New York State Sales Tax Penalties, Paying, and Filing
The State of New York imposes sales tax on certain retail sales that take place in the state. When you’re running a business in New York, it’s crucial to understand how these taxes work and what your responsibilities are. Otherwise, you’ll get hit with penalties for failing to comply with tax laws.
This guide walks you through everything you need to know about New York State sales tax and how to manage it all successfully. To get guidance now, contact us at the Law Offices of Stephen B. Kass today.
Key Takeaways:
- Businesses must register with the Department of Taxation and Finance and obtain a Certificate of Authority before collecting sales tax in New York.
- Your sales tax filing frequency depends on revenue, and returns must be filed for a given period, even if you didn’t make any sales.
- Late filing or failure to pay sales tax can result in significant penalties and interest charges from the state.
- New York State may audit your business, so maintaining accurate and accessible records is crucial.
- If you fall behind, options like payment plans, voluntary disclosure, or professional help can resolve issues.
Understanding NYS Sales Tax Basics
New York has a statewide sales tax rate of 4%, but your local jurisdiction will also impose a sales tax percentage. There may also be slight tax rate differences depending on the type of product being taxed.
For instance, in New York City, for clothing and shoe purchases of more than $110, the sales tax is 4% from the state plus a 4.5% New York City sales tax for a total rate of 8.5%.
As a business, you are required to collect this tax from your customers and send it to the state. This requires getting set up with the New York Taxation and Finance Department so you’re registered with a Certificate of Authority.
Registering as a Sales Tax Vendor
Here’s what to know about registering:
- Without a Certificate of Authority, you can’t collect sales tax.
- You must register 20 days or more before you make taxable sales.
- You must display your certificate in plain view where your business operates.
- To register, you’ll complete Form DTE-17.1, Business Contact and Responsible Person Questionnaire.
- You’ll need this information:
- The reason you’re applying, such as starting a new business or adding a location
- Contact information for the business
- Type of entity
- The date you’ll begin selling taxable products or services
- Bank account details
- License numbers, if applicable
- Information about your tax preparer, if applicable
- Business contact/responsible person information
- You’ll need to create an NY.gov business account so you can use the online tool New York Business Express.
If these requirements seem confusing or overwhelming, don’t hesitate to work with a tax expert at Stephen Kass for assistance. Our attorney works closely with you to resolve your tax problem and get you set up properly in New York.
Filing Sales Tax Returns
To stay in compliance with New York sales tax requirements, you need to file a sales and use tax return on a regular basis—quarterly, monthly, or annually. If you didn’t make any taxable sales in a given period, you still must file a sales and use tax return.
You’re required to file your sales tax return online through the E-file mandate if you prepare your tax returns yourself (i.e., don’t use a tax professional); if you use a computer to calculate and prepare your filings; and if you have broadband internet access.
Here’s the breakdown of how to figure out when you need to file:
- Quarterly: Your receipts, purchases, rents, and amusement charges are under $300,000 during the last quarter, and you haven’t been told to file annually
- Annually: You owe $3,000 or less in a year
- Monthly: You file an annual or quarterly return; your receipts, purchases, rents, and amusement charges are $300,000 or more in a quarter; and you are a distributor under Article 12-A of the tax law and sold at least 100,000 gallons in petroleum products
For annual filers, the filing period is from March 1 through the last day of February. Most sales tax vendors fall under the quarterly category. These are the quarterly filing periods and their respective deadlines:
- March 1 through May 31
- Filing deadline June 20
- June 1 through August 31
- Filing deadline September 20
- September 1 through November 30
- Filing deadline December 20
- December 1 through February 28 or 29
- Filing deadline March 20
Staying compliant starts with understanding what New York State requires you to do. Follow these guidelines closely so you don’t risk any penalties.
What If You Mess Up NYS Sales Tax?
As with any of your tax obligations, state or federal, you may be worried that you’ll mess something up and get into trouble. The two most common mistakes businesses make are not filing their returns on time or not paying what they owe.
Late Sales Tax Filing
There are a few penalties you may have to pay if you don’t follow filing requirements, usually filing late or failing to file at all. Here is a summary of those penalties:
- Failed to file a return but didn’t have any tax due: $50 penalty
- Filed a return that was late by 60 days or less: 10% of the tax due in month one, with 1% added for each additional month or partial month, up to 30%. Minimum penalty $50
- Didn’t file a return or failed to file within 60 days of the deadline: The greater of these three options: 1) 10% of the tax due for month one, with 1% added for each additional month/partial month, up to 30%; 2) $100 or 100% of the amount required to be shown as tax on the tax return, whichever is less; or 3) $50
Late Sales Tax Payment
Failing to pay sales tax on time will also lead to penalties. Here’s a breakdown of what you could face based on the mistake:
- Filed your return on time, but didn’t send the tax due: 10% of the tax due for month one, plus 1% for each additional month/partial month, up to 30%
- Didn’t pay over 25% of the taxes required to be shown on your tax return: 10% of the tax you didn’t report but should have
- Your failure to pay is fraudulent: Twice the amount of the tax you didn’t pay, plus interest on unpaid tax, which you pay at the greater of 14.5% or the Tax Commissioner’s set rate.
