Any person who operates a business in the state of New York and sells taxable property or services must register with the New York State Department of Taxation and Finance. Business owners should register no less than 20 days before they begin operating their company, whether they have a dedicated business location or work from home.
Business owners can register for sales tax through the state government’s New York Business Express webpage. After registration, the state issues business owners a Certificate of Authority, which authorizes them to make taxable sales and collect taxes on these sales.
If a company is entering the New York State market by acquiring a New York State business, the acquirer should contact the State Department of Taxation and file a Form AU-197.1 to see if the target company owes any sales taxes to the state. The State Department of Taxation will let the acquirer know if the target owes any taxes. If it does, the acquirer should not pay the business owner until all of their taxes are paid. Otherwise, the acquirer will be liable for them. Only after the seller clears accrued taxes should the buyer register for its Certificate of Authority. This should be 20 days before purchasing the assets of the target.
Companies that have registered for sales tax are trustees of New York State. This role comes with responsibilities. First, the business owners are required to collect the correct amount of sales tax from their customers and remit this tax to the state. Companies should pay the entire amount of sales tax owed every year even if they have not yet collected it. Further, companies should maintain different bank accounts for sales tax receipts and should not use this money to pay business expenses or personal expenses.
All of these measures are New York State-mandated and are meant to help business owners account for their sales tax obligations. Tax laws impose personal liability for payment of sales tax upon the responsible persons. These can be the business owners, partners, directors, shareholders, and even employees. If outstanding sales tax liabilities exist, the State Department of Taxation can seize the personal assets of the responsible persons to satisfy those liabilities.
New York State companies should file sales tax returns monthly, quarterly, or annually with the State Department of Taxation. They must file even if they have no taxes due for that period. Companies should implement controls to ensure that they keep complete and accurate records that make filing their tax returns easy. Companies also should verify the accuracy of their returns in case of an audit.
The New York State Department of Taxation requires companies to keep a record of each sale they make in paper or electronic form. The records should indicate the dollar amount of each sale and the sales tax due. Companies should store these records for three years after filing the returns.
The New York State Department of Taxation further requires companies to maintain true copies of their sales invoices, receipts, contracts, and statements. If a company does not issue written documents to buyers, it must keep a daily record of cash and credit sales in a journal. The records should distinguish between taxable and nontaxable goods.
If a company fails to maintain adequate records, it may be subjected to an audit by the Department of Taxation to assess the correctness of its reported sales taxes. If the Department of Taxation finds that the company owes additional taxes, the Department will penalize the company. Penalties are payable with interest. If tax authorities find that the responsible person willfully failed to maintain proper records, the Department of Taxation can pursue criminal charges.
Business owners may find sales tax requirements overwhelming. Those who need assistance with tax records or filing returns should consult a professional accounting service.