Should you collect sales tax in New York?
Sales tax is levied when you earn revenues on goods or services your customers provide. However, you will collect the sales tax if you determine the nexus in New York. A nexus is a presence that may come physically or economically.
A physical nexus is typically created when your business has a New York store, warehouse, or office location. An economic nexus is intertwined when you cross paths with threshold limits as already stipulated by the state. These thresholds can be on a revenue or some other transactional basis.
Let’s explore if your business has a Physical nexus in New York.
A physical nexus is integrated when your business is engaged in the following in New York:
- Leasing or owning any physical property in New York.
- Maintaining, occupying or using a place of business or an office in New York.
- Employing or retaining any contractor, including an agent, representative, or salesman, by whatever name is called.
- Having a distribution place in New York.
You may also refer to the New York Taxation Department advisory to know more about business activities that may create a physical nexus within the state.
Is it constituting an Economic nexus in New York?
You must comply and register under sales tax rules if your retail business sales in New York exceed $500,000 and you made more than 100 sales during the previous four quarters. (must be both)
For more detailed guidance on economic nexus, please read the guidance issued by the Department of Revenue of New York.
How can you Register for Sales tax in New York?
You must use New York Business Express to apply for a tax registration and obtain a tax account number in New York.
Additionally, before applying for a new tax account number, make sure you have the following information handy:
- Personal and Business IDs (SSN, EIN, etc.).
- Business starts date.
- Bank Account Information
- License Numbers (e.g. NY State Liquor Authority, NY State Lottery, etc.)
- Contact information
- Business-related information (e.g. name, business title, ownership percentage etc.)
To know more or clear your doubts, reach out to us or check out the registration requirements stipulated by the state.
Is your product or services liable to Sales tax in New York?
Tangible Property: Sales tax in New York is imposed on the retail sale of tangible personal property by businesses with an economic or physical nexus. The seller collects the tax and remits it to the state directly.
Digital Product: New York does not charge sales tax on digital products. So, if you sell digital products such as software, streaming services, e-books, etc., you don’t need to collect the sales tax. Please see the New York Taxation Department advisory (pg. 30) on digital transactions.
SAAS: SAAS is software that allows users to connect to the cloud and use it over an internet connection. It is taxable in New York. Click here for the guidance issued by the state.
Services: Albeit the services are not subject to sales tax in New York , a few exceptions include service or labor costs leading to the creation of tangible personal property, hotel stays, beautician services, etc. For more information, visit here.
The state provides certain exemptions from the sales tax levy, such as food for home consumption, prescription drugs, manufacturing equipment, etc. To see what exemptions are covered, please click here.
You can read further by visiting the department website to find exactly what’s included in your list of items that must pay sales tax.
How should you collect and calculate state taxes in New York?
Collecting and computing accurate sales tax to be remitted to the state may involve stratospheric efforts, especially when you are not New York-based. The sales tax is destination-based in New York, which means you must collect taxes on tangible property sold to buyers based in New York.
However, complexities are involved when you have a business nexus, even outside the state. Any default may lead to severe concerns, penalties, or fines by the state. That is what TaxDo is here for you! Our specialized sales tax calculator and professional services will simplify your job and lighten your compliance burden.
New York has a base sales tax rate of 4%, followed by local tax rates that vary by city and municipality. The sales tax rates page on the New York Revenue Department website provides more information.
Below is the simple formula you can use to calculate your sales tax collection on each merchandise sold:
Sales Tax collectable = Sale value * (4% plus local tax rate)
Do you need to collect sales tax on Shipping Charges?
If non-taxable items are sold, shipping charges associated with such sale are not liable to sales tax. However, the sale includes both taxable and non-taxable items, shipping charges need to be apportioned relatively between taxable and non-taxable parts of the sale, and accordingly, sales tax is applicable on the taxable portion of the sale. Refer to more detailed guidance on delivery charges.
How should you file sales tax in New York?
Sales taxes will be filed electronically through https://www.tax.ny.gov/bus/st/stmp.htm the New York Department’s online portal. You must pay the sales tax along with filing the return to avoid penalties and interest.
Filing frequencies and due dates
Based on your reported sales tax or estimated taxable sales, the New York Department of Taxation assigns you a Monthly, Quarterly or Yearly filing frequency. Visit this link to know your filing frequency based on your sales.
According to your filing frequency, you must file the return within 20 days from the end of the relevant reporting period.
Note: If the due date is a holiday or weekend, the next business day would be considered the final due date. This link will take you to the official New York website, where you can see what the state says about sales tax filing due dates.
Are there any fines or penalties for default in filing or paying sales tax?
The state levies a penalty of 10% of sales tax due for the first 30 days of default, which shall be increased by 1% for each subsequent month of default. The total penalty can’t exceed 30% of the tax due.
When the default is more than 60 days, the penalty would be greater of:
- 10% of sales tax due for the first 30 days of default, which shall be increased by 1% for each subsequent month of default (not to exceed 30% of the tax due),
- Lesser of $100 or 100% of the tax due,
- $50
Please visit the sales tax department website to know more.