Most states in the U.S. charge sales tax on retail goods and services and New York is no different. In New York, sales tax is charged on the sale of tangible goods and some services. The tax is obtained by the seller and remitted to state tax authorities, so in this case, the seller acts as a “de facto” tax collector. In addition to sales tax in New York, residents must pay use tax. Before going further, What are Sales and Use Taxes in New York?
New York sales and use tax
- What is sales tax?
Sales tax is a tax paid to a governing body on the sale of specific goods and services. The sales tax percentage differs by state, with some states not charging a tax. New York approved a general state sales tax in the year 1965, and since then, the base sales tax rate has increased to 4%. Sales Tax in New York applies to retail sales of specific tangible personal property and services.
- What is use tax?
Use tax is comparable to sales tax, but assigned where goods are consumed rather than where purchased. Use Tax applies if you buy tangible personal property and services outside the state and utilized them within New York State.
The purpose of New York’s use tax is to urge New York residents to shop locally instead of shopping in states that have a lower or no sales tax.
Sales and use tax rates in New York
New York State sales tax differs by location, but in general, the total sales and use tax rate is 8.875 percent. This includes:
- New York State sales and use tax rate of 4.0 %
- New York City local sales and use tax rate of 4.5%
- Metropolitan Commuter Transportation District (MCTD) surcharge of 0.375%
New York Sales Tax differs by county, so a specific county may have more than one rate due to local taxes.
Tax registration in New York
Sellers of tangible personal property and providers of taxable services in New York must register with the NY tax department before doing business. The seller must obtain a Certificate of Authority from the New York State Department of Taxation and Finance. This certificate will give the business the authority to collect the mandatory sales and use taxes and to issue sales tax exemption documents.
The seller must obtain a Certificate of Authority regardless of whether the business operates from a commercial property or is a home-based business. Negligence to register for sales tax purposes and engaging business without a credible Certificate of Authority will be subject to a monetary penalty.
What is taxable, and what isn’t in New York?
As anticipated, the retail sale of most tangible physical products is subject to sales tax in New York. Specific services, admissions, and dues are also taxable. In general New York charges sales tax on many services and on retail sales for most goods, except for unprepared and packaged food, medicine, diapers, and some items used to make or repair clothes.
Also, there is no longer a sales tax on clothing and footwear costing less than $110. But clothing and footwear costing over $110 per item is subject to the full 8.875% tax rate.
Tax recordkeeping
Companies and small businesses that have a physical location in New York are mandated to collect sales tax, so for this, business owners must keep detailed records of every sale, the amount paid or charged, and the sales tax due by jurisdiction.
For use tax, business owners must keep thorough records of the nature, value, type, and amount of all purchases.
Filing requirements
Once registered with the Tax Department, New York requires all businesses to file and pay sales tax either annually, quarterly or monthly. The regularity with which business owners must file is determined by the business’s estimated yearly income.
Impact of failing to collect New York sales tax
If business owners meet the criteria for collecting sales tax and decide not to, the business will be held responsible for the tax due, plus applicable penalties and interest.
If you have any tax-related questions or need help with registering your business in New York, let’s go ahead and contact your Damalion expert now.