Other mistakes that lead to tax penalties include failing to register your business, failing to display your certificate, failing to collect required sales tax, failing to collect and send the right tax amount, or failing to keep adequate business tax records.
For instance, if you fail to keep records “available in auditable form,” the penalty is up to $1,000 per quarter. If you don’t display your Certificate or Authority, the penalty is $50.
Note that some rare cases could lead to jail time, typically if you are found to have willfully avoided tax obligations or had an intent to evade taxes.
New York State Sales Tax Audits
The New York Department of Taxation and Finance has the right to audit your business records. The state could pursue a computer-assisted audit, desk audit, or field audit.
For computer-assisted audits, you’ll receive Form DTF-76, General Business Corporation Computer Audit Questionnaire, which asks you to provide additional information about your business, and you’ll meet with a sales tax auditor to discuss the matter further.
In desk audits, the auditor will review your tax returns and other applicable tax documents, as well as information received from third parties, and determine whether or not they need more information from you. In field audits, the auditor will contact you 15 days in advance to set up a meeting to go over your tax records. These usually happen at your place of business.
Auditors will generally look for discrepancies in the information you provided. If they find that you didn’t pay the full amount of taxes you owe, or find some other problem, they may submit proposed changes to your tax return or suggestions to update your recordkeeping practices. The auditor could find that no changes are necessary.
Audits can be stressful, even if the outcome isn’t owing more money or facing penalties. Talk to the legal team at the Law Offices of Stephen B. Kass for help getting through New York sales tax audits.
How to Resolve or Avoid Sales Tax Problems
In a perfect world, you’d stay compliant with all sales tax requirements, never having to worry about audits or penalties. But sometimes, mistakes do happen. Here’s how to be proactive against them or to resolve a problem you’re dealing with:
Update Your Recordkeeping Practices
As a business owner, you need effective, organized ways to keep tax and financial records. When you’ve missed a deadline or made a mistake in your tax calculations, it’s probably time to update your recordkeeping practices. For instance, use a calendar or notification system to track deadlines and send out automated alerts.
Start relying on digital tools to safely store your records for easy access for you or tax auditors. A lot of point of sale systems will automate sales tax payments, or they integrate with apps that can do that for you.
Take Advantage of Voluntary Disclosure
New York State has a voluntary disclosure and compliance program, which allows you to avoid penalties just by coming forward after you make a mistake. You’ll just need to tell the department what you owe, pay your owed taxes, and enter into an agreement to pay all taxes owed in the future.
Set Up a Payment Plan
If your issue is that you can’t afford your full tax bill right now, you may qualify for a payment plan, also known as an installment payment agreement (IPA), with the state. You can apply online and request an IPA if your balance is $20,000 or less. You’ll just have to make monthly payments over a maximum of 36 months.
Apply for an Offer in Compromise
If your business is insolvent, you may also be eligible for an offer in compromise, which allows you to settle your debt for less, particularly if you’re experiencing undue economic hardship. Generally, you can only qualify for a settlement on sales taxes if you filed for bankruptcy or the business is insolvent.
Get Help from a Tax Professional
One of the best steps you can take to protect your business is to work with a tax expert. A tax attorney or CPA will help you manage a sales tax audit, find the right option to get your debt paid off, or help you avoid additional penalties.
Why Work with Stephen B. Kass?
When you have questions about New York sales tax requirements, you need an expert by your side who will help you comply. Working with a tax attorney is a good idea, whether you’re having trouble affording your sales tax bill, missing filing and payment deadlines, or facing a sales tax audit.
The Law Offices of Stephen B. Kass provide a range of business tax solutions for New York businesses, including help dealing with the Department of Taxation and Finance. Contact our office today to set up a consultation.
Sources:
https://www.nyc.gov/site/finance/business/business-nys-sales-tax.page
https://www.tax.ny.gov/bus/st/register.htm
https://www.tax.ny.gov/e-services/elcoa/
https://www.tax.ny.gov/bus/st/filing_sales_tax_returns.htm
https://www.tax.ny.gov/pdf/publications/sales/pub132.pdf
https://www.tax.ny.gov/enforcement/vold/
https://www.tax.ny.gov/pdf/publications/income/pub130d.pdf
https://www.tax.ny.gov/pdf/publications/income/pub130f.pdf
https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/sales_and_use_tax_penalties.htm
https://www.tax.ny.gov/bus/st/rates.htm
https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/sales_tax_rate_publications.htm
