Below Economic Nexus Thresholds
If youre collecting sales tax in your home state, but youre sure you havent hit economic nexus anywhere else, youre in a great position to set up systems before you need to start collecting.
Track
To do this, make sure you have a system in place to track sales. During times of growth, periodically review your sales by state, as outlined above . Most platforms have some way of downloading sales data, and knowing a few basic spreadsheet formulas can save you tons of time adding them up.
Research
Starting to watch and listen for companies and software solutions will give you a head start when you do reach that point of needing them. If you know other ecommerce sellers, ask for reviews and recommendations on solutions to use.
Prepare for a Nexus Study
As your business grows, be prepared to commission a professional nexus study which will tell you where youve hit nexus and need to register.
Nyc May Abate Ubt Late Filing/late Payment Penalties But Interest Still Accrues
The New York City Department of Finance, upon request, will waive late filing and late payment penalties for individual unincorporated business tax taxpayers, if such taxpayers complete filing payment on or before May 17, 2021. However, interest will accrue at the underpayment rate for the late payments. UBT taxpayers can request a penalty abatement by using the Departments portal, sending an email, filing a paper return and writing 21 at the top of the page, or request an abatement in writing.
Whats Taxed And What Isnt
The majority of retail sales are subject to sales and use tax in New York. Some things, like cars and other motor vehicles, are taxed on the residence of the buyer and not the place where you actually buy the vehicle.
There are also a number of things that are exempt from sales tax. Some common examples are groceries, newspapers, laundering and dry cleaning, prescription drugs and feminine hygiene products. Clothing and footwear are not taxable if they are less than $110. If they are over $110, they are subject to regular sales tax rates. Any water delivered through mains and pipes is not taxable. However, public utilities like gas, electricity and telephone service are subject to sales tax.
Renting a car gets expensive in New York. If you rent a passenger car, New York state charges a sales tax of 6%. There is also a 5% supplemental tax if you rent the car within the metropolitan commuter transportation district . If you pay for any parking services , you will pay the New York sales tax of 4% plus any local sales taxes.
You can find a more complete breakdown of taxable goods and services with New York States Quick Reference Guide for Taxable and Exempt Property and Services.
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New York State Tax Information
| All CBA Travel account purchases | IBA Travel account meal & incidental purchases |
| All CBA Purchase account purchases | GSA SmartPay Tax Advantage Travel Card account meal & incidental purchases |
| IBA Travel account lodging & rental car purchases | |
| GSA SmartPay Tax Advantage Travel Card account lodging & rental car purchases |
Do I need a form?Yes.
Note: Form ST-129 cannot be used to claim exemption from locally imposed and administered hotel occupancy taxes, also known as local bed taxes. When presenting the certificate you must also provide Government ID. Government entities are not allowed to use Form ST-119.1 for tax exemption. Only use Form ST-129 to qualify for exemptions. For confirmation of exemption to sellers for purchases please contact 457-2782.
Who do I contact if I have a question?New York Department of Taxation and Finance: Sales Tax Information Center: 485-2889Important links:
Best Practice: Before booking your hotel, call ahead to verify state tax law compliance. If your hotel does not comply with state tax law, it is recommended that you chose an alternate hotel.
Amazon Tax Exemption Program Items purchased through Amazon.com LLC, or its subsidiaries and shipped to this state are subject to tax. However, the Federal Government may receive tax exemption in these states by Enrolling in the Amazon Tax Exemption Program .
*Updated 12/9/19
The Saas Business Owners Guide To Tackling Sales Tax In Each State
While software as a service has quickly revolutionized our lives, it is still a fairly new way of doing business. Due to the heavy emphasis on digital transactions, many states sales tax laws havent kept up with this new technology.
Like many of your businesss tax responsibilities, filing sales taxes depends on where you conduct your business activities. So whats the deal with SaaS taxability? Lets go over what youll need to know about state to state sales tax as a SaaS business owner.
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How Often Should You File
How often you need to file depends upon the total amount of sales tax your business collects.
- Annual filing: If your business collects less than $3,000.00 in sales tax per year and you have been notified that you should file annually, then your business should file returns on an annual basis.
- Quarterly filing: If your businesss gross receipts total less than $300,000 in taxable goods or services, then your business should file returns on a quarterly basis. Most companies will file their sales tax returns quarterly when they start their business.
- Monthly filing: If your businesss gross receipts total more than $300,000 in taxable goods or services, then your business should file returns on a monthly basis.
Note: New York requires you to file a sales tax return even if you have no sales tax to report.
