New York Sales Tax Nexus: $500,000 and 100 Sales Test

Do I have to collect New York sales tax if I have no office there?

Yes, if you make taxable sales of goods delivered into New York and meet both remote-seller tests. New York presumes that a seller is regularly or systematically soliciting New York customers, which makes it a sales tax vendor, when, in the immediately preceding four sales tax quarters, its gross receipts from goods delivered into the state exceeded $500,000 and it made more than 100 sales of goods delivered there (New York Tax Department). The rule is not limited to websites: mail, phone and any other way of selling count.

A case is not simple when:

• sales come both through a marketplace and from your own checkout or invoices;
• you cross the tests in several states at once;
• some New York sales may have gone untaxed in earlier quarters;
• you sell a mix of taxable goods, exempt goods and services.

Before you decide, gather sales and invoice counts for each sales tax quarter and the delivery address of every New York sale. Your records must show where each item was delivered, not where the buyer is billed.

Do I need both New York tests, or just one?

You need both. The Tax Department says both conditions must be met in the lookback period: a business that passes the receipts test but not the count is not required to register under this rule (New York Tax Department).

"More than" means the amount or count must be exceeded, not just reached. Other states set their own tests; see thresholds by state.

What are the four sales tax quarters, and which period do I look back over?

New York looks back over the immediately preceding four sales tax quarters. These quarters do not match calendar quarters (New York Tax Department).

The Tax Department says the review happens after each sales tax quarter ends. Each time a quarter closes, add its sales to the three before it and drop the oldest quarter. A business can pass the tests in any quarter, not only at year end.

What counts as gross receipts and as a sale?

Gross receipts are the amount received for all sales of goods delivered into New York, taxable or exempt, with no deduction for expenses. A sale is each invoice, sales slip, contract or other memorandum of sale for goods delivered into New York, taxable or exempt, including sales for resale (New York Tax Department).

• Exempt and resale sales count. A wholesale invoice to a New York retailer is one sale and its amount counts toward the receipts test.
• Each invoice is one sale. Ten items on one invoice are one sale; ten invoices of one item are ten.
• Marketplace sales count. The Tax Department says to include sales made through an online marketplace in the calculation.
• Services do not count. The tests measure sales of tangible personal property, which New York describes as physical property you can see and touch. Prewritten software is on its list of taxable examples. For software and subscriptions, see sales tax on SaaS and software.

A marketplace seller that meets a vendor registration rule must register and file periodic returns even when a marketplace provider remits the tax on sales it facilitates (TB-ST-175).

When must I register, and when must I start collecting?

Once you meet both tests, file a certificate of registration within 30 days after the day you met them and begin collecting tax 20 days after that. A seller that already met the tests and has not registered should register immediately (New York Tax Department).

The Tax Law measures both tests over the four sales tax quarters ending on the last day of February, May, August and November, so the 30 days run from the end of the quarter that completed the tests (Tax Law section 1134). The duty to collect starts 20 days after that registration deadline, not 20 days after you apply (Tax Law section 1131).

Partners and LLC members, and officers, managers or employees with a duty to handle the tax, can be personally liable for New York sales tax the business must collect (Tax Law section 1131); see filing sales tax returns.

Apply well before the deadline. The Certificate of Authority is mailed after approval, and a seller can legally make taxable sales once it receives the certificate (TB-ST-360).

If sales were taxable and you already passed the deadline, see catching up on uncollected sales tax.

How do I register with New York Business Express, and what is the Certificate of Authority?

You apply online through New York Business Express. The Certificate of Authority is New York's sales tax registration: it gives you the right to collect tax on taxable sales and to issue and accept most exemption certificates (TB-ST-360).

1. Create a NY.gov Business account. An individual NY.gov account is not enough to reach New York Business Express.
2. Have Form DTF-17.1, the business contact and responsible person questionnaire, ready.
3. Complete the application for a sales tax Certificate of Authority. The Tax Department publishes an application checklist and instructions.
4. Print the confirmation page and keep it with your records.
5. Watch the email tied to your account for status messages, then add Tax Online Services to the account so you can file returns (Register as a sales tax vendor).

A Certificate of Authority cannot be transferred. If your business changes legal form, for example from sole proprietorship to corporation, the new entity needs its own certificate (TB-ST-360).

