New York, particularly New York City, is well-known for having some of the highest taxes in the United States. NYC residents pay income and sales taxes to both the state and the city, which can make it difficult to determine how much tax you owe to each agency.
New York City’s overall sales tax rate is 8.875%. This includes a 4.5% sales and use tax from the city, a 4% sales and use tax from the state, and a 0.375% Metropolitan Commuter Transportation District (MCTD) fee.
Sales taxes apply to retail sales of most goods and services, with a few exceptions, while use tax applies to business purchases from out-of-state vendors that don’t collect state and local sales taxes. (If you buy a printer for your business from a website that doesn’t collect sales taxes, for example, it’s probably subject to city and state use tax.)
State sales taxes apply to any sales made in New York state, city sales taxes apply to any sales made in New York City and MCTD surcharges apply to any sales made in the city, as well as Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess and Westchester counties.
What is Exempt From NYC Sales Tax?
There are a few exemptions from city and state sales and use taxes, generally involving essential day-to-day goods. The following items are exempt from city, state and MCTD sales taxes:
- Clothing and footwear costing less than $110.
- Unprepared and packaged food.
- Medicine.
- Diapers.
- Certain items are used in clothing manufacturing and repair.
In addition, there are a few other items that are exempt from New York state sales taxes but may still be subject to city and MCTD taxes:
- Beautician, barbering, and hair-restoring services.
- Hair removal services.
- Manicures and pedicures.
- Massage services.
- Tanning salons.
- Tattooing or permanent makeup.
- Weight control and health salons, gyms, Turkish and sauna baths, and similar places.
Businesses are responsible for actually paying NYC and New York state sales, use and MCTD taxes to the government by filing sales tax returns.
If you’re a consumer, NYC sales tax is generally baked into the price of whatever you’re buying — and isn’t something you need to worry about, unless you want to try to deduct it from your income tax liability (more on that in a moment).
NYC sales and use taxes — as well as the MCTD surcharge — are collected by New York state.
Businesses can file New York sales tax returns on the state’s Sales Tax Web File site. Some businesses, such as those with taxable receipts of more than $500,000, must use the state’s PrompTax program, which a business can join through an Online Services for Businesses account.
You can deduct NYC sales tax via the state and local tax (SALT) deduction — but doing so comes with some big caveats. The SALT deduction is only available to taxpayers who choose itemized deductions, is capped at $10,000 for joint filers, and makes you choose between deducting your state and local income taxes or your state and local sales taxes.
How Does the NYC Sales Tax Work?
In the state of New York, the sales tax that you pay can range from 7% to 8.875% with most counties and cities charging a sales tax of 8%.
The sales tax rate in New York applies to two separate levies: sales tax and use tax. The sales tax is applied to goods bought within the state and the use tax is levied on goods bought outside of New York. (Read more on sales tax vs. use tax in the next section.) The New York sales tax is currently 4%. Each county then charges an additional sales tax between 3% and 4.5%.
Read Also: How Can I Reduce my Income Tax Legally?
Counties in the metropolitan commuter transportation district (MCTD) also collect a sales tax of 0.375%. This applies to all taxable sales within the counties of Bronx, Kings (Brooklyn), New York (Manhattan), Queens, Richmond (Staten Island), Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester.
Sales Tax in New York Counties
| County | State Rate | County/City Rate | Total Sales Tax |
|---|---|---|---|
| Albany | 4% | 4% | 8% |
| Allegany | 4% | 4.5% | 8.5% |
| Bronx | 4% | 4.875% | 8.875% |
| Broome | 4% | 4% | 8% |
| Cattaraugus | 4% | 4% | 8% |
| Cayuga | 4% | 4% | 8% |
| Chautauqua | 4% | 4% | 8% |
| Chemung | 4% | 4% | 8% |
| Chenango | 4% | 4% | 8% |
| Clinton | 4% | 4% | 8% |
| Columbia | 4% | 4% | 8% |
| Cortland | 4% | 4% | 8% |
| Delaware | 4% | 4% | 8% |
| Dutchess | 4% | 4.125% | 8.125% |
| Erie | 4% | 4.75% | 8.75% |
| Essex | 4% | 4% | 8% |
| Franklin | 4% | 4% | 8% |
| Fulton | 4% | 4% | 8% |
| Genesee | 4% | 4% | 8% |
| Greene | 4% | 4% | 8% |
| Hamilton | 4% | 4% | 8% |
| Herkimer | 4% | 4.25% | 8.25% |
| Jefferson | 4% | 4% | 8% |
| Kings (Brooklyn) | 4% | 4.875% | 8.875% |
| Lewis | 4% | 4% | 8% |
| Livingston | 4% | 4% | 8% |
| Madison | 4% | 4% | 8% |
| Monroe | 4% | 4% | 8% |
| Montgomery | 4% | 4% | 8% |
| Nassau | 4% | 4.625% | 8.625% |
| New York (Manhattan) | 4% | 4.875% | 8.875% |
| Niagara | 4% | 4% | 8% |
| Oneida | 4% | 4.75% | 8.75% |
| Onondaga | 4% | 4% | 8% |