Do I Still Need To File A New York Sales Tax Return
If you are registered to collect sales tax in New York then the state still requires that you file sales tax returns.
If you only make sales via marketplaces, and all of your marketplaces collect sales tax from buyers on your behalf, then you may only be required to file a zero return.
If you no longer have any sales tax to remit to the state of New York, we recommend checking directly with the state to determine if you can cancel your sales tax registration.
Be cautious here. If you are registered for a sales tax permit and do not file, the state can assess penalties even though you dont have any sales tax to remit! We have, unfortunately, talked to too many sellers who have found this out the hard way when a tax penalty bill arrives.
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Economic Impact Of Ecommerce
So how much does ecommerce disrupt brick and mortar business? In 2019, the global business-to-consumer ecommerce market was valued at over $3 trillion. Its projected to grow at a rate of 7.9% through 202,7 according to Grandview Research.
In 2020, ecommerce accelerated even faster than expected as a result of the COVID-19 pandemic and quarantine measures to contain it. As consumers attempted to limit social contact and stay at home, online shopping took off like never before.
Imposed Sales Tax On Vapor Products
Effective December 1, 2019, a new 20% supplemental sales tax will apply to retail sales of vapor products in New York, which should be collected by a vapor products dealer. Any business that intends to sell vapor products must be registered as a vapor products dealer before making sales of vapor products. The Tax Department is developing an online registration process. In addition, if a taxpayer has debit blocks on their bank account, even if the taxpayer has already authorized sales tax payments to the Tax Department, the taxpayer must communicate with their bank to authorize their vapor products registration payment.
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New York City Sales Tax
On top of the state sales tax, New York City has a sales tax of 4.5%. The city also collects a tax of 0.375% because it is within the MCTD. The total sales tax in New York City is 8.875%. This is the highest rate in the state. With such a high sales tax, its no wonder the cost of living in New York City is so high.
Tax Relief For New Yorkers Impacted By Post
The Acting Tax Commissioner has extended certain filing and payment deadlines for taxpayers who were directly affected by Post-Tropical Depression Ida.
For more information, visit , Announcement Regarding Relief from Certain Filing and Payment Deadlines due to Post-Tropical Depression Ida.
Sales tax applies to retail sales of certain tangible personal property and services. Use tax applies if you buy tangible personal property and services outside the state and use it within New York State.
- For information on the Oneida Nation Settlement Agreement, see .
- and identifying the correct local taxing jurisdiction
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Technical Memorandum Issued By The Department Of Taxation And Finance
Pursuant to the enactment of the 2019-2020 Budget Bill, the Department of Taxation and Finance issued a technical memorandum discussing the sales tax collection requirements for marketplace providers. The memorandum reflects an increase in the sales threshold amount from $300,000 to $500,000, which is retroactive to June 1, 2019. Taxpayers affected by this change must register with the Department at least 20 days before beginning business in the state. This memorandum supersedes TSB-M-19S issued on May 31, 2019. S, 17/10/2019.)
Services Subject To Tax In New York City
New York City collects sales tax on certain services that the state doesnt tax. Examples include beautician services, barbering, tanning and massage services. The city also charges sales tax at health and fitness clubs, gymnasiums, saunas and similar facilities. If youre trying to improve your credit, keep in mind that New York City charges sales tax on most credit reporting services.
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File Sales Tax Returns
If you’re registered for sales tax purposes in New York State, you must file sales and use tax returns quarterly, part-quarterly , or annually with the department. Even if your business did not make any taxable sales or purchases during the reporting period, you must file your sales and use tax return by the due date.
If you have taxable receipts of more than $500,000 or have an annual liability for prepaid sales tax on motor fuel and diesel motor fuel exceeding $5 million, you are required to participate in the department’s PrompTax program. Other vendors may request to participate in the PrompTax program on a voluntary basis.
If you need to know how to file sales tax returns, Tax Bulletin Filing Requirements for Sales and Use Tax Returns explains the filing requirements. You can Web File all forms and schedules, including:
- monthly, quarterly, and annual sales tax returns
- PrompTax filers submitting Form ST-810
- no-tax-due returns and final returns
- the Sales Tax Record of Advance Payment
Your Filing Frequency May Change
Your filing frequency may change over time, depending on the amount of your taxable sales or tax due. When your filing frequency changes, the correct return will automatically be available when you Web File.
Quarterly to annual – If you are a quarterly filer, and your total tax due for the four most recently filed quarterly periods is $3,000 or less, the Tax Department may reclassify you as an annual filer. The Tax Department will notify you of the change.
