What to Know About New York State Small Business Taxes

New York is an essential business hub in the United States, with several of the biggest corporations choosing to headquarter or have a significant presence in New York City and other parts of the state. It's an exciting place to operate, but that doesn't mean it's easy.

Business owners interested in entering the New York market must understand the state taxes, regulations, and other financial responsibilities associated with running a small business in the region.

The federal income tax will be the same no matter where you go in the United States, but each local government has its own state income tax policies. In New York, those policies will depend greatly on what kind of entity your business is.

Whether you're in the process of forming your entity or drafting a plan, use this great article to learn more about state tax requirements that apply to your business.

Key Takeaways: New York LLCs must pay an annual filing fee of $25 if their revenue is $100,000 or less. Businesses making over $25,000,000 must pay a fee of $4,500, which is the maximum.

• Learn how taxes impact various business entities in New York. 

• Understand multistate tax duties. 

• Review New York business registration, filing requirements, and write-offs. 

Corporation Franchise Taxes in New York

Businesses formed as corporations in New York must pay a corporation franchise tax. If you plan to form a C corporation in the state, you must learn how to calculate this to pay your state corporation tax.

Many big corporations find ways to "artificially" keep their tax rate low, so New York's state requires corporations to calculate their franchise tax four ways and pay the highest. This is intended to assess your tax base fairly and stop companies from exploiting loopholes, but it also makes the process more complicated and confusing for business owners. Here are the four options:

• Net income taxed at 7.1% (or 6.5%, depending on total net income)

• Business capital taxed at 0.15%

• Minimum taxable income taxed at 1.5%

• Fixed dollar minimum tax with flat rates on gross income

S Corp Taxes in New York

Corporations with fewer than 100 shareholders can apply to the IRS to be recognized as an S corporation business entity for federal tax purposes. This usually means the S corporation will not be subject to the corporate tax rate at the federal level, and shareholders will file business income solely on their personal tax returns.

States vary in how they tax S corps, but New York does not exempt them from corporate taxes. S corporations in New York must pay the corporate franchise tax, but they can pay lower tax rates than other corporations. The fee typically ranges from $25 for S corps with revenue of $100,000 or less to $4,500 with revenue exceeding $25,000,000. 

New York LLC Taxes

A limited liability company (LLC) is a business entity that protects members from liability while offering flexibility in filing status. Members of an LLC usually pay federal income taxes only at the individual level. However, they can also pay LLC taxes as a partnership or a corporation for federal income tax purposes.

State taxes for an LLC in New York similarly depend on how the LLC chooses to be classified. If an LLC files as a corporation, it will be subject to the corporate tax rate in New York. Any other LLC not filed as a corporation in New York will instead pay a state filing fee. This filing fee is an annual payment set according to a company's gross income.

Like S corps, the filing fee for LLCs and LLPs in New York is $25 for any company with $100,000 or less in gross income. The fee goes up as gross income goes up, with a maximum filing fee of $4,500 for companies with a gross income of more than $25,000,000 in the previous tax year.

Partnership Taxes in New York

Partnerships in New York are taxed similarly to LLCs. If your business entity is a partnership, you don't pay taxes at the corporate level. Still, the income passes through to the individual owners of the partnership and their personal tax returns.

Like all business owners, partnership owners will need to pay state income taxes on their personal returns. However, you may also need to pay the state filing fee with a partnership. Fortunately, only partnerships with a gross income higher than $1 million have to pay the filing fee, providing relief to newer businesses as they grow.

Sole Proprietorship Taxes in New York

With a sole proprietorship as your business entity, you don’t have to worry about any specific New York state taxes for your business. As the lone owner of your business, all of your business income counts as personal income for your tax return, and you will file your self-employed taxes according to your personal rate.

The personal income tax rate in New York uses tax brackets based on income level, just like the federal system. The tax rate starts at 4% for income up to $17,150, which will go as high as 10.9% for income over $25,000,000.

Multistate Taxes

If you work and earn wages in multiple states, you may need to file a tax return with each, assuming they collect income tax. You should pay taxes in each state according to the income you earned in that state.

Federal and state taxes effectively tax the same income, but the same income cannot be taxed by multiple states.

The New York state W-2 does not clearly separate wages and tax withholding by state, which means you will need to calculate it yourself on your tax returns to figure out what you owe to each state.

Registering with the State

In New York, businesses can handle nearly all their state tax obligations online once they have created a business online services account. You can create an online services account on the state website and start receiving and paying bills on that platform. New York requires businesses that have the capacity to file and pay taxes online. Once registered, you can use your business account online to handle estimated tax withholding for employees, annual tax returns, sales tax, and more.

New York Sales and Use Tax

You can register to charge and remit New York sales tax through your online business services account. Once registered, sales tax filing is required regularly, depending on the reporting period you set, which can be monthly, quarterly, or annually. File sales tax returns, even if you made no sales in that period.  

The sales tax rate for the state of New York is 4%, but local and municipal taxes will vary widely, with some rates totaling 8.875%. Make sure you consult local regulations or a sales tax calculator. New York property tax will also range depending on your area.

Find an Accountant to Help

New York small business taxes vary depending on numerous factors, including your business entity type. Regardless of your business structure, avoiding mistakes that can impact your taxes and invite additional IRS scrutiny is imperative. That's why so many small business owners and entrepreneurs in New York trust 1-800Accountant, America's leading virtual accounting firm, for their financial needs.

Whether it's New York business tax preparation, tax advisory, or any of our professional accounting services, we have the solution you need at a price that fits your budget. Schedule a quick consultation – usually 30 minutes or less – to learn how we can help your business flourish!

New York Business and Corporate Taxes FAQs

What are the different filing requirements for businesses in New York?

If your New York C corporation or S corporation pays corporate business taxes, they must typically be prepared and submitted by March 15th. To submit your taxes to the state, use Form CT-3 or Form CT-3-A. 

Are there tax credits and deductions available to small businesses in New York?

Generous tax credits and tax deductions are available to qualifying New York small businesses. They not only reduce your tax liability but are designed to incentivize growth within the state. Learn about tax credits and deductions you might be eligible for by visiting the New York State Department of Taxation and Finance website. 

What is the income threshold for filing taxes in New York?

New York LLCs must pay an annual filing fee of $25 if their revenue is $100,000 or less. Businesses making over $25,000,000 must pay a fee of $4,500, which is the maximum.