| Ontario | 4% | 3.5% | 7.5% |
| Orange | 4% | 4.125% | 8.125% |
| Orleans | 4% | 4% | 8% |
| Oswego | 4% | 4% | 8% |
| Otsego | 4% | 4% | 8% |
| Putnam | 4% | 4.375% | 8.375% |
| Queens | 4% | 4.875% | 8.875% |
| Rensselaer | 4% | 4% | 8% |
| Richmond (Staten Island) | 4% | 4.875% | 8.875% |
| Rockland | 4% | 4.375% | 8.375% |
| Saratoga | 4% | 3% | 7% |
| Schenectady | 4% | 4% | 8% |
| Schoharie | 4% | 4% | 8% |
| Schuyler | 4% | 4% | 8% |
| Seneca | 4% | 4% | 8% |
| Steuben | 4% | 4% | 8% |
| Suffolk | 4% | 4.625% | 8.625% |
| Sullivan | 4% | 4% | 8% |
| Tioga | 4% | 4% | 8% |
| Tompkins | 4% | 4% | 8% |
| Ulster | 4% | 4% | 8% |
| Warren | 4% | 3% | 7% |
| Washington | 4% | 3% | 7% |
| Wayne | 4% | 4% | 8% |
| Westchester | 4% | 4.375% | 8.375% |
| Wyoming | 4% | 4% | 8% |
| Yates | 4% | 4% | 8% |
What Is Sales and Use Tax?
When you read about sales tax in New York, you’ll see talk of “Sales and Use Tax.” What is use tax and why do you have to pay it?
As you might know, sales tax applies to goods and services you buy within a state. Use tax is an equivalent tax that you pay on items that you purchase outside of the state. It ensures that out-of-state retailers don’t benefit just because they don’t have to pay the in-state sales tax. The use tax in New York is equal to the sales tax. The two taxes are also mutually exclusive so if you pay one of them, you won’t have to pay the other.
Let’s look at an example to show how the use tax works. Imagine you’re a New York resident and you buy a computer somewhere within the state. The seller will collect the regular New York sales tax. But if you buy a computer from New Hampshire, the seller won’t collect the New York sales tax. That means you can get the computer without paying the full tax on it. So New York collects a use tax. New York requires residents to report their out-of-state spending in their New York income taxes.
The majority of retail sales are subject to sales and use tax in New York. Some things, like cars and other motor vehicles, are taxed on the residence of the buyer and not the place where you buy the vehicle.
Several types of goods are exempt from sales tax. Some common examples are certain food products and drinks, newspapers, laundering and dry cleaning, prescription drugs and feminine hygiene products. Clothing and footwear are not taxable if they are less than $110. If they are over $110, they are subject to regular sales tax rates. Any water delivered through mains and pipes is not taxable. However, public utilities like gas, electricity and telephone service are subject to sales tax.
Renting a car gets expensive in New York. If you rent a passenger car, New York state charges a sales tax of 6%. There is also a 5% supplemental tax if you rent the car within the metropolitan commuter transportation district (MCTD). If you pay for any parking services (whether you have a rented vehicle or not) in New York City, you will pay the state sales tax of 4% plus any local sales taxes.
On top of the state sales tax, New York City has a sales tax of 4.5%. The city also collects a tax of 0.375% because it is within the MCTD. The total sales tax in New York City is 8.875%. This is the highest rate in the state. With such a high sales tax, it’s no wonder the cost of living in New York City is so high.
New York City collects sales tax on certain services that the state doesn’t tax. Examples include beautician services, barbering, tanning and massage services. The city also charges sales tax at health and fitness clubs, gymnasiums, saunas and similar facilities. If you’re trying to improve your credit, keep in mind that New York City charges sales tax on most credit reporting services.
How to File and Pay Sales Tax in New York
Filing an accurate return in New York State is difficult due to factors such as variable jurisdictional rates and specific taxability criteria. New York’s base sales tax rate is 4%, however, many counties and localities levy additional taxes. As a result, your company must keep track of each customer’s address to ensure that the correct amount of tax is collected and declared on returns.
Completing a New York sales tax return consists of three steps. Businesses must first determine their filing frequency and due dates, then prepare their returns and then file and remit sales taxes. Following this procedure will assist you in preparing for and completing your return smoothly and accurately.
Step 1: The first step in filing your New York sales tax return is to log into
https://www.tax.ny.gov/online/bus.htm. Click “LOG IN.”
If you do not have a username and password, you need to click on “CREATE ACCOUNT” and then follow the instructions for signing up.
Step 2: You should now be on your homepage. Think of this page as your home base. You can always come back to this page if you get lost. Start by selecting the type of tax you want to file returns for. In this case, we would choose “Sales tax.”
Step 3: Click on “File Return” for the time period you want to file.
