So, you need to know about sales tax in The Empire State. Look no further!
Whether you’ve fully set up shop in New York, or simply ship there once in a while, it’s important you know whether your business is liable to their sales taxes. This guide will tell you everything you need to know, plus direct you to the right places for handling any sales tax responsibility you may have.
What’s taxable in New York?
Services
Services include professional services provided by lawyers, architects, landscapers, etc. The definition can be pretty wide, and many exemptions can apply. Your best bet would be to check with the New York Department of Revenue to confirm your service is even taxable.
Tangible products
Tangible products, as you might guess, are physical items. New York taxes most tangible products, but there can be exemptions! To be absolutely clear about which products are subject to sales tax, and which are exempt, check the New York Department of Revenue.
Software-as-a-Service products
Better known as SaaS, these products are cloud-based software products, accessed online by customers. The definition of SaaS sometimes falls in the gray area of “digital service.” New York does tax SaaS products, but check the website to confirm that the definition firmly applies to your service.
Do you have nexus in New York?
The word “nexus” refers to a commercial connection in the state. Nexus determines the following questions for a state tax agency: Do you do business here, what kind, and how much? And when you do have nexus, that means you’re obligated to collect tax on your sales there.
So the first question for you to answer is whether you have nexus in New York.
You probably have nexus in New York if any of the following points describe your business:
- A physical presence in New York: a store, an office, a warehouse or distribution center, storage space, you, an employee, a representative, etc.
- Any affiliate businesses or individuals in New York, which generate sales.
- Online ads or links on a New York-based website, which channels potential customers and new business.
- A significant amount of sales in New York within twelve months.1
1 This is called an economic nexus, a sales tax nexus determined by economic activity, i.e. - the amount of sales you make in a particular state. Any kind of economic activity could trigger the nexus, once your total sales reach a certain threshold amount.
The threshold in New York is $500,000 in annual sales and 100 separate sales transactions. To learn more about how this works, check out the Ultimate Guide to US Economic Nexus.
How to collect sales tax in New York
Now it’s time to tackle the intricate stuff! Tax rates can vary based on the location of your business and the location of your customer, plus the levels of sales tax that apply in those specific locations.
The state-wide sales tax in New York is 4%.
There are additional levels of sales tax at local jurisdictions, too.
New York has a destination-based sales tax system,2 so you have to pay attention to the varying tax rates across the state. Charge the tax rate of the buyer’s address, as that’s the destination of your product or service.
Check out Quaderno’s Sales Tax Calculator to see your product’s tax rate, amount, and final price in New York.
2 Important to note for remote sellers: While this is generally true for New York, some state have peculiar rules about tax rates for remote sellers. Contact the state’s Department of Revenue to be sure.
Sales tax on shipping charges in New York
New York does apply sales tax to shipping costs. The rule of thumb is that if what you’re selling is subject to tax, then the shipping charges are also subject to tax. (And vice versa is true: If the item being shipped is not subject to sales tax, neither are the shipping charges.)
If you happen to be shipping products that are both taxable and nontaxable, then shipping charges for the entire shipment are subject to tax.
How to register for sales tax in New York
Okay, so you have nexus! Now what?
The next crucial step in complying with New York sales tax is to register for a sales tax permit. It’s actually illegal to collect tax without a permit. So to get all your ducks in a row, start with tax registration first.
Learn more in our New York State Registration and Filing Guide.
When to file taxes in New York
Your filing frequency (monthly, quarterly, or annually) depends on the amount of sales tax you collect. Returns are typically due on the last day of the month following the reporting period. If the due date falls on a weekend or holiday, it’s due the next business day. Check your specific deadlines in our New York State Registration and Filing Guide.
How to file taxes in New York
When tax time rolls around in New York you must:
- Calculate sales tax collected and owed
- File a sales tax return
- Make a payment
Even if no sales were made, a zero-tax filing is still required. Learn more in our New York State Registration and Filing Guide.
Other New York tax info
Penalties
If you miss a filing or payment deadline, certain penalties can apply. Such a pain! Check the state’s website for up-to-date penalty fees.
Discounts
On a brighter note, you could be eligible for sales tax discounts in New York! Usually these discounts are designed to save you a bit of money, as a reward for complying with the sales tax system. Check the state’s website for up-to-date discount policies.
Sales Tax Holidays
One final tricky aspect about New York sales tax are the sales tax holidays. During these days of the year, you aren’t required to charge sales tax, and buyers will expect to not be charged. Check the state’s website for current sales tax holidays.
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the tax authorities.