What is Nexus?You'll need to collect sales tax in New York if you have nexus there. There are two main ways that sellers can be tied to a state when it comes to nexus: physical, or economic.
Physical nexus means having enough tangible presence, or activity in a state to merit paying sales tax in that state.
Economic nexus means passing a states' economic threshold, for total revenue, or the number of transactions in that state.
Calculating Nexus in New York
You’ve got physical nexus if your business has a real presence in New York. This includes:
- Owning or leasing a place like an office, warehouse, or store
- Having employees, agents, or reps working in the state
- Using a warehouse or fulfillment center for your inventory
- Participating in trade shows or product demos in New York
Economic nexus comes into play based on your sales figures. In New York, you'll have economic nexus if:
- Your gross sales to New York customers exceed $300,000, and
- You have 100 or more separate transactions in the state over the last four quarters
Affiliate nexus happens when you're linked to another entity in New York that aids your sales. This might be:
- A parent company, subsidiary, or related business in New York
- An agent or rep providing sales or customer support on your behalf in the state
Click-through nexus is all about online referrals. It applies if:
- A New York entity refers customers to you via a website or online method, and
- You make over $10,000 in sales from these referrals in the past four quarters
Marketplace nexus is for businesses using platforms like Amazon, eBay, or Etsy to reach New York customers. If these platforms handle the sales tax collection and remittance for you, that’s marketplace nexus.
In New York, if you buy a whole bagel, it's tax-free. However, if that bagel is sliced, toasted, or served with a schmear of cream cheese, it's considered a prepared food and therefore taxable. It's as if New York says, "Slice it, and we tax it!"
As an impassioned New Yorker myself, my #BagelVote goes to the egg bagel with plain schmear and the blueberry bagel with blueberry schmear from Absolute Bagels on Broadway between 107th and 108th. If you disagree, please shoot me a note at firstname.lastname@example.org where we can kindly discuss why I am correct :)
Sales Tax Registration in New York
How to Get Your New York Sales Tax Permit
Getting registered for sales tax in New York is a pretty simple online process. Here's what you need to do:
- Head to the Tax Department Website: Visit the New York State Department of Taxation and Finance website and go to the Online Services page. Click "Register a Business Online" to kick things off.
- Create an Online Services Account: If you don’t have an account already, you’ll need to set one up. Click "Create Account" and follow the steps to get your username and password.
- Log In and Start the Process: Once you’ve got your account, log in and select "Businesses." Then, click "Register a business" and choose "Sales tax – vendors and purchasers."
- Fill Out the Application: Follow the prompts to complete the online application. You’ll need to enter details about your business like its structure, ownership, and what you sell.
- Submit Your Application: Double-check your info for accuracy, then submit the application. You should get a confirmation email soon after.
- Wait for Your Certificate of Authority: Your application will be processed, and once approved, you’ll receive your Certificate of Authority in the mail. This is your green light to legally collect sales tax in New York, so make sure it's displayed clearly at your business.
Cost of Registering for a New York Sales Tax License
The great news is, there’s no fee to register for a sales tax license or to get a Certificate of Authority in New York.
Federal Tax ID for New York Sales Tax License
Yes, you’ll need a Federal Tax ID Number, or EIN, to register for a sales tax license in New York. Don’t have one? You can easily apply for it online through the IRS website.
Other New York Registrations to Consider
Depending on your business, there might be a few other places in New York you need to register:
- New York State Department of Labor: If you have employees, head here for unemployment insurance, workers’ comp, and disability insurance.
- New York State Department of State: Corporations, LLCs, or limited partnerships will need to register with the Department of State.
- Local Government Requirements: Your city or county might have additional licenses or permits you need. Check with your local city or county clerk's office to find out.
Guide to collecting sales tax in New York
Is New York an Origin or Destination Sales Tax State?
New York operates on a destination-based sales tax system. This means the sales tax rate you collect depends on where your buyer is located, not where you're selling from. So, when a customer in New York buys from you, you'll need to apply the sales tax rate specific to their location, including local taxes.
What Sales are Subject to Sales Tax in New York?
