January 02, 2014
A. Sales Tax: New York State imposes a sales tax on retail sales of both tangible personal property as well as certain enumerated services. Tax Law § 1105.
1. Sales tax is imposed on the receipts from every (non-exempt) retail sale of tangible personal property or taxable service delivered by a vendor to a purchaser in New York. 20 N.Y.C.R.R. § 527.1(a), et seq.
2. Sales tax is a “transaction tax,” meaning the liability for the tax occurs at the time of the transaction.
3. Sales tax is a “destination tax,” meaning the place of delivery (i.e., the place where possession is transferred from seller to buyer) controls the incidence and rate of tax.
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4. It is presumed that all receipts from sales of tangible personal property or taxable services are taxable. The burden to prove otherwise is on the vendor or the customer. Tax Law 1132(c)(1).
B. Use Tax: New York State imposes a compensating use tax on both tangible personal property and certain services purchased out-of-state but which are used in New York. Tax Law § 1110.
1. Use tax is imposed on every person for the (non-exempt) use within New York of tangible personal property and certain services, except the extent they have been or will be subject to the sales tax. 20 N.Y.C.R.R. § 531.1(a).
2. Use tax is designed to directly compliment the sales tax.
3. Use tax allows for the taxation of goods and services that are brought into and used in New York, but which were not subject to New York’s sales tax. A credit is provided for any sales tax paid to another state, but the credit may not be dollar for dollar. See, e.g., Matter of Cimino, DTA No. 823748, Admin. Law Judge Unit, July 19, 2012 (New York resident purchased a boat in Florida in 2003, brought the boat into NewYork for mooring in 2007 thereby triggering use tax; use tax was due on the current market value of the boat, with a credit for Florida taxes paid, but credit is based on proportional amount of Florida sales tax paid on current market value of boat, not actual amount of tax paid).
4. Use tax is also intended to protect New York businesses from the competitive disadvantage posed by out-of-state businesses that have no presences (nexus) in New York, and thus are not required to charge and collect sales tax on sales to New York customers.
C. New York City: New York City imposes its own sales and use tax, which is not identical to New York State.
Prepared by: Debra Silverman Herman, Hodgson Russ LLP
Presented by: Lance E. Rothenberg, Hodgson Russ LLP
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