New York does not have a VAT. The state runs a sales and use tax system: a flat 4% state rate, plus local county and city rates that push the combined New York sales tax to 8.875% in New York City. If you sell taxable goods or certain services in the state, you have to register for a Certificate of Authority, charge the correct combined rate for wherever the customer takes delivery, file returns on the schedule the Department assigns you, and remit what you collected. Miss any of that and the penalties are steep — and they can reach the owner personally.
How the Rate Is Built
The state portion is 4%. Every county, and some cities, layer their own sales tax on top, and the Metropolitan Commuter Transportation District adds a 0.375% surcharge in the New York City metro area.1New York State Department of Taxation and Finance. Find Sales Tax Rates In New York City the combined rate lands at 8.875%: 4% state, 4.5% city, and the 0.375% MCTD surcharge.2NYC Department of Finance. New York State Sales and Use Tax
Rates vary by county and city, so the rate you charge is the rate for the location where the customer takes delivery, not the rate where your business sits. A Buffalo retailer shipping to a Manhattan buyer collects the New York City rate. The Department publishes a lookup tool for every jurisdiction.
What You Have to Charge Tax On
Physical Goods
The default rule is that any tangible personal property sold at retail is taxable unless a specific exemption applies.3New York State Department of Taxation and Finance. Quick Reference Guide for Taxable and Exempt Property and Services Electronics, furniture, household goods — all in. Prewritten computer software is treated as tangible personal property and is taxable whether delivered on a disc or downloaded. Downloaded music, videos, and e-books are not currently taxed. Software is the only digital product New York taxes this way.
Services (Only the Listed Ones)
New York does not tax services broadly. Tax Law Section 1105 lists the specific categories that are taxable. The ones most businesses run into:
- Maintenance and repair of tangible personal property or real property — equipment repair, janitorial work, building maintenance.
- Information services that collect, compile, or analyze information and furnish reports, unless a narrow exclusion for customized reports applies.
- Protective and detective services, including alarm monitoring and guard services.
- Parking, garaging, and storage of motor vehicles, plus storage of other personal property and safe deposit box rentals.
- Interior decorating and design, whether or not combined with a sale of furnishings.
Professional services — legal advice, accounting, medical care — generally are not taxable. The line can be subtle: a photographer who delivers only digital files is performing a service, but one who delivers physical prints is selling tangible personal property and must charge tax.
Leases and Rentals
Leases and rentals of tangible personal property are taxable. That includes short-term car rentals, which in New York carry among the highest combined tax-and-fee burdens in the country, well above 10% in most areas. Commercial leases of office equipment and construction machinery are also subject to sales tax.
Common Exemptions
Clothing and footwear sold for less than $110 per item are exempt from the 4% state sales tax and may also be exempt from local tax depending on the jurisdiction.4New York State Department of Taxation and Finance. Clothing and Footwear Exemption The $110 threshold is per item, not per receipt. Unprepared food for home use — fresh produce, dairy, meat — is exempt. Prescription medications are exempt; over-the-counter dietary supplements and vitamins are not.
Goods shipped by the seller directly to a buyer outside New York are generally not subject to New York sales tax, because the sale is sourced to the delivery destination. But if the buyer takes physical possession in New York before transporting the goods out of state, the sale is taxable. Keep delivery records; this is a common audit issue.
Foreign diplomats and international organizations like the United Nations can be exempt under federal treaty obligations. The U.S. Department of State issues tax exemption cards that specify what the cardholder may buy tax-free, and eligibility is based on reciprocity, so not every foreign visitor qualifies.5United States Department of State. Diplomatic Tax Exemptions Examine the card at the point of sale and keep a copy.
Registering: The Certificate of Authority
Before you collect a dollar of sales tax, you need a Certificate of Authority from the Department of Taxation and Finance.6New York State Senate. New York Tax Law 1134 – Registration Apply at least 20 days before you start doing business, through the New York Business Express portal.7New York State Department of Taxation and Finance. How to Register for New York State Sales Tax The certificate has to be displayed at each business location. Operating without one is its own violation, separate from any failure to collect or remit tax.
Change the legal structure of the business — for example, converting a sole proprietorship into an LLC — and you need a new certificate. Certificates for ongoing businesses do not expire. Temporary certificates are available for short-term events like craft fairs.
Online and Out-of-State Sellers
After the 2018 Supreme Court decision in South Dakota v. Wayfair, New York requires a business with no physical presence in the state to register and collect if, in the immediately preceding four sales tax quarters, it exceeded both $500,000 in gross receipts from sales of tangible personal property delivered into New York and 100 such sales.8New York State Department of Taxation and Finance. Registration Requirement for Businesses With No Physical Presence in New York State Both thresholds have to be met. Crossing the dollar figure with fewer than 100 transactions does not, by itself, create nexus.
