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:

http://www8.tax.ny.gov/STLR/stlrHome

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: http://www.tax.state.ny.us/e-services/stlr/stlrinfo.htm

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: http://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/taxable_receipt.htm

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.


The IRS Website–Links for Businesses

The Internal Revenue Service (IRS) website is great–I ordered all sorts of goodies for new businesses when I started up. (That was before there were so many things available immediately on their website–like pdf versions of booklets and video lessons I had to order on CD.)

Small Business and Self-Employed One-Stop Resource
http://www.irs.gov/businesses/small/index.html

Publications from the IRS
Now viewable online or through the mail with CDs or DVDs
http://www.irs.gov/businesses/small/article/0,,id=101169,00.html

Online Classroom
I had ordered CD versions of these lessons, and though they are as boring as dust, I learned a lot. Now you can click on the name to watch them on-line, click the “d” to download it to your computer or “t” to read the text transcripts.
http://www.irs.gov/businesses/small/article/0,,id=97726,00.html

Taxpayer Identification Number
also referred to as TIN, EIN, or FTIN*, instead some folks just use their SSN

You may not need an Employer Identification Number (EIN) if you won’t have employees, incorporate or be a partnership–you might be able to just use your Social Security Number (SSN) when paying income tax for your sole proprietorship. Check this page to see if you are required to get one:

http://www.irs.gov/businesses/small/article/0,,id=97872,00.html

We got a federal EIN to use during registration for our state sales tax ID. While we didn’t need to get an EIN by the IRS’ standards, we signed up for one with the IRS right away because many wholesale companies won’t let you purchase materials at wholesale without a sales tax ID number. That means you won’t pay sales tax on the supplies you buy and that you’ll have the opportunity to (or requirement of) purchasing supplies in bulk for a discount.

When you get your state sales tax id, often you can give them your SSN as an ID number instead of the EIN, and some states will then use your SSN as your sales tax ID number (some states make you get an EIN before they let you get a state sales tax ID).

I prefer to protect my personal information, so I got the EIN give to the state during registration for our Authority to Collect Sales Tax to be sure my SSN didn’t end up on the license that we must display publicly at craft shows and need to give to wholesalers for a discount/not pay sales tax.

In NY, if you register to collect sales tax your EIN will also be the number for your registration with the state’s sales tax department, giving you the authority to collect sales tax on the state’s behalf. (You must register with the state before you are permitted to collect sales tax even if you already have an EIN.)

Getting an EIN is free, it doesn’t require any special paperwork once you’ve registered, and registering online is easy as pie:

Apply for an Employer Identification Number Online

State Links from the IRS
A collection of links to official US state government web sites with useful information for businesses including information on sales tax laws. Sales tax laws vary from state to state, so it’s important to find your own state’s regulations from official sources.
http://www.irs.gov/businesses/small/article/0,,id=99021,00.html

Sales Tax vs. Income Tax

Go To Great Panes, Kathryn Maloney ©2009

The first thing about taxes and your small business is that sales tax is completely unrelated to your annual state and federal income tax.

Sales tax:

Collected and regulated on a state level, so every state has its own laws that govern the collection and payment of sales tax by sellers to the state. The laws vary widely, please always contact your state directly if you have any questions or get the info directly from your state’s official website. Two examples differences:

  • Some states use the tax rate where the seller is located, some the rate where the buyer is located, and
  • Some states tax shipping while others don’t.

One thing that’s true for all states–if you don’t have a business nexus in a state you don’t have to collect sales tax for that state (nexus = physical presence, like selling from your home or doing a craft show/having a store front, or having a business rep in a state). So you collect from in-state buyers, and out of state buyers will owe “Use Tax” to their own state if the transaction would have been taxable in their state.

If your state has sales tax, you usually need to register with the state to be authorized to collect it from your customers, then you pay the state the money you collected according to the schedule the state provides you, on special forms that are only for sales tax remittance.

Most states require sellers (including hobbyists/individuals, not just “businesses”) to register before they start to sell. Some states do allow you to sell under a certain amount a year before registering, but it’s not common. For example:

  • Texas requires you to register if you sell 2 taxables items in-state within 12 months,
  • Tennessee if you sell less than $400/month and pay tax on your supplies you don’t yet have to register.

See those details here: links to state websites

Some states require sales tax be remitted monthly, some quarterly, some once a year. In some states the schedule changes depending on your sales. Your state will tell you how often you should remit it.

Income tax:

Paid by US citizens/residents and those employed in/selling from the USA at the federal level and at the state level (if the state has income tax). Due April 15.

Some states also have additional taxes for businesses–be sure to check with your state’s taxing authority for your business responsibilities.

For help getting started with what your state requires see this post:

Sales Tax & Business Registration Help
–links to official state websites–

.