In New York, you'll generally be collecting sales tax on:
- Clothing and footwear over $110 per item or pair
- Furniture, appliances, and electronics
- Cars, boats, and trailers
- Prepared food and drinks
- Hotel stays
- Tickets to entertainment and recreational activities
- Telecommunication services
- Pre-written computer software
Is Software as a Service (SaaS) Taxed in New York?
Yep, SaaS is considered taxable in New York. It's defined as software accessed over the internet and falls under taxable digital products. The New York State Department of Taxation and Finance has clarified this in advisory opinions, stating that SaaS is taxable even when it's not delivered physically.
Taxable SaaS types in New York include:
- Software accessed via a web browser
- Cloud computing services
- Web-based software
What is Exempt from New Yorkne Sales Tax?
Some items and services are off the hook for sales tax in New York, including:
- Groceries and unprepared food and drinks
- Prescription and over-the-counter drugs
- Medical equipment and supplies
- Clothing and footwear under $110 per item or pair
- Newspapers, magazines, and periodicals
- Medical, legal, and accounting services
- Manufacturing machinery and equipment
Who is Eligible for New York Sales Tax Exemptions?
Sales tax exemptions in New York apply to:
- Government agencies
- Charitable, educational, and religious organizations
- Native American tribal members on reservation land
- Diplomatic personnel with proper ID
What To Do If Your Customer is Exempt from Sales Tax in New York?
If your customer is tax-exempt, you'll need to get a completed exemption certificate from them and keep it on file. This is your proof that the sale was exempt from sales tax. Don't charge sales tax on these transactions.
What if You Lose a New York Sales Tax Exemption Certificate?
Misplaced an exemption certificate? Reach out to your customer for a new one. It's vital to have these certificates in case of an audit. Not having them could leave you responsible for any uncollected sales tax.
New York exempts haunted house admissions from sales tax if the haunted house is run by a non-profit organization. This means getting scared for a good cause is tax-free. It's New York's way of saying, "Boo! But for charity."
Steps for Filing a New York Sales Tax Return
How often you file and pay sales tax in New York depends on how much you collect. The state will set your filing frequency based on your average tax liability. Here's how it breaks down:
- Monthly Filing: If you're pulling in more than $600 a month in tax, you’re on a monthly schedule. File and pay by the 20th of the month following your sales period.
- Quarterly Filing: Collecting between $200 and $600 a month? You’ll file quarterly. Your due dates will be March 20th, June 20th, September 20th, and December 20th, covering the respective previous quarters.
- Annual Filing: If you collect less than $200 a month, you file annually. Your deadline will be March 20th of the following year.
What If a Filing Date Falls on a Weekend or Holiday?
Got a due date falling on a weekend or holiday? No sweat, you get until the next business day to file and pay.
How to File a New York Sales Tax Return
Filing your sales tax return in New York is pretty easy and can be done online. Here’s your step-by-step guide:
- Log In Online: Jump onto the New York State Department of Taxation and Finance website and log into your Online Services account.
- Access Your Sales Tax Account: In your dashboard, hit the "Businesses" tab and select "Sales tax – file and pay."
- Select Your Filing Period: Pick the period you’re filing for and hit "File a return."
- Fill Out the Form: Enter your total sales, taxable sales, and the sales tax collected. Make sure to break down the sales tax by jurisdiction.
- Review and Submit: Double-check everything and then submit your return.
- Make Your Payment: If you owe tax, you’ll be prompted to pay. You can use EFT, credit card, or check. Follow the instructions if you’re mailing a check.
Penalties for Late Filing in New York
Missed a deadline? Here’s what might happen:
- Late Filing Penalty: The greater of 10% of the tax due or $50.
- Late Payment Penalty: This ranges from 2% to 10% of the tax due, depending on how late you are.
- Underpayment Penalty: 10% of any underpaid tax.
- Fraud Penalty: Up to 50% of the tax due.
- Interest: Charged on unpaid tax at the current rate, updated quarterly.
Sales Tax Incentives in New York
New York has a few incentives to lighten the tax load for businesses:
- Empire Zones Program: Get sales tax exemptions and other tax benefits if you’re in an Empire Zone.
- Start-Up NY Program: This offers sales tax exemptions and other tax perks for participating businesses.
- Film Production Tax Credit: Qualifying film and TV productions can score a sales tax exemption on related purchases.
The Kintsugi White-Glove Promise
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