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The Holidays - A Taxing Time for New Yorkers

author photo of Tom Mazurek

The holiday season is upon us once more and people across New York State are busy shopping for presents, parties and other seasonal preparations. Everyone looks forward to this time of year, especially the folks at the New York State Department of Taxation and Finance, who count on the surge in spending for a much needed boost in sales tax revenue.

As you go about preparing for the coming holidays, consider the following sales and use tax facts before you purchase:

New Yorkers always enjoy a Sales Tax Holiday on clothing and footwear, as items sold for less than $110 are exempt from the State’s 4% sales tax. Several counties, including Chautauqua, Chenango, Columbia, Delaware, Greene, Hamilton, Tioga, and Wayne, as well as New York City, also exempt clothing and footwear sold for less than $110 from their local sales taxes.

Sales of tangible personal property are subject to tax, so unfortunately most of the presents you’re shopping for are taxable. However, New York is one of the few states that does not tax sales of digital products. Instead of purchasing a movie, album, book or video game at the store and paying sales tax on it, purchase the digital version online and download your way to sales tax savings. Gift cards, which are also exempt from tax, can be used for purchasing or streaming nontaxable digital products online as well.

Think digital when taking your kids to meet Santa Claus as well. Instead of purchasing a printed photo of your little ones sitting on Santa’s lap, purchase a digital file that can be emailed to you, if offered. Photographs transferred in tangible form are subject to sales tax, while the same photo transferred electronically, is exempt from tax.

Food is always a big part of the holiday season; and everyone enjoys their traditional holiday meals, as well as all the seasonal baked goods and candy. Generally, food and food products are exempt from sales tax; however, New York is the state that taxes bagels differently, depending on whether they are sliced or not, so you know there are bound to be some special rules here. The following categories of food are taxable:

  • Food that is sold in a heated state;
  • Food that has been prepared by the seller and is ready to be eaten;
  • Sandwiches;
  • Candy and confectionary products.

Essentially, if you go to the supermarket and purchase all the ingredients and fixings for your holiday dinner and prepare it yourself at home, you will likely pay little to no sales tax on your food purchases. However, if you decide to have your holiday dinner catered and you purchase trays of heated chicken or pasta or a sandwich platter or relish tray, then you will need to pay sales tax on these purchases. Food that is prepared and arranged on platter by the seller and that is ready to be eaten is taxable. It doesn't matter whether the food is sold to be eaten on location or another place, or whether it's served hot or cold. Even cookies aren’t exempt from sales tax. If you purchase a cookie platter prepared by a bakery, it is subject to tax.

Let’s not forgot about fruit baskets or cheese boards either. Any time exempt food is sold in combination with a taxable item (i.e., basket, cutting board, etc.) for a single charge, the entire charge is taxable.

New Yorkers should not worry about all the sales-tax-free online shopping they did on Cyber Monday or during the holiday season. There is a calculation method and line for reporting use tax on your IT-201 Resident Income Tax Return, as well annual and periodic forms (ST-140/141) an individual can use to report sales and use tax on purchases when it was not charged by the seller.

I hope these New York sales and use tax tips help save you some money this holiday season. Thank you for all your great questions and comments this past year. I look forward to writing more posts in 2018, so please feel free to email me ideas or issues you would like more information on.

Happy Holidays!

Questions or Comments?

Do you have questions about NEW YORK (and/or MULTI-STATE) sales tax - or does your business need assistance with other tax issues? Please use the "Request a Consultation" link on Tom Mazurek's FIRM PROFILE page to submit your business sales tax question and/or consultation request.

Other recent “New York (NY)” posts by Tom Mazurek, CPA:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.

Comments

2 Responses to The Holidays - A Taxing Time for New Yorkers

  • Posted by SUSAN on August 28, 2018 6:28am:

    IF A TAXABLE ITEM IS RETURNED FOR CREDIT IS SALES TAX CREDITED AS WELL? IF THE RETURN IS OVER 90 DAYS PAST THE SALE DATE IS TAX REFUNDED? HOW LONG AFTER A SALE CAN TAX BE REFUNDED ON A RETURNED ITEM?

    • Posted by Tom on August 28, 2018 1:21pm:

      Susan,

      Thanks for your question...This is a tough issue for retailers because it involves extra work on your part to recover the sales tax you previously remitted to the state.

      If a taxable item is returned, the sales tax should be credited as well. You would then have to apply for refund of the tax remitted to the customer using Form AU-11 or take a credit on your current monthly or quarterly return using Form AU-11 as well. Regulation Sec. 534.6 - Refunds and credits by reason of cancelled sales and returned merchandise - explains this in detail:

      (a) Cancelled sales and returned merchandise.

      (1) Exclusion from return. Where a contract of sale has been cancelled or the property returned within the reporting period in which the sale was made, a vendor of tangible personal property or services, may exclude such receipts, charges, or rents from his sales and use tax return.

      (2) Credit where tax previously remitted. Where a contract of sale has been cancelled or the property returned and the tax collected thereon refunded to the customer, and such tax had been paid and reported on a return by the vendor of tangible personal property or services, an application for refund or credit for the tax paid shall be filed with the Dept. of Taxation and Finance within three years from the date when the tax was payable by such person to the Dept. of Taxation and Finance. The applicant may, as part of the application for credit, take the credit on the return which is due coincident with or immediately subsequent to the time such application is filed.

      In other words, you have 3 years from the date of sale to claim a refund or credit for tax you refunded to your customer. Most retailers would likely claim a credit on their current return - which can be done electronically when you're preparing the return online.

      If your return policy allows customers to return items over an extended period of time, make sure you have good documentation to substantiate the refund or credit.

      Hope this answers your question.
      Tom

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