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Understanding New York sales tax 

by | Jan 8, 2023 | Corporate Structuring

New York sales taxes for businesses – Luxembourg

Most states in the U.S. charge sales tax on retail goods and services and New York is no different. In New York, sales tax is charged on the sale of tangible goods and some services. The tax is obtained by the seller and remitted to state tax authorities, so in this case, the seller acts as a “de facto” tax collector. In addition to sales tax in New York, residents must pay use tax. Before going further, What are Sales and Use Taxes in New York? 

New York sales and use tax 

  • What is sales tax? 

Sales tax is a tax paid to a governing body on the sale of specific goods and services. The sales tax percentage differs by state, with some states not charging a tax. New York approved a general state sales tax in the year 1965, and since then, the base sales tax rate has increased to 4%. Sales Tax in New York applies to retail sales of specific tangible personal property and services. 

  • What is use tax? 

Use tax is comparable to sales tax, but assigned where goods are consumed rather than where purchased. Use Tax applies if you buy tangible personal property and services outside the state and utilized them within New York State. 

The purpose of New York’s use tax is to urge New York residents to shop locally instead of shopping in states that have a lower or no sales tax. 

Sales and use tax rates in New York 

New York State sales tax differs by location, but in general, the total sales and use tax rate is 8.875 percent. This includes: 

New York Sales Tax differs by county, so a specific county may have more than one rate due to local taxes. 

Tax registration in New York

Sellers of tangible personal property and providers of taxable services in New York must register with the NY tax department before doing business. The seller must obtain a Certificate of Authority from the New York State Department of Taxation and Finance. This certificate will give the business the authority to collect the mandatory sales and use taxes and to issue sales tax exemption documents.

The seller must obtain a Certificate of Authority regardless of whether the business operates from a commercial property or is a home-based business. Negligence to register for sales tax purposes and engaging business without a credible Certificate of Authority will be subject to a monetary penalty. 

What is taxable, and what isn’t in New York? 

As anticipated, the retail sale of most tangible physical products is subject to sales tax in New York. Specific services, admissions, and dues are also taxable. In general New York charges sales tax on many services and on retail sales for most goods, except for unprepared and packaged food, medicine, diapers, and some items used to make or repair clothes. 

Also, there is no longer a sales tax on clothing and footwear costing less than $110. But clothing and footwear costing over $110 per item is subject to the full 8.875% tax rate. 

Tax recordkeeping 

Companies and small businesses that have a physical location in New York are mandated to collect sales tax, so for this, business owners must keep detailed records of every sale, the amount paid or charged, and the sales tax due by jurisdiction. 

For use tax, business owners must keep thorough records of the nature, value, type, and amount of all purchases. 

Filing requirements 

Once registered with the Tax Department, New York requires all businesses to file and pay sales tax either annually, quarterly or monthly. The regularity with which business owners must file is determined by the business’s estimated yearly income. 

Impact of failing to collect New York sales tax 

If business owners meet the criteria for collecting sales tax and decide not to, the business will be held responsible for the tax due, plus applicable penalties and interest. 

If you have any tax-related questions or need help with registering your business in New York, let’s go ahead and contact your Damalion expert now.

Damalion – Luxembourg

Understanding New York sales tax — rates, nexus, registration, taxable items, exemptions, filing and recordkeeping

For entrepreneurs, companies, marketplaces, and cross-border sellers • This guide explains practical points in clear language. It is not legal or tax advice.

Last updated:

Overview

New York State applies a 4% state sales and use tax. Cities and counties add local tax. Some areas are in the Metropolitan Commuter Transportation District (MCTD), which adds 0.375%. In New York City, the combined rate is 8.875% (4% state + 4.5% NYC + 0.375% MCTD).

Tip: Sales tax applies to the sale of taxable goods and services. Use tax applies to taxable items used in New York when sales tax was not paid.

Rates at a glance

Area Combined rate (illustrative) Breakdown
New York City 8.875% 4.0% state • 4.5% NYC • 0.375% MCTD
Other counties Varies by county and city 4.0% state • local rate • MCTD 0.375% if in district

Clothing and footwear under $110 per item are exempt from the 4% state tax. Local participation in this exemption varies. New York City participates in the exemption for items under $110; items at or above $110 are fully taxable at NYC’s combined rate.

When you must register 

  • Physical presence: office, store, warehouse, employees, or in-person selling in New York.
  • Economic nexus: generally triggered when remote sellers exceed New York thresholds (e.g., $500,000 in sales and 100 transactions into the state in the prior four sales tax quarters). Marketplaces have separate rules.
  • Marketplace facilitators: platforms that meet New York rules must collect and remit on facilitated sales.

