New York State Sales and Use Tax
We are all aware of the implications that income
tax has on our business, however, sometimes we overlook another tax that is
just as cumbersome, New York State Sales and Use Tax. The following are some
factors that may enhance your understanding or help in the compliance issues
regarding New York State Sales and Use Tax:
1. If you own a business in New York State and have taxable sales, or expect
taxable sales, or take receipt of exempt certificates, you should be registered
with New York State Sales Tax. By registering, you could avoid potential
penalties for failing to register.
2. Some of the exemptions and exclusions from New York State Sales Tax are as
follows:
- Sales for resale.
- Machinery and equipment used directly and predominantly in the
production of tangible personal property for sale. This exemption also
would apply to sales tax on parts and tools to repair the machinery and
equipment, repairs by an outside service, and utilities pertaining to the
machinery and equipment.
- Capital improvements.
- Tangible personal property used in research and development.
- Sales by certain tax exempt organizations.
3. If you are a retailer or supplier and make sales that are excluded or
exempted, please make sure that you obtain the proper exemption certificate and
that the certificate is properly completed. All certificates regarding
non-taxable sales must be obtained within 90 days of the transaction or the
sale is deemed taxable.
4. Sales tax is computed on receipts. Receipts are deemed to be sales that are
made. Therefore, if you bill a customer for a taxable sale, the sales tax is
owed regardless if the money is collected. If a receivable becomes a bad debt,
you can apply for a refund on the sales tax portion previously paid. Receipts
include taxes such as the federal tax on gasoline and the federal tax on
tobacco products. Some taxes, such as the state tax on gasoline, are excluded.
5. If you operate a business that charges a membership fee and that fee gives
an economic benefit to your customer, the fee is subject to sales tax. If the
membership fee does not give an economic benefit, it is not subject to sales
tax.
6. If you purchase tangible items out of state that would ordinarily be subject
to New York State sales tax and bring them into New York State to use, a use
tax return should be filed and use tax paid.
The above information offers just a few examples that pertain to New York State
Sales and Use Tax. If you are unsure regarding a sales tax or use tax position,
it is best to find a definitive answer before the New York State Sales Tax Department
finds it for you.
