New York Sales Tax FAQ

Go To Great Panes, Kathryn Maloney ©2010-2012
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

This information doesn’t cover all areas of sales tax and when/how to apply it. This is based on my knowledge of NY State business info, and I advise you to re-check the info with NYS publications and employees yourself which is why I try to link to the info on the state website for reference.

Please-please-please–Always double check info you get on-line with the authorities.

Each state has its own regulations–posts for other states can be found here: Sales Tax & Business Registration Help

This NYS document is a great place to start, it has the basics for NY Sales Tax–it’s a PDF file:

Pub 750: A Guide To Sales Tax in New York State

Be sure to register before you start collecting NYS sales tax. NYS start up info here: NYS Business Links

Some commonly asked about NY Sales Tax issues:

1. New York has destination-based sales tax:

Destination-based sales tax means you collect sales tax at the rate where the buyer takes possession of the goods–if you mail an item that’s the rate at the address you mail it to, not the location you mail it from/the seller is located in.

To find the tax for a specific New York address, use this on-line tool:

Don’t forget to make sure your items fall under the general sales tax rate by checking the blue “Limitations on Use” link on that page. Clothing, food items and other products may not get the same rate as everything else gets at a particular location.

Limitations on Use:

2. What sales tax rate do I use for NY transactions?

If you have registered with the state of NY to be authorized to collect New York sales tax…:

NY has destination-based sales tax–the tax rate is where the buyer takes possession of the goods. See it on the NYS website here:

In-person rate is based on where the buyer takes possession.

In-Person Sales–Use the Local Sales Tax Rate:

For in-person sales, you charge the state and local tax for the NY location where the buyer takes possession of the item.

For example, when you are at a craft show, you charge the rate based on the street address of the show for taxable items buyers take with them. If you mail the item to the person, you use the NY tax rate for where the item is delivered to–even if they pay you at the show–because that’s where the customer takes possession of the goods.

Shipping Items You Sell–Use the Ship-To Address to Get the Rate:

If you sell through the internet, by mail or by phone, the location is the New York address to which the item is shipped regardless of the location of the buyer or seller. If someone from CA has something shipped to their aunt in NY, you charge the CA customer NY sales tax at the rate where their aunt will receive the package.

This means that collecting the tax based on your location is not correct unless you happen to live in a zone with the same tax rate as the delivery address. (You’re also not allowed to over-charge or under-charge–see New York Sales Tax FAQ, part 2, link at the end of this post.)

See it on the NYS website here:

Shipped goods sales tax rate is based on “point of delivery”.

Items you ship out of state: You cannot collect NY sales tax on items that are being delivered out of state. On interstate orders, the customer is responsible for paying “Use Tax” directly to their own state if their state taxes the items they received, just like when a NY buyer purchases something over the internet which is taxable but on which NY sales tax hasn’t been collected by the seller. More help for Use Tax here: What is Use Tax?

3. You can’t use Paypal’s sales tax calculator for NY Sales Tax
(nor Etsy’s sales tax feature)

NY has more than 10 different tax rates across the state based on our 60+ counties that can only be determined by using the buyer’s street address AND zip code, which means you can’t set up Paypal (or Etsy) to accurately charge NY sales tax.

Even if you put all the 5 digit zip codes for NY in the sales tax function, it will not charge sales tax appropriately for NYers because the sales tax rates are determined by political zones (counties) which are not defined by 5 digit zip codes since 5 digit zip codes can cross county lines–you’d need the full 9 digit zip code to determine the right zone. (You cannot put 9 digit zip codes in the tax calculator, so even if you wanted to spend a week doing it, you can’t.)

You can even have two houses next to each other in the same zip code and each has a different sales tax rate because they are in different counties and so they fall under different political jurisdictions. Here’s what we do for our NY Etsy sales:

Have Trouble with Destination-based Sales Tax on Etsy?

4. There is Sales Tax on Shipping if items are taxable:

NY sales tax is also applied to shipping charges for taxable items, unless you use a third party service to ship your items, in which case they charge you tax on their service (so you don’t charge it to your buyer).

For example, a pack and ship store will charge you sales tax on their services, and you pass that cost on to your buyer in the total cost; you don’t re-tax that amount since sales tax has already been paid on it. That’s different than when you mail an item to a buyer.

See it on the NYS website:

It gets more complicated if only some of the goods in the transaction are taxable–see here for full details:

Technical Services Bureau TSB-M-92 (2)SPDF

More on NYS sales tax & shipping here:
Shipping and Delivery Charges (Tax Bulletin ST-838 (TB-ST-838))

Commonly asked questions about NY sales tax is continued here:

New York Sales Tax FAQ, part 2

Go To Great Panes, Kathryn Maloney ©2010-2012
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

20 thoughts on “New York Sales Tax FAQ”

  1. Thanks for this post, I’ve been so confused about how to charge for tax on Etsy. I see in your shop that you do a revised invoice for NY buyers; has that policy worked for you? Is it wrong just to charge the highest possible tax or an average tax instead? I feel like invoicing could take a while and discourage buyers.