Registration

Register as a sales tax vendor before doing business. Apply at least 20 days before your first sale. You will receive a Certificate of Authority. Display it at your business location. You must collect tax once you are authorized.

Taxable vs. exempt

  • Generally taxable goods: most tangible personal property.
  • Common taxable services: certain information services, credit reporting, utilities, admissions, and selected personal services. Some services have special New York City rules.
  • Common exemptions: unprepared food, prescription and many OTC medicines, diapers, and clothing/footwear under $110 per item (state; local rules vary).

Filing and payment

  • Frequencies: monthly (part-quarterly), quarterly, or annual — assigned by the tax department.
  • Due dates: returns are generally due on the 20th day of the month following the period end.
  • Sales tax year: New York’s sales tax quarters run Mar–May, Jun–Aug, Sep–Nov, Dec–Feb.
  • E-file: electronic filing is required for most vendors.
  • Schedules: include required schedules (e.g., Schedule N for special NYC items) when applicable.

Recordkeeping

Keep detailed records of sales, tax charged by jurisdiction, exemptions, resale certificates, and use tax on purchases. Keep records at least as long as state rules require.

Penalties

If you must collect but do not, you remain liable for the tax. Penalties and interest may apply. Operating without a Certificate of Authority can also lead to penalties.

Frequently asked questions 

1) What is the current New York State sales tax rate?
The state rate is 4%. Local rates apply on top. Some areas add a 0.375% MCTD surcharge.
2) What is the combined rate in New York City?
8.875%: 4.0% state + 4.5% NYC + 0.375% MCTD.
3) Are clothing and footwear under $110 taxable?
They are exempt from the 4% state tax. Local rules vary. New York City also exempts items under $110. Items at or above $110 are fully taxable in NYC.
4) When does a remote seller have nexus?
Economic nexus is generally met when a remote seller exceeds New York thresholds (for example, $500,000 in sales and 100 transactions into New York in the prior four sales tax quarters). Review current thresholds and aggregation rules before concluding.
5) Do marketplace facilitators collect the tax?
Yes. Registered facilitators that meet New York rules must collect and remit on facilitated sales. Sellers should keep records of marketplace tax collected.
6) When must I register?
Register before you start taxable business. Apply at least 20 days before your first sale. Wait for your Certificate of Authority and display it.
7) What filing frequency will I have?
Monthly, quarterly, or annual. The tax department sets this based on your tax due. It can change over time.
8) What are the filing due dates?
Returns are generally due on the 20th day of the month after the period. New York’s sales tax year uses quarters Mar–May, Jun–Aug, Sep–Nov, Dec–Feb.
9) Do I need to e-file?
Most vendors must e-file and e-pay. Use the state’s online system.
10) How do I handle sales across counties?
Charge the rate for the destination jurisdiction for delivered items, or the seller’s location for over-the-counter sales. Keep evidence to support sourcing.
11) Are services taxable?
Some services are taxable (for example, certain information services, credit reporting, admissions). Some services have special rules in New York City.
12) Are digital goods taxable?
Taxability depends on the item (e.g., prewritten software delivered electronically is generally taxable). Check the specific item category and guidance.
13) How do I document exempt sales?
Collect a properly completed exemption or resale certificate. Keep it in your records. Invalid or missing certificates can make you liable for tax.
14) What is use tax?
Use tax applies to taxable items used in New York when no sales tax was paid. Report and pay on your return.
15) Are shipping and handling taxable?
Shipping charges are often taxable when the sale is taxable and the charge is part of the sale to the customer. Separate, optional charges may be treated differently. Check the rules and invoice format.
16) How long should I keep records?
Keep books, invoices, exemption certificates, and working papers for the period required under New York rules. Retain longer if under audit or as advised.
17) What if I do not collect tax?
You remain liable for the tax. Penalties and interest may apply. Operating without a Certificate of Authority can also lead to penalties.
18) Do local clothing exemptions always match the state?
No. Localities can choose whether to adopt the clothing exemption. New York City adopts it for items under $110. Confirm rules for each locality.
19) Are there special NYC rules?
Yes. Some services have special treatment in NYC. Certain items may be subject only to the state portion. Check schedules and bulletins for details.
20) How are marketplace and direct sales reported?
Marketplace-collected sales are usually reported by the marketplace. Report your direct taxable sales and use tax. Keep reconciliation records.  

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