New York business tax – Complete Guide

New York Business Tax

Once you register or incorporate a new business in New York, you will be required to file New York business tax returns annually. When we talk of business taxation, it essentially refers to taxes that any existing or new business has to pay as a part of their business operations in the said state. As a business owner or a company, the type of taxes can vary and a single organization might need to file multiple taxes. As an example, a newly incorporated company may have to file New York corporation taxes as well as sales and use tax. It is also important to note that you need to apply for and obtain an Employer Identification Number (EIN) from the IRS as this will assist you in filing tax returns

What taxes do businesses pay in New York?

Whether you form a sole proprietorship, an LLC ,or a business corporation, each type of entity will have different tax statuses. If you are planning to start a small business then managing your New York business tax is one of the several expenses that your company might need to undertake. The amount of tax applicable for your business will depend on the type of tax and can often require the use of a New York business tax Calculator. There are three categories of taxes essentially and they are federal, state, and local taxes and the amount of tax you pay will be considered as your tax liability. Let’s try and understand the different taxes applicable to businesses in the state of New York.

Franchise tax

Different states have different types of taxes and one of the common forms of taxes is the franchise tax. There is franchise tax in New York apart from some other states including Georgia, Texas, Illinois, and Mississippi among others. In the state of New York, the franchise tax is also known as the corporation franchise tax and it is applicable to both the traditional C Corporations and S corporations. This type of New York corporation tax is applicable to both domestic and foreign business entities. Corporate taxpayers in the state of New York have to pay taxes equal to the highest amount as calculated considering three types of tax bases in addition to the Metropolitan transportation business tax (MTA surcharge). These are:

• Business income
• Capital base
• Fixed dollar amount

• Income from any non-New York bonds
• Royalty payments made to related parties
• Depreciation adjustments

NY State income tax

One of the important taxes that may apply to your business is the income tax. This is a type of New York business tax that is payable on the income derived by you or your business in the state. This also includes a form of tax that is known simply as the filing fee or an estimated income tax and is applicable to LLCs, limited liability partnerships (LLPs), and some regular partnerships.

NY State sales tax

One of the most important forms of business tax apart from the franchise tax in New York is the sales tax. It is also often known as the sales and use tax. The NYS sales tax is applicable to companies that are involved in the retail sales of certain tangible personal property as well as services. The use tax on the other hand is applicable if you or your business is buying specific tangible personal property or services outside the New York state but are planning to use it within the state.

How New York Businesses are Taxed?

If you are thinking of starting a new business in New York then you need to consider the taxes applicable in the state. There are different types of taxes including franchise tax in New York and these taxes vary from one form of business to another. Some businesses may need to file only NYS income tax while others may need to file multiple taxes like New York LLC taxes may not be applicable for sole proprietorships or corporations. Let’s look at the different types of entities and their taxations.

Taxes for LLC

A New York LLC is considered similar to S corporations when it comes to taxes. A Limited Liability Company enjoys pass through taxation, which means that the income earned is passed through to the owners or members and they are required to file a personal income tax return on it. This is one of the types of New York LLC taxes and the rate can vary from 4.00-8.82%. You will be required to file a New York resident tax return or Form IT-201 and if you are a non-resident then you will be required to file Form IT-203.

Example: If the gross income of your New York LLC is less than $100,000 then the NY LLC filing fees would be $25. If the gross income is over $250,000 but under $500,000 then the fee is $175 and for incomes more than $25,000,000, the fee would be $4,500.

Taxes for C Corporation

A C corporation is a traditional corporation and it will be subjected to a franchise tax in New York. This type of tax is also known as a privilege tax, which you essentially pay to conduct business in this state. In order to calculate and pay franchise taxes, you will need the help of a New York business tax Calculator and fill out Form CT-3 or New York corporate tax return.

• The tax on business income – This is known as the federal taxable income (FTI) and will be the starting point for calculating your New York corporation taxes using business income. The rate for most businesses is 6.5% although a lower rate of 4.875% may be applicable if your entity is considered a qualified emerging technology company (QETCs).
• The tax on capital – This type of tax is based on the total business capital base, which is considered as the fair market value (FMV) of all your assets as well as investments owned by the business in New York State. The New York corporation taxes rate for most businesses is 0.025%.
• The fixed dollar minimum tax – This tax is also used for the calculation of franchise tax in New York. The tax is calculated based on New York State receipts or money earned while conducting business in this state.
  

  Example: If the total New York receipts for your company are less than $100,000 then the fixed dollar minimum tax will be $25. Similarly, if the total New York receipts are more than $25,000,000 but less than $50,000,000 then the fixed dollar minimum tax will be $5,000.

Taxes for S Corporation

If you plan to form an S Corporation in New York then for tax purposes, it enjoys pass through taxation. This simply means that the income earned by the company will be passed through to the owners or directors and they will be required to file a personal income tax return on it. The rate of New York business tax on personal income will vary from 4% to 10.9%.

Taxes for Sole Proprietorship

A sole proprietorship is also known as a sole trader business and comprises a single owner. It is an unincorporated business where New York business tax is paid as personal income tax on the profits earned by the company. The personal income tax rate varies from 4% to 10.9% in the state. If you are a New York resident then you will need to file the returns using Form IT-201 and non-resident or part-year resident owners will have to file taxes using Form IT-203.

Taxes for Partnerships

There are different types of partnerships that you can form in New York including a limited liability partnership (LLP) and general partnership. As a rule, a partnership doesn’t pay any income tax or New York business tax directly on its income. Instead, the income is passed through to the partners and has to be filed in the income tax return or franchise tax return of each partner. You will be required to file Form IT-204 for Partnership Return. A Partnership company may also be required to file an annual filing fee and pay estimated income tax on behalf of specific partners.

Ready to Incorporate your New York Company?

Whether you are planning to form a limited liability company (LLC), or a C Corporation in New York, the new business formation process can be quite extensive, and time consuming. This is where IncParadise can provide meaningful assistance as we are an expert incorporation service provider in New York and help to register your LLC or corporation in New York.