New York Business Tax: Everything You Need to Know
New York business tax is any tax collected by the state of New York from establishments conducting business in the state.3 min read
2. What Is the New York Business Income Base?
3. What Is the New York Business Capital Base?
4. What Is the Proposed Unincorporated Business Tax?
New York business tax is any tax collected by the state of New York from establishments conducting business in the state. Many different types of businesses pay taxes to the state, but the specific taxes owed may differ.
Which Taxes Are Collected in New York?
Corporation franchise taxes are collected in New York. These apply to C corporations and S corporations. Other business types pay this tax in the form of a filing fee when they register to do business in the state. These include:
- Limited liability companies (LLCs).
- Limited liability partnerships (LLPs).
- General partnerships.
The filing fee is determined by the business's gross income. A regular partnership in New York has to pay a filing fee only if it brings in more than $1 million gross income. Therefore, some partnerships will not have to pay this fee. Any income that passes through a business to its owners, members, or shareholders will also be taxed through personal income taxes on the New York state tax return.
Corporations that incorporate in New York are required to pay corporation business taxes. These tax amounts are based on the corporation's income base, its business capital base, or the fixed dollar minimum (FDM). LLCs are required to pay the state filing fee, and the members must pay tax on their income from the company. The only business structure types that may avoid paying New York business taxes are small partnerships and sole proprietorships.
Some corporations will also be required to pay an MTA surcharge, or metropolitan transportation business tax. This applies to incorporated businesses that conduct business, lease or own property, hold office space, employ capital, or obtain receipts from actions within the Metropolitan Commuter Transportation District. This area includes New York City and its surrounding areas.
What Is the New York Business Income Base?
The New York business income base is determined through the amount of federal taxable income brought in by a business with some modifications specific to New York state. All businesses required to pay state taxes have a default rate of 6.5 percent. Certain types of companies qualify for a lower 5.5 percent rate if they are recognized as qualified emerging technology companies (QETCs). New York manufacturing companies can qualify for a zero percent rate in some cases.
What Is the New York Business Capital Base?
The New York business capital base is determined through the addition of a company's investment and business capital minus any short- and long-term asset liabilities. These are currently taxed at 0.1 percent. Certain New York manufacturers and QETCs can qualify for a lower, .85 percent rate. Qualified housing corporations enjoy an even lower .04 percent rate.
What Is the Proposed Unincorporated Business Tax?
The New York State Department of Taxation and Finance is proposing an unincorporated business tax (UBT) and some tax credits to be offered to partnerships that conduct business in the state. This is meant to be New York state's response to the federal Tax Cuts and Jobs Act.
This proposal includes a 5 percent tax on all unincorporated taxable income. This income amount is determined by multiplying an unincorporated business's new income by an allocation percentage that includes property, gross income, and payroll percentages. In addition to this tax, unincorporated businesses would receive three different credit provisions. These include:
- The Unincorporated Business Credit (UBC).
- Personal income tax credit.
- Corporation franchise tax credit.
The UBC offers a credit against the UBT to partners in other parent unincorporated businesses. This credit is for businesses with sub-businesses or subsidiaries so that they don't have to pay business taxes twice on the same business income.
The personal income tax credit and corporation franchise tax credit are grouped together as the Credit of Unincorporated Business Tax. These credits are meant to prevent double taxation through income and franchise taxes paid by owners of unincorporated businesses.
New changes that have taken place because of the Federal Tax Cuts and Jobs Act include a $10,000 limit on deductions for the state and local taxes, also called SALT deductions. These deductions used to be unlimited. This new UBT action by New York state is said to be an attempt to lessen the effects of these changes.
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