Here are the most often-asked questions our customers at TaxJar (particularly if you use Amazon’s Fulfillment by Amazon) ask us about having to collect and pay sales tax in New York. If your scenario is more unique, contact a tax professional.
You live outside New York state
If you run a business out of your home, for example, and you’re located in a state other than New York, then you have no sales tax nexus with New York. That means you’re not required to collect sales tax from customers that want taxable items shipped to a New York address.
To take this scenario one step further, let’s say you live in Texas and use FBA to store and ship your inventory. You’re not required to collect sales tax from your customers in New York because Amazon doesn’t have any warehouses located in New York. Cross NY off your list and concentrate on states like Texas or Pennsylvania. Those are more complicated.
You live/operate your business in New York
Let’s change the scenario. Let’s say you’re a resident of New York and you operate a business out of your garage. First, the New York Department of Taxation and Finance says,
Every person who sells taxable tangible personal property or taxable services (even if you make sales from your home) must register with the Tax Department before beginning business.
Next, you’re required to collect sales tax on any taxable item sold and shipped to an address in New York. By the way we put together a very helpful sales tax guide for NY that’s worth checking out.
How much sales tax do you collect?
Ok, so we know if you live in New York that you need to collect sales tax on table items shipped to New York addresses How much you should collect is the next piece you need to figure out. The key thing to understand is that New York is a destination-based sales tax state – in other words, the sales tax rate you collect is based on the location of your customer. It is not based on your businesses location.
Here’s where it gets tricky. The sales tax rate can vary. It’s not the same for every address in New York. The correct rate is a combination of two rates:
- The New York state sales tax rate (4%)
- The local sales tax rate (click here for a list of local New York sales tax rates)
Here’s a screenshot from NY’s Guide to Sales Tax in New York State (page 9) that discusses the above.
Let’s go through an example. You run your business out of your home in Stamford, New York. You sell a taxable item to a customer who wants their order shipped to their home in Buffalo. According to both the Sales Tax Jurisdiction and Rate Lookup and the New York State Sales and Use Tax Rates by Jurisdiction, you are required to collect a total of 8.750% in sales tax. That’s 4% for the state and an additional 4.750% for the local jurisdiction (in this case Erie County). Remember, the rate is based on where you’re shipping to, not from.
The state of New York actually does a really nice job of explaining the concept of local sales tax collection in this video I found:
Summing it all up: only New Yorkers should collect in New York
If you live outside of New York (even if you are an Amazon FBA seller) then you’re not required to collect sales tax from your customers in New York. If you live in New York, then you are required to collect sales tax. Collect sales tax at the combines state and local rate. The local rate is determined by your customer’s location.
Got questions? Feedback? Tell me about your experience selling in NY in the discussion section below.
This post is brought to you by TaxJar. Start your free 30 day trial today.