Sales and Use Taxes in New York

April 13, 2006

	Visited: 127

	4.0/5.0 (1 votes total)
	Rate:

Effective June 1, 2005, New York state imposes a 4 percent sales tax (previously 4.25 percent) on the receipts from retail sales of tangible personal property and on charges for certain services. A use tax may be imposed, which is complementary to the sales tax, and is designed to tax purchases made outside New York for use in the state. The following are the general categories that the sales and use tax is applied to:

retail sales of tangible personal property
gas, utilities, and telephone and telegraph services
taxable services
food and drink sold by restaurants and caterers
room occupancy (applies to hotels and the like)
certain admissions charges, social or athletic club dues and roof garden or cabaret charges

An additional tax of 5 percent is imposed on the receipts from an entertainment service, or an information service, provided or delivered by means of interactive information network, telephony, telephone or telegraph service that is received by the customer exclusively in an aural manner.

The principal exclusion from sales tax is for property purchased for resale.

Liability for sales tax. In New York, sellers of tangible personal property or services subject to tax, are the ones required to collect the sales tax from the purchaser when they collect the price or rent to which the tax applies. New York holds sellers personally liable for the sales tax. However, if purchaser doesn't pay the tax, the liability for the tax is transferred to the purchaser. Because the seller remains responsible for collecting the tax, the ball is really in his or her court.

Sales tax on services. New York imposes a sales and use tax on nine categories of services:

information services
processing and printing services
installation, repair, and maintenance services performed upon tangible personal property
storage and safe deposit rental
real estate maintenance, service or repair
motor vehicle parking and garaging services
interior decorating and designing services
protective and detective services
telephonic and telegraphic entertainment and information services

Liability for use tax. In order to avoid missing out on collecting taxes on sales transactions taking place outside the state, New York imposes a use tax on purchases made outside New York for use in New York. If the use tax applies, then the sales tax does not. A credit is allowed for sales or use tax paid to out-of-state jurisdictions. Again, the seller is responsible for collecting the use tax. The New York use tax is imposed on receipts from the following categories of items or services:

use of tangible personal property in New York
use of tangible personal property manufactured, processed, or assembled by the user
use of information services, interior decorating and designing services, and protective and detective services
use of tangible personal property upon which certain taxable services are performed (processing or printing, installation, repair, and maintenance services performed on tangible personal property, and interior decorating and designing services)
use of telephone answering services
use of computer software written or otherwise created by a user who, in the regular course of business, offers software of a similar kind for sale (whether just the software is sold or the software is sold as a component part of other property)

The use of a passenger car rental is subject to a special use tax as well. (Leases of passenger cars for a year or more aren't subject to the tax.)

If property and services are not subject to sales tax, then they're not subject to use tax either. Also, no New York compensating use tax is due when tangible personal property is purchased by the user who's a nonresident of New York. (However, the use tax is imposed upon tangible personal property that a user incorporates into real property located in New York in the performance of a contract.) In addition, the following categories are exempt from use tax although they are subject to sales tax:

retail sales of tangible personal property
gas, utilities, and telephone and telegraph services
taxable services

Other exemptions from the use tax include, property incorporated into produced articles, paper used in newspapers and periodical publications, and certain exemptions for the sale of thoroughbred and standardbred racehorses (subject to qualifying conditions) and the use of horses purchased outside New York and brought into the state for racing, to the extent that the value of the horse exceeds $100,000.

The following discussions address additional sales and use tax issues which many small business owners confront: