
If you believe you have a physical or economic nexus in New York, it's up to you to apply for a New York sales tax permit (Certificate of Authority). Once approved for the permit, you can start collecting sales tax on each transaction.
Then, at the end of the period, you should fill out a sales tax return. The return will show the amount of your sales and the sales tax due based on the applicable rate.
To file, you must use New York State’s online system. If you don't have broadband internet, you can usually get around that requirement. In that case, you can file one of the following paper sales tax returns:
To pay your taxes, you can make a payment online when you file your tax return. If you mail in a return, you can send a check, cashier's check, or money order.
You can also use New York State’s online payment system for past-due payments. Simply navigate to the Department of Taxation and Finance and click "Pay a Bill or notice." The next page will give you further instructions on how to pay. You can either create an account to pay online, make a one-time quick payment, or pay via check or money order.
If you do decide to pay via check, then you'll mail your payment to:
NYS Assessment Receivables
Binghamton, NY 13902-4127
Include your ten-digit case number and your taxpayer ID number to ensure your payment goes through.
If you fail to collect New York sales tax on sales you've made throughout the year, then you'll be in a very bad position when it comes time to remit those payments to New York state's government. The state can hold you financially responsible for sales tax that you were supposed to collect and didn't.
In addition, under New York law, you could be subject to both fines and a jail sentence if you fail to charge the state and local sales tax.
Unfortunately, arguing that you didn't know about your tax obligations won't be enough to get you out of these charges. That's because when you take out a Certificate of Authority to charge sales tax, you are telling the government of New York State that you understand your tax obligations and that you will obey them. Also, when you own a business, the government excepts you to research and understand your tax obligations.
If you file your tax return but don't pay your tax obligation, then you could face a civil penalty of up to 10% of the tax due for the first month and 1% for each additional month up to 30%. If you file but omit more than 25% of the taxes you should be paying, you'll be fined up to 10% of the tax you failed to report.
Failing to pay your taxes for fraudulent or suspected fraudulent reasons could make you liable for twice the amount of tax not paid, plus interest on the unpaid tax. Depending on the situation, you can also be subject to criminal charges and a jail sentence if you willfully attempt to evade taxes or fail to pay them.
Failing to file on time will result in a $50 penalty even if you don't owe any sales tax. If you file a return late by 60 days or less, you'll be subject to a penalty that's up to 10% of the tax due for the first month plus 1% for each additional month. Your overall fee will not exceed 30% of your taxes owed, but this penalty also must be at least $50.
Filing over 60 days late means your penalty will be the greater of the following:
These penalties can cost your business big time if you owe a significant tax amount.
If you have unpaid sales tax, the state applies interest at a rate of 14.5% per year or a rate set by the Commissioner. This is the sales tax rate used by the NY DTF as of 2023, and it is subject to change.
When you're making your individual income tax returns, you can usually file for an extension if you can't file everything on time. Regarding sales tax, however, delaying your return is not an option. Failure to file on time will lead to significant penalties and fines.
If you're struggling to make payments or have fallen behind, it's best to reach out to the state’s tax department or a tax attorney for more information on what to do.
When you owe money towards unpaid taxes, your best option is to attempt to pay off the full balance of the bill as soon as possible. That's not always possible, however. If you can't pay your tax obligation in full, then you'll likely get hit with fines, penalties, and possible civil or criminal enforcement actions depending on how long you've held the debt.
The state of New York's tax department has great authority to ensure they're able to collect sales tax from parties who owe it. If you fail to meet your obligations, the tax agency can issue levies, tax warrants, wage garnishment orders, or other actions against you.
Owing back taxes in New York can feel intimidating in the face of these types of collection efforts, but it’s important to realize that the tax agencies will only levy these types of enforcement actions against you if you are willingly avoiding paying off what you owe. Generally, tax agents will work with you to find ways to help you pay, including possible payment plans, NY State tax settlements, and other options.
New York's Voluntary Disclosure program can help taxpayers who owe back taxes in New York. Taxpayers eligible for this program can avoid continued monetary penalties, civil enforcement actions, and criminal charges by cooperating with the state tax agency.
In exchange for halting collection efforts, the taxpayer is expected to be honest and forthright with the tax agency about the taxes they owe. The taxpayer is also expected to agree in good faith to pay those taxes as soon as possible. The taxpayer will also need to enter into an agreement with the tax agency to pay all future taxes.
If your nonpayment was a result of criminal behavior like fraud, you might automatically assume you're ineligible for relief like this voluntary disclosure program. The good news is that any taxpayer who meets the eligibility criteria can participate in this program, so it's worth investigating whether you meet the qualifications if you currently owe back taxes in New York.
If you’ve already completed and submitted your sales tax to the proper tax authorities before realizing you made a mistake, then it’s important to know that you can still fix the error. First, print off all your sales tax forms and complete them just as you would if you were filing them for the first time. You should also include all the forms you included with your original return, too.
From there, you’ll need to mail your documents in to:
State Processing Center
Albany, NY 12212-5555
As you well know, sometimes you might put your products on sale at a discount. You might also offer certain sales, which will result in a reduction in the overall selling price. When the selling price gets reduced, that might also result in a reduction in the sales tax you collect but not always.
When the discount is given at the time of the sale, then you will reduce the sales tax based on the reduced selling price. For example, if you normally sell a product for $10 but you reduce the price to $9 for a special promotion, you will assess sales tax on $9.
In contrast, when discounts are established based on an early payment, then the sales tax will be applied to the full sale price of the item. For example, if you sell a customer $300 worth of taxable goods but offer a 10% discount on early payment, you should assess the sales tax on the $300 even if you only collect $270 for the sale.
Special rules also apply when you’re calculating sales tax based on food stamps or coupons. Store coupons often reduce the amount that will be subject to sales tax, but manufacturer coupons usually do not.
A New York sales tax audit is an in-depth investigation into your sales tax returns. When the state tax agency requests an audit, they’ll expect you to provide all your financial records to prove the statements you made on your sales tax returns.
An audit can happen if the state suspects you aren’t being honest on your taxes or if they believe you’ve made a mistake. An audit can also happen as a result of a random selection, too, though, so don’t make the mistake of thinking you did something wrong if you do get audited.
This comprehensive guide should give you a solid foundation of knowledge regarding the sales and use tax in New York. Understanding the law and remaining compliant with it, however, are two different things. If you still have more questions about taxes in New York, then we invite you to continue utilizing our free resources on our website.
Remember, however, that taxpayers’ finances are all unique, so the best way to handle sales taxes might vary depending on your situation. To get specific advice that suits your situation, use TaxCure to search for a local New York tax professional. Then, filter your results to find a pro who has experience with sales tax in particular.
