How to Register for a Sales Tax Permit in New York

Registering your own business can seem to be as daunting as running your own business for the first time, but things might not be as complicated as it may seem. In any case, the advantages brought by running your own business outweigh the potential problems and drawbacks.We all dream of financial freedom, flexible working hours and enough spare time to spend with your family and friends or enjoying a holiday. Running your own business can give you all these benefits if you put in some hard work and effort when you’re starting.

Just think about all the hours you spent working for someone else and think what you could have accomplished for your own business. You might think that you don’t know much about your own business, but it might come as a surprise just how much you are capable of, only if you take all the experience you gathered over the years and put it to good use. You already have an insight into the market conditions and you know where the best suppliers are or what markets are undersupplied. All this can work in your favor, because, truth be told, knowing all this and preparing for the market is half the job when it comes to running your own company.

While this article will be looking at the process and requirements related to registering and running a business in the state of New York, it is strongly recommended that you consult an attorney or a business advisor to help you with the process.

Preparing to Register a Business in New York

There is a lot more to the business registration process than simply filing papers with the relevant authorities. Even before you get to that stage, you have to know what type of business you would like to start. While we said that you could use skills acquired over the years as an employee and put them to work for yourself, it is not always possible to stay in the same line of business. This heavily depends on the market environment. To know what conditions prevail in a market, you have to complete certain steps that will not only let you prepare for your business properly, but it is also an essential part of your business plan development. The business plan is very important in this process as it serves as a roadmap for both the registration process and the preparation.

You will also need to do some thorough market research, for which it is advisable to consult a professional. While developing a business plan, you have to research your target market, consider the supply and demand, the costs of running a business and essentially, find out if your business is sustainable.

But this market research also uncovers something else. If your target market is already saturated, you will be able to identify the niche, undersupplied markets to exploit. It is safer to start in a smaller market due to several factors. One is the fact that the competition is not as fierce as it may be in more popular and developed markets. Another is the fact that there is a healthy level of demand for you to maintain a business and gather valuable knowledge and experience along the way. This approach allows you to build a customer base as well as a name that will be recognized on the market. Once you have come to terms with running the business in a smaller environment, it is easier to take the next step and expand into other markets.

Other parts of the business plan include revenue and income projections, costs projections, besides describing the business in detail. In addition to that, a well-defined business plan is essential when it comes to securing external funding for your company. No bank or financial institution will even consider funding a business without a well-developed business plan.

Once all the research is complete and your business plan is in place, it is time to move to the next step and register your company with the relevant authorities in the state of New York.

Registering a New Business in New York

The legal business registration process in the state of New York requires you to work with state and local authorities. Luckily, the state of New York streamlined the process by developing an online platform named New York Business Express, a resource for entrepreneurs looking to start, run or grow their business.

The first step to take is to decide on the name and legal structure of your business. If you intend on doing business under a name that is not your own, you are required to register a business name. If the name is available, you may file name reservation documentation with the New York Department of State (mailing address provided in the Contact Details section below). The reservation is valid for 60 days and each applicant is granted two 60-day extensions. The initial reservation, as well as the extensions, will cost you $20 each.

Once the name is reserved, you need to choose the business structure that will suit your business. Have in mind that each structure has its own characteristics and its own advantages and disadvantages. This will also dictate the requirements when it comes to obtaining permits, or deal with taxes and liabilities. Depending on your place of residence or the place of business, you might also need specific local or county permits, on top of the state and federal licenses you will have to obtain. This is why it is advisable to work with an attorney or a business advisor, to avoid potential issues, or visit your local authorities and ask about any specific requirements for your business.

The list of business entities starts with a sole proprietorship. This is the simplest and easiest legal form you can register and also the easiest to maintain. In case you plan on doing business under a name other than your own, you are required to file an Assumed Name Certificate with the county clerk. In terms of liability, the owner/sole proprietor is personally responsible for all the debts of the business as there is no legal distinction between the business and its owner in the case of a sole proprietorship. Once the business owner passes away, the business itself ceases to exist. In addition, you are not obliged to file for a Federal Employer Identification Number (FEIN) with the Internal Revenue Service as taxation is carried out through the owner’s personal tax return.