What do I collect: the state and local rate, and the clothing exemption?

Collect the state rate of 4% plus the local rate of the place where the item is delivered, plus the commuter district rate where it applies. The delivery place is usually where ownership or possession passes to the buyer, so a shipment to a customer's home uses that home's rate (TB-ST-825).

• Local rate. A city, county or school district may add its own rate. The Tax Department offers a rate lookup by address and Publication 718 lists rates by jurisdiction. You remain responsible for using the right rate. The Tax Department says a remote seller that in good faith used a wrong local rate in its first four quarters after it had to register owes the missing local tax but no penalty or interest on it (TSB-M-19(4)S).
• Commuter district. An additional 0.375% applies to taxable sales in New York City and the counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester.
• Returns by jurisdiction. Tax collected is reported separately for each local jurisdiction code.
• Clothing and footwear. Items sold for less than $110 per item or pair are exempt from the state tax. A county or city may still tax them, and the commuter district tax still applies there, unless it elected the exemption; a change takes effect only on March 1 (TB-ST-122). Check the locality list in Publication 718-C for each delivery address.

Sales of goods are taxable unless specifically exempt; most services are exempt unless specifically taxed (TB-ST-175). Software and subscriptions turn on their own rules, covered in the SaaS guide.

Does a visit, a contractor or my own truck create nexus without the tests?

Yes for some connections. TB-ST-175 lists conditions that require an out-of-state seller of taxable goods or services to register without the receipts and count tests (TB-ST-175).

TB-ST-175 words the delivery rule as at least 12 times a year; the Tax Law counts trips over the preceding four sales tax quarters (Tax Law section 1101). A seller that becomes a vendor through these trips registers within 30 days and collects 20 days after that deadline, as with the receipts and count tests. The bulletin does not list a one-time visit or a single delivery. Whether one creates a duty depends on the facts, so check before assuming it does not. A seller with any connection in the table should not rely on the tests. For employees working in New York, see employees in another state.

Do I file returns when I have no taxable sales?

Yes. Once you hold a Certificate of Authority you are in business for sales tax purposes, and you must file each return on time even with no taxable sales. Late filing brings penalties even when no tax is due (TB-ST-360). Vendors that prepare their own returns on a computer with broadband internet must file online through a Business Online Services account (Welcome, new vendors).

Return frequency, no-tax-due returns and marketplace lines are covered in filing sales tax returns.

Can I stop collecting if I fall below the tests?

Possibly. If you did not exceed the receipts test and the sales count in the immediately preceding four sales tax quarters, and you have no other connection with New York that makes you a sales tax vendor, you may file a final return and stop collecting (New York Tax Department).

You may instead stay registered in case you meet the tests again. If you do, you must file a return for every reporting period, even when you made no sales or too few taxable sales to collect tax. The final return and permit closing are explained in filing sales tax returns.

Example

These examples are illustrative and use US dollars.

Receipts pass but the count does not

A Texas seller delivered $600,000 of goods to New York customers over the last four sales tax quarters, on 80 invoices. The receipts test is passed, but the seller did not make more than 100 sales. It has not met New York's remote-seller tests. It rechecks after each quarter closes, because a later quarter can change the totals.

Both tests met

The same Texas seller delivered $600,000 of goods on 140 invoices in the four quarters ending November 30. Both tests are met. Counting from that quarter end, the seller must apply by December 30 and must collect from January 19, 20 days after that deadline. It applies early in December so the certificate can arrive in time. It uses the rate for each delivery address and files a return for every period after registering.

Delivering in its own truck

A seller based in Pennsylvania made 15 trips into New York in its own vehicle to deliver taxable goods over the last four sales tax quarters. That is more than 12, so the Tax Law presumes it delivers regularly, and it registers whatever the receipts and count tests show, unless it can show it will not exceed 12 trips in the next four quarters.

Different for you?

• You sell into other states too: start with where you have to collect sales tax and the thresholds by state.
• You made New York sales that were never taxed: follow catching up on uncollected sales tax before or while you register.
• You must file in several states or through a marketplace: see filing sales tax returns; bookkeeping help can organize sales by state and quarter.
• You sell software or subscriptions: read sales tax on SaaS and software.
• Your business is outside the US: see foreign sellers and sales tax.
• You have employees working in New York: see employees in another state.