Since June 2019, marketplace providers like Amazon and Etsy have been required to collect and remit sales tax on sales they facilitate for third-party sellers. A marketplace provider is a person who supplies the forum where the sale takes place and who collects or arranges collection of payment on the seller’s behalf.9New York State Senate. New York Tax Law 1101 – Definitions Once the platform meets the same $500,000-and-100-transaction thresholds, it takes over the collection obligation for those sales.10New York State Department of Taxation and Finance. Sales Tax Collection Requirement for Marketplace Providers
Practical effect: if you sell only through a qualifying marketplace, the platform handles the tax. Sell through your own website or in person as well, and you still need your own Certificate of Authority and still collect tax on those direct sales yourself.
How Often You File
The Department assigns your filing frequency based on volume; you do not choose it.11New York State Department of Taxation and Finance. Filing Requirements for Sales and Use Tax Returns
- Annual, if total sales tax during an annual filing period is $3,000 or less.
- Quarterly, the default for most businesses.
- Monthly (part-quarterly), once combined taxable receipts hit $300,000 or more in any quarter — the switch takes effect the following quarter.
The Department moves filers in either direction as sales volumes change.
Use Tax on What You Buy
Use tax is the mirror image of sales tax. If your business buys taxable property or services from an out-of-state seller who did not charge New York sales tax, you owe use tax at the same combined rate you would have paid at home.12New York State Department of Taxation and Finance. Use Tax for Businesses That covers online orders, catalog purchases, and items brought back into New York from out of state. Use tax gets reported on the same sales tax return you already file.
Penalties for Getting It Wrong
File or pay late and the penalty is 10% of the tax due for the first month, plus 1% for each additional month, capped at 30%.13New York State Senate. New York Tax Law 1145 – Penalties and Interest If the return is more than 60 days late, the minimum penalty is the lesser of $100 or 100% of the tax due. Interest accrues at 14.5% per year or the underpayment rate set by the Commissioner, whichever is greater; as of early 2026, that rate is 14.5%.14New York State Department of Taxation and Finance. Interest Rates 1/01/2026 – 3/31/2026
Understate total state and local tax by more than 25% on a return and there is an additional 10% penalty on the omitted amount.13New York State Senate. New York Tax Law 1145 – Penalties and Interest A fraudulent failure to pay triggers a penalty of twice the unpaid tax, plus interest.15New York State Department of Taxation and Finance. Sales and Use Tax Penalties
Willful evasion is prosecuted under Article 37 of the Tax Law. Any tax fraud act is a Class A misdemeanor (criminal tax fraud in the fifth degree); underpayments over $3,000, $10,000, $50,000, and $1,000,000 escalate through felonies from Class E up to Class B.16New York State Senate. New York Tax Law 1802 – Criminal Tax Fraud in the Fifth Degree17New York State Senate. New York Tax Law 1806 – Criminal Tax Fraud in the First Degree The Department can also revoke your Certificate of Authority, issue tax warrants to seize assets, or shut the business down.
Owners Are Personally Liable
Sales tax you collect from customers is trust fund money that belongs to the state. Under Tax Law Section 1133, every person required to collect the tax is personally liable for the amount collected or required to be collected.18New York State Senate. New York Tax Law 1133 – Liability for the Tax In practice that means corporate officers, LLC members, and anyone with authority over the business’s finances can be held individually responsible for unremitted sales tax. The Department regularly assesses responsible persons when the business entity itself cannot pay, and the liability survives the dissolution of the business. Owners often assume the corporate form protects them; for sales tax, the statute cuts through it.
If You’re Already Behind
A business that has been operating in New York without collecting or remitting sales tax may be able to come into compliance through the Voluntary Disclosure and Compliance Program. If approved, the Department waives all penalties and agrees not to pursue criminal tax charges for the disclosed periods.19New York State Department of Taxation and Finance. Voluntary Disclosure and Compliance Program Interest on the unpaid tax still runs.
To qualify, you cannot currently be under audit for the tax type being disclosed, you cannot have already received a bill for the past-due amount, you cannot be under criminal investigation by a New York State agency, and you cannot be disclosing participation in a listed tax shelter. Businesses that filed returns but did not pay in full are not eligible for this program; they need to request an installment agreement instead. Eligible applicants can also ask for a limited lookback period, capping how far back the payment obligation reaches.
Disputing an Assessment
If you disagree with a tax bill, the first stop is a conciliation conference with the Bureau of Conciliation and Mediation Services, an independent bureau within the Department that reports directly to the Commissioner.20New York State Department of Taxation and Finance. Protest a Department Notice The request has to be filed within the deadline printed on the notice — typically 90 days for a notice of determination. BCMS is faster and cheaper than a formal hearing and acts as a neutral mediator between you and the Department’s audit division.
If BCMS does not resolve it, you can petition the Division of Tax Appeals for a formal hearing before an administrative law judge. The next step up is the Tax Appeals Tribunal, and after that, judicial review in the Appellate Division of the New York Supreme Court. Settlement is possible at any stage, especially when the fight is over how a product or service should be classified. Assessments above a few thousand dollars usually warrant getting a tax professional involved early.