Next in line are the different kinds of partnership. A General Partnership is similar to a sole proprietorship in terms of personal liability; however, it is formed when two or more individuals join to conduct a business. This type of legal structure requires the filing of the Certificate of Assumed Name with the county clerk where the business will be conducted. General partners share joint and individual liability as well as the obligations of the partnership. Unlike the sole proprietorship, which ceases to exist if the owner passes away, the lifespan of a general partnership is agreed through the partnership agreement. General partnerships share similarities with sole proprietorships when it comes to taxes as these types of legal entities are not taxed separately, but rather through personal tax returns of each general partner.

The second type of a partnership is the Limited Partnership. To form this type of partnership, the members are required to file a Certificate of Limited Partnership and a Certificate of Publication with the Department of State. Unlike the general partnership, where each partner shares joint and individual liability, in Limited Partnerships, general partners are liable for all liabilities of the business while limited partners are not liable either for contractual obligations of the business or any of its liabilities. In terms of tax requirements, business income, like in a general partnership, is taxed through each partner’s personal tax return.

The third type of partnership is the Limited Liability Partnership, which is similar to the previously mentioned Limited Partnership, with an additional protection for general partners in terms of liabilities.

To register a Limited Liability Company (LLC), you will have to file Articles of Organization and a Certificate of Publication with the Department of State. In terms of liabilities, an LLC resembles a Corporation in a sense that personal liability for debts of the business is limited to its members. An LLC has the option of being treated as a sole proprietorship in tax terms in order to avoid double taxation. In general, an LLC is considered the combination between sole proprietorships and corporations, taking the best of both worlds.

The last type of business entity is the corporation. While there are several types of corporations, we will focus on the Business Corporation. This requires you to file Certificate of Corporation with the Department of State. The major advantage of a corporation is the limited liability it provides for its owners/shareholders. Being a separate entity, it is subject to state franchise taxes, while shareholders also pay taxes on income.

Before moving on to the next step, which will be a more detailed look into the need to register for a sales tax permit, we have to add that each of the above named legal entities, apart from sole proprietorships and general partnerships, requires you to apply for a Federal Employer Identification Number (FEIN) with the Internal Revenue Service (IRS), a process that can be completed online.

New York Sales Tax Permit

Depending on your line of business, you might need to register for a sales tax permit in the state of New York. Let’s say you will be purchasing wholesale used electronics to resell online, would you need to apply for a sales tax permit?

The first thing you have to establish is whether you have a sales tax nexus, meaning an office in the state, and employee, goods in a warehouse or you maybe own a real or personal property in the state. Having a sales tax nexus also encompasses the delivery of merchandise within the state of New York or having an independent contractor or a representative.

Next, you’d have to check whether the products you sell or the services you provide are taxable. The New York Department of Taxation and Finance considers services as non-taxable; however, there are some exceptions, like providing repair or maintenance services to real property. In terms of dealing with tangible products, like selling used laptops, you are required to apply for a sales tax permit.

Once you’ve determined that you do require to apply for a sales tax permit, as you will be making sales that are subject to tax, you have to obtain a Certificate of Authority from the New York Department of Taxation and Finance. This process can be done online through the Business Express platform. You will have to provide general business information as well as the employer details including the FEIN or a Social Security Number (SSN). The application is free of charge and, according to the platform, it takes five days on average to process the application. Once you have obtained your Sales Tax Certificate of Authority, you will not need to renew it.

Sales Tax Exemptions in New York

The state of New York allows for tax-free purchases to be made in some cases. This is possible through the use of a Sales Tax Exemption Certificate, also known as Resale Certificate. It is called that because it can be used when you are buying merchandise for resale. Do pay attention when using the exemption certificate, because it has to be completed properly before providing it to your seller. You have to provide information like the date it was prepared, your name and address, the seller’s name and address, your Certificate of Authority ID number and the document has to be signed.

The seller can refuse your exemption certificate and collect sales tax from you, in which case you are able to apply for a refund. But, if you make a number of purchases from the same source that accