A Comprehensive Guide to Small Business Taxes in New York

They say if you can make it in New York, you can make it anywhere. While New York is a popular state with numerous industries and opportunities for business owners, it also ranks as one of the most difficult climates for small businesses with its high costs, substantial unemployment, and low business survivability rate.

Thriving in such a unique and challenging environment takes effort and planning, including a strategic approach to your business tax liability. Use this blog as your complete guide to small business taxes in the state of New York.

New York Small Business Tax: Overview

New York's business tax code is complicated no matter the entity you're formed as. In this comprehensive tax guide, we'll touch on pertinent information across business entities, including tax rates and insights that your New York-based small business can use.  

New York Business Franchise Taxes

Entities taxed as corporations for tax purposes in the state of New York must pay a franchise tax. However, determining the exact amount you will owe in franchise taxes can be difficult no matter your type of business.  

C Corporation Taxes In New York

Your New York-based C corporation must pay the corporate franchise tax. The state ensures you'll owe the highest amount possible by actively closing loopholes and exemptions meant to reduce your tax liability.

New York allows you to calculate your taxes due in several different ways. Your business is responsible for paying the method yielding the highest tax bill. 

Net Income

The least complex way to calculate your tax burden is based on your business's net income, which typically results in a tax rate of 6.5%.  

Capital

With the capital method, your C corporation's business and investment capital may be taxed at a .025% rate with a $5 million cap that excludes liabilities. There are some exceptions. For example, certain manufacturers operating as corporations have a tax rate of .019% with a $350,000 cap. 

Fixed Minimum

The fixed minimum method would tax your C corporation's gross receipts in tiers assigned by a flat dollar amount. The lowest tier is $25 if your business's gross receipts are under $100,000, and the highest tier is $200,000 if your business's gross receipts exceed $1 billion. 

MTA Surcharge

The Metropolitan Transportation Authority (MTA) powers public transportation in New York. You will need to pay this surcharge if your C corporation does business in certain popular counties, including New York City (NYC)/Manhattan, the Bronx, Brooklyn, and Queens. You would pay the MTA surcharge along with the franchise taxes your business owes. 

S Corporation Taxes In New York

If your business is formed as an S corporation, you will be responsible for paying the franchise tax in New York. S corporations typically pay via the fixed minimum method, where gross receipts are used to calculate what is owed. Net income that is passed through to ownership is taxed at personal income rates ranging from 4% to 10.9%.

Limited Liability Company Taxes In New York

Limited liability companies (LLCs) allow you to choose how you'd like your business to be taxed. If you've formed as an LLC that is taxed as a corporation, you will be responsible for paying the franchise tax in New York. You will not be required to pay the franchise tax if you've decided to be taxed as something other than a corporation, such as a partnership.

Partnership Taxes In New York

Partnerships are pass-through entities and pay neither federal nor state taxes in New York. Along with revenue taxed at a personal income tax rate, your partnership would be responsible for paying a filing fee. 

Sole Proprietorship Taxes In New York

If your business is taxed as a self-employed sole proprietorship, you will not be responsible for paying any filing fees or the New York franchise tax. In this scenario, your income as a sole proprietor would be taxed at the personal rate. 

New York Pass-Through Entity Tax

The New York pass-through entity tax (PTET) is an optional tax that certain pass-through entities can elect annually for specific income. Owners and shareholders of S corporations and partnerships that elect to pay PTET may be eligible for a PTET credit on their income tax returns. 

New York Sales and Use Tax

The New York state sales tax is applied to retail sales of tangible personal property or services. If you purchase tangible personal property or services outside of New York and use them within the state, you will be subject to a use tax.

You can determine your sales and use tax rate by adding the 4% state tax with local taxes, which can exceed 8% depending on the location. 

New York Withholding Tax

You are required to withhold and pay personal income tax on your employee's wages and on other compensation they may receive. You can only pay and file your withholding tax returns electronically and are given three options to file:

Tax Department Web File

Tax Department Web Upload

FSET compatible software

New York Unemployment Insurance Tax

The unemployment insurance tax rate for established New York businesses ranges from 2.1% to 9.9%, while new employers must adhere to a 4.1% tax rate. The New York Department of Labor recommends filing electronically.

To do so, register on the department's website. 

Build Your New York Business with 1-800Accountant

Operating your small business in New York can be incredibly fulfilling if you stay on top of things, including the complex tax regulations impacting your business. Staying compliant in the state is easier said than done, which is why so many owners and entrepreneurs trust 1-800Accountant, America’s leading virtual accounting firm for small businesses, for their small business needs.

Whether you need small business taxes, tax advisory, or any of our professional accounting services, we have the solution you need at a price that works within your budget. Schedule a quick consultation—usually 30 minutes or less—to learn how we can help your New York-based small business.