  2. **Please note–I always recommend contacting the authorities yourself for definitive answers, there’s no substitute for getting the information directly from the source. I am just another small businesses owner sharing my own research and make no guarantees that information is accurate or up to date.**

    A while back I called NY State and asked about charging the highest rate and refunding any over-payment, they told me that overcharging NY tax is illegal. You can choose to pay all the tax yourself, and that is okay ONLY if you tell the buyer that you’ve paid the state and local taxes for them, otherwise the buyer is obligated to pay sales tax on the items on their state annual income forms.

    I’ve got that question and many others in the works for another post, grouped from so many wrong answers I’ve seen given in various forums.

    I’ve also got an upcoming post about post-sale invoices and Etsy coming up, in general it works okay for us. Feel free to email me if you’d like more info before I get to put that post up.

  3. I have a couple questions regarding charging NYS sales tax. I didn’t see anywhere mentioned on your website how you charge. When etsy users pay, I’m not sure how to do a revised invoice (Don’t see it on paypal as an option) Do you send a new invoice for the tax amount after they pay? Or is there something I am missing? Do you write on your etsy that you send revised invoices for tax for users in NYS? When you go to tax the transactions do you tax the total amount of item + s/h minus the paypal fee..? what about the etsy fee? I would assume maybe you tax the amount minus the paypal fee since that is what shows up in your paypal balance, but the etsy fee would just be considered a separate expense?

  4. You should awlays check with the state to be sure the info you use is correct, that said…

    It is my understanding that you collect sales tax on the entire amount the buyer paid (including shipping/handling), regardless of fees you are charged.

    On Etsy we ask all NY buyers to wait for an adjusted invoice that includes state and local sales tax based on the shipping address.

    To send a revised invoice, see here:

    Sending a Paypal Invoice

  5. oh okay, i’ve always just had people do paypal payments right away. you mean that in the note that gets sent to people who buy, you tell NYS residents to hold off on payment for a revised invoice?

  6. When we had it set up to allow Paypal payments, we asked in every listing and the shop policies that all NY buyers wait for a revised invoice to pay becasue we’d have to add sales tax.

    If someone from NY paid before the revised invoice, we usually refunded the payment and sent an email to explain why, then we sent an email invoice with sales tax.

  7. hi,

    thank you for all this–brilliant, clear presentation. i have one question:

    you say it’s all right to pay your customers’ sales tax, as long as you inform them (so they don’t pay it twice). does this mean that i don’t need to itemize on their receipt? it seems easier to me somehow to calculate tax later, but maybe i should not be taking this risk.

  8. Hi Jerise–I don’t think I said it’s ok to pay it for them.

    It is ok to include the tax in the price if you are doing a show or something, but if they get a written receipt (such as Paypal, a cash register receipt or a handwritten one), you must break the sales tax out for them on it so they can see how much is paid to the state on their purchase.

    Calculating tax later isn’t legal in many states, so I would advise calling the state before doing that. It is sometimes referred to as “backing out taxes”.

  9. I find it difficult to believe that big shot PayPal can’t discern the appropriate NYS sales tax base upon shipping destination.
    I’m tired of explaining to customers why they are being charged 9.5% on sale that should be charged @ 8.65% or as low as 7%…
    Hey PayPal..
    Get it together!

  10. Joel–The trick is that NY tax regions are based on county, as are several other states, and not by zipcode and NY doesn’t have an interface that would allow them to connect and accurately charge buyers based on street address and zipcode.

    It would be nice if they gave us the option to set up rates by county, but since that’s not part of the info folks put in when they sign up they’d have to change that too.

    In the mean time, charging them 9.5% when they owe less, even if you refund the overage later, is not allowed in NY.

  11. So lets say I rarely do shows, markets or fairs and I mostly sell on my own website(I live in NYC and plan on selling jewelry), do I only charge tax when the item is being shipped within New York State? I assume if I do sell at those rare times in person in NYS that sales tax is to be charged, right? I just want to make sure I understand because I’ve been going nuts through all the sites I’ve been sifting through for info and I appreciate your blog entries a lot.

    1. Glad you found them helpful!

      You only charge sales tax on items the buyer takes possesion of in a state you are registered in.

      If you are registered in NY, you charge for items shipped to a NY address and you charge if you sell in-person in NY. (If you sell in person in other states, you might be required to register there too.)

      In NY you charge the sales tax rate for where the buyer takes possesion of the item too, so if you ship to NYC the rate will be different than if you ship to Albany. That’s where the headache comes in. 🙂

      If you ship out of state/country, you don’t charge sales tax and it is up to the buyer to report use tax to their own states.

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