Annual to quarterly – If you are currently an annual filer, and during your annual filing period, your total sales and use tax due exceeds $3,000, the Tax Department may reclassify you as a quarterly filer. The change to quarterly filing takes effect the sales tax quarter following the annual period in which your total sales and use tax exceeds $3,000. The Tax Department will notify you of the change.
Quarterly to part-quarterly – If the combined amount of your taxable sales during any quarter is $300,000 or more, you must begin filing monthly returns. The change to monthly filing status takes effect the first month following the sales tax quarter in which your taxable transactions equaled or exceeded $300,000. The Tax Department will notify you of the change.
You must continue to file returns monthly until your taxable sales are less than $300,000 each quarter for four consecutive quarters. At that time, you may contact the Tax Department to request a change to quarterly filing status.
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New York Auditing Income Tax Returns Of Certain Nonresident Remote Employees
New York tax authorities are focused on auditing 2020 income tax returns filed by nonresidents who work for New York employers. During the course of the Coronavirus Pandemic, the New York Department of Taxation and Finance directed nonresidents whose primary office is in New York to count telecommuting days as time working in the state. More specifically, TSB-M-06I, issued in 2006, provides that in order for any work days to be allocated outside of New York State, such services must be because the employers necessity and not the employees convenience. Applying this rule, unless telecommuting was because of necessity of the employer, employee services rendered remotely were to be considered New York work days. However, there may be legal challenges to that position because taxpayers are arguing telecommuting was a requirement and, in many cases, mandated rather than simply being based upon convenience. Moreover, the U.S. Supreme Court will rule on a similar issue as requested by New Hampshire, which is challenging Massachusetts taxation of residents working remotely.
Identify Where You Have Sales Tax Nexus
Sales tax nexus is a fancy way of saying significant presence in a state. If you have nexus in a state, that state requires you to charge sales tax to buyers in that state. Factors that create nexus for SaaS businesses can include a location such as an office or warehouse, an employee, contractor, or salesperson, inventory or an affiliate. But this is where things can get complicated for SaaS businesses.
From a states point of view, if your organization uses resources in the state, then the state can require you to collect sales tax. Since SaaS is so new, states are still trying to define what can legally create nexus. For example, some states now say that leasing space on a server in the state creates nexus, even if the business has no other presence there.
In addition to sales tax, having nexus in a state may tack on additional filing requirements. This article explains tax responsibilities that vary across states such as income, franchise, and gross receipts taxes. If youre unsure whether or not you have tax nexus as a SaaS business, its always a good idea to consult a sales tax expert.
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Taxable And Exempt Shipping Charges In New York
New York sales tax may apply to charges for shipping, delivery, freight, handling, and postage.
Shipping and handling charges billed by the vendor to the customer are generally taxable in New York if the sale is taxable, whether the charges are combined or separately stated on the invoice. Shipping and handling charges billed by the vendor are generally exempt when the sale is exempt, whether combined or separately stated.
When a vendor charges a single charge for delivery of both taxable and nontaxable property or services, the entire charge is generally subject to tax. However, if taxable and nontaxable charges are separately stated on a bill, and the charge for delivery is separately stated and allocated between taxable and non-taxable sales, the charge to deliver the taxable goods is taxable and the charge to deliver the exempt goods is exempt.
If a customer arranges delivery by a third person and pays that person directly, the third persons delivery charge is not taxable, even if the item delivered is taxable.
There are exceptions to almost every rule with sales tax, and the same is true for shipping and handling charges. Specific questions on shipping in New York and sales tax should be taken directly to a tax professional familiar with New York tax laws.
For additional information, see the New York State Department of Taxation and Finance, Shipping and Delivery Charges.
Did Your Ny Business Have Employees
If so, you will likely have to file a final quarterly combined withholding, wage reporting, and unemployment insurance return and indicate that your business ceased paying wages or that you sold or transferred your business if that was the case.
Closing a business in New York State will require that your final NYS-45 be filed.
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S To Manually Filing A Sales Tax Return In New York
New York Temporarily Suspends Hotel Occupancy Tax
New York City Mayor Bill de Blasio has issued an executive order suspending the 5.875% hotel occupancy tax imposed by NYC Administrative Code Section 11-2502 from June 1, 2021 through August 31, 2021. The daily hotel room tax under NYC Administrative Code § 11-2502 remains in effect. For additional information, please see the executive order released on May 18, 2021.
May 13, 2021
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