Step 4: To start filing your sales tax return, answer the questions below and select “Continue.” To save the data you entered and return to it later, select “Save & Exit.” “Save & Exit” is located in the upper right-hand corner of each page after you select the filing period.
Step 5: On the next screen, complete the requested information and select “Continue.” If you make a mistake, select “Back” to correct the information.
Note: If you have marketplace sales they should be included in your gross sales and also included in your non-taxable sales.
Step 6: Choose a task to complete by selecting a link in the “Task” column.
A task is complete when a green check-mark displays in the status column.
If you do not see the schedule that you are required to file in the “Task” column, then choose the schedule from the drop-down menu and select “Add.” To remove a schedule and any data reported on it, select the trash icon.
Step 7: Click on the “Main Form-Jurisdiction Summary.” The list will include jurisdictions from your previously filed returns. To customize your list of taxing jurisdictions, choose a jurisdiction from the drop-down menu and select “Add.” To remove a jurisdiction, simply check the box next to the jurisdiction(s) and select “Remove.” Be careful to select “Remove” only if you are sure you want to delete the selected jurisdiction(s) and any data reported on them.
Select a taxing jurisdiction to display the data entry fields and begin entering your data. Use the icons to change the view of the data entry fields. When all data has been entered select “Calculate.”
Select “Return Summary” to make adjustments within your return. Select “Continue” when the jurisdiction summary is complete.
Step 8: Once you have finished entering your data, your return summary should have all green checkmarks in the status column. If this is correct, click “Continue.”
Step 9: You should now see the tax due details. This page displays any advance payments that you’ve made or overpayments from a prior period that you’re carrying forward. Select “Calculate” to calculate totals. Select “Continue” when all of the information is complete.
Step 10: You are now ready to make your payment.
**Before you continue, please review and verify the total amount due or over-payment amount indicated on the return. If the amount is correct, select “Continue” again.
Follow the payment instructions below to pay and submit your return.
Step 11: Once you have submitted and paid your return it is important to save or print your confirmation and/or return as there is no clear way to print your return once it is filed.
How to Prepare Your New York Sales Tax Return
The first step in preparing a return is to collect the sales information for the tax period—this may be a month, a year, or a quarter. The New York Department of Taxation and Finance online filing system outlines a list of the fields businesses need to complete in order to prepare the return. This can be a time-consuming process, so be sure to allocate plenty of time for data collection.
Filing a sales tax return generally requires the following sales transaction information:
- Gross sales
- Taxable sales by type
- Nontaxable sales by type
- Deductions such as shipping charges
- Total collected sales taxes
Some businesses will have special circumstances that require adding one or more schedules to the return. For example, New York City taxes some services that the state does not. In these scenarios, businesses will need to complete Schedule N, which will require additional information.
Identify taxable sales transactions
Businesses will need to know two things to complete their New York sales tax return: how much they sold—both in total sales and in taxable sales—and to whom they sold.
If the amount of taxable sales does not reach economic nexus thresholds in New York, then a sales tax return might not be required. You can find out whether economic nexus applies to you by checking the list of sales tax registration requirements on the New York Department of Taxation and Finance website.
In addition to meeting economic nexus thresholds, if a business has employees, an office, or a warehouse located in New York State and is selling taxable goods and/or services, then the business must collect sales taxes on all taxable transactions, file returns, and pay the appropriate amount to the state.
Most tangible products are taxable in New York, with a few exceptions such as groceries and medicines. Most services are not taxable, with the exception of repair and maintenance made to real property, such as plumbing repair or landscaping services.
In addition to collecting and remitting state sales tax, businesses will likely also have to consider local sales tax. Any time a sale is made to a buyer located in a county or other jurisdiction that charges more than the base 4% state tax, businesses will have to collect the extra tax for that county.
For example, Albany County charges an extra 4% sales tax on top of New York State’s 4%. That means businesses must collect 8% of sales tax for transactions with buyers in Albany County.
Each business must track a customer’s jurisdiction and charge them the appropriate tax at the time of the sale. Otherwise, the incorrect amount of sales tax will be remitted, and the business will still owe money to New York, which will come out of its revenue. Sellers who make only occasional sales in New York may be able to get by with the Jurisdiction/Rate Lookup by Address tool on the New York Department of Taxation and Finance website. For businesses making a significant number of sales in New York, an automated tax solution can be beneficial to calculate, collect, and track sales tax.
The final step to completing a sales tax return in New York is to file and remit tax. Even if you owe nothing, you’re still required to file a sales tax return for each tax period or you will be assessed a $50 penalty. If you fail to file when you do owe taxes, penalties quickly add up—to as much as 30% of the tax due for that return.
The New York Department of Taxation and Finance has an online filing system that will outline what information to fill out to generate the return. To file a sales tax return online, start by logging in and following the prompts. Once you have completed the return, it’s time to remit the total calculated sales taxes for that return, minus any monthly prepayments that have already been made. Businesses that are required to e-file their sales tax returns are also required to make electronic payments rather than sending a paper check.
