New York Sales Tax Nexus Provisions Effective Immediately

Jan 18, 2019

New York, in its issuance of Important Notice N-19-1 on January 16, 2019, announced that its enumerated economic nexus provisions became effective immediately, requiring certain taxpayers with New York sales tax nexus potential to review their position and whether a filing obligation exists.

Though the South Dakota laws litigated in Wayfair provided that $100,000 or more in sales and/or 200 or more transactions would result in economic sales tax nexus, a standard mirrored by a host of states seeking to implement economic sales tax nexus, the Empire State has deviated in its interpretation.

Taxpayers that have no physical presence in New York, but meet the following requirements in the immediately preceding four sales tax quarters, are required to register and collect/remit sales tax if the business both:

makes more than $300,000 in sales of tangible personal property delivered in New York, and
makes more than 100 sales of tangible personal property delivered in New York.

Note that this differs from the generalized Wayfair threshold instituted by South Dakota in several ways:

It appears to apply economic sales tax nexus solely to sellers of tangible personal property, despite a number of enumerated services which are subject to sales tax. This means that despite in-state sellers of taxable services which have otherwise have nexus via physical presence or otherwise alternative nexus-creating activity, for the purposes of economic sales tax nexus only a seller of tangible personal property would be potentially subject.
As the test requires fulfillment of both prerequisites (I.e., an “and” rather than an “or” statement between the receipts and the number of transactions) you could have a vendor with several substantive transactions totaling many millions of dollars that nevertheless falls under the 100 sale transaction threshold, therefore failing to establish nexus
As the transactions at issue relate to sales of tangible personal property, taxpayers which sell both goods and services into New York should segment such sales to determine solely the sales amounts / transactions relating to only sales of tangible personal property.

Businesses that meet both prerequisites must register to collect and remit New York state and local sales tax.

The sales tax quarters for New York are also on a slightly different time frame than traditional annualized quarter used in many states, and in analyzing them retrospectively for the purposes of determining nexus would be, in reverse chronological order, the following 4 periods: