Frank Sinatra sang it brilliantly ― if you can make it there, you can make it anywhere. He is referring to New York City, of course, now the most densely inhabited city in the United States, with a population of over 8 million people.

New York City serves as a center for finance, communication, and culture, and it is the home of the New York Stock Exchange ― the largest stock exchange in the world. Outside of this vast city, however, the state of New York is a leader in the agricultural sphere (producing top quantities of cabbage, dairy, and grapes) and the manufacturing sphere (housing production facilities for garment-making and printing).

Thus, New York is a state with many faces, ranging from dairy farms and its 169 state parks to Broadway shows, Five Diamond hotels, and a homeless population of over 2,300.

The New York state motto is “Excelsior,” which appears on the state flag and means “Ever Upwards.” From this ever-growing diverse landscape, two major financial pieces have emerged: that of New York State and that of New York City itself. The City has many of its own tax laws that are different from the rest of the state.

The 2009 budget deficit for New York State has increased largely due to the 44% drop in Wall Street cash bonuses in 2008. This cost the state $1 billion in tax revenue and cost New York City $275 million in tax revenue, according to the New York Post. (Before the autumn of 2008, personal and business income taxes from Wall Street made up 20% of the State’s tax revenue and 12% of the City’s tax revenue.)

The following sections explain the general aspects of New York’s tax system and provide information for both New York State and New York City, where it applies.

TABLE OF CONTENTS

General Information About New York Tax Laws

• • Personal Income Tax
• • Sales and Use Tax
• • Corporate Tax
• • Other Taxes

Notable Changes In Policy/Legislation

Information About Filing Your New York Taxes

Tax Tips & Helpful Facts

GENERAL INFORMATION ABOUT NEW YORK TAX LAWS

New York has three major sources of tax revenue ― the Personal Income Tax (PIT), the Sales and Use Tax (SUT), and the Corporation Tax (CT). These, plus Property Taxes and other local levies round out the structure of New York’s tax system.

PERSONAL INCOME TAX (PIT)

New York is a state that allows its chief city (New York City) to impose its own income tax beyond the state and federal income tax.

New York State PIT

New York State has 7 different brackets for PIT rates:

• 4% on the first $8,000 of taxable income
• 4.5% on taxable income between $8,001 and $11,000
• 5.25% on taxable income between $11,001 and $13,000
• 5.9% on taxable income between $13,001 and $20,000
• 6.85% on taxable income between $20,001 and $200,000
• 7.85% on taxable income between $200,001 and $500,000
• 8.97% on taxable income of $500,001 or more

The last two brackets were added in January 2009. These numbers apply to those who file as Single or Married Filing Jointly. For Married Filing Separately statuses, the rates are the same but the income bracket numbers are doubled.

There are 5 filing statuses recognized by the state of New York: Single, Married Filing Separately, Married Filing Jointly, Head of Household, and Qualifying Widow(er) with Dependent Child. In nearly all cases, a taxpayer must use the same filing status on their state return as their federal return.

Nonresidents must pay a New York State income tax if they have income sourced from New York. For this computation, a base tax (using the same rates as residents) is multiplied by their ratio of AGI (Annual Gross Income) derived from New York.

For the 2008 tax year, New York State’s earned income credit was 30% of the federal credit. For taxpayers of this state, this can help reduce taxes owed and counterbalance increases in living expenses. In some cases, it can even give refunds to those who do not owe any tax.
To file a claim for Earned Income Credit, Form IT-215 can be found at the following website:

• www.tax.state.ny.us/pdf/2008/fillin/inc/it215.pdf

New York City PIT

New York City imposes its own PIT on its residents (income-earning individuals, estates, and trusts), which are collected for the City by the New York State Department of Taxation and Finance. There is no separate return ― residents fill in the New York City PIT section of the State PIT form and then mail it to Albany, NY by April 15th.

New York City has 4 brackets for PIT rates:

• 2.907% on income of $12,000 or less
• $349 plus 3.534% of income between $12,001 and $25,000
• $808 plus 3.591% of income between $25,001 and $50,000
• $1,707 plus 3.648% of income of $50,001 or more

These rates include a 14% surcharge imposed by New York City. The above numbers apply to resident unmarried individuals, resident individuals who are married filing separately, and resident estates and trusts. A City resident will apply these different rates (and credits), but use the same filing status and taxable income as for the State.

Nonresidents who work in New York City must file Form 1127 and pay income taxes each year, equal to the amount they would owe if they lived in the City.

Because New York’s tax structure relies greatly on financial markets and the PIT makes up almost 60% of the state tax revenue, the economic boom in 2003–2007 and the following recession in 2008 have highlighted the volatility of New York’s tax system.

SALES AND USE TAX (SUT)

Although New York City has some different tax laws, this does not mean they simply cancel out State laws. In cases such as the SUT, City taxes are enforced in addition to State tax laws.

The SUT has two parts: the sales tax and the use tax (or compensating tax). The sales tax is a tax on tangible personal goods, paid as part of the sales transaction. The use tax is more like a quiet counterpart, paid after-the-fact to the state, for goods/services not covered by the sales tax. It also applies to merchandise that is purchased out-of-state and brought into the state for use or consumption.

Sales tax on a retail purchase is computed using three components: the New York State sales tax rate, the local/county sales tax rate, and the Metropolitan Commuter Transportation District (MCTD) sales tax.

New York’s state SUT rate is 4%. In general, this applies to tangible personal property, certain services, electricity, food and drink, and hotel/motel room charges. A more complete list of taxable sales can be found on pages 17–20 of Publication 750 by the New York State Department of Taxation and Finance:

• www.tax.state.ny.us/pdf/publications/sales/pub750.pdf

Local SUT rates range from 3% to 4.5%. These local taxes are imposed in addition to the state tax of 4%. For a list of rates by county, see Publication 718:

• www.tax.state.ny.us/pdf/publications/sales/pub718.pdf

The Metropolitan Commuter Transportation District (MCTD) tax is 0.375% for businesses that operate in participating counties.

New York City’s local sales tax rate is 4.5%. That, added to the state rate of 4% and the MCTD rate of 0.375%, equals a total of 8.875% sales tax for the city:

• 4% (State) + 4.5% (City) + 0.375% (MCTD) = 8.875% Total

New York State has a sales tax agreement with the State of New Jersey and the State of Connecticut. This simplified tax reporting program allows New York State vendors (with no physical presence in New Jersey or Connecticut) to collect New Jersey and Connecticut sales tax on goods delivered to customers in those states. More information on this agreement can be found on page 15 of Publication 750:

• www.tax.state.ny.us/pdf/publications/sales/pub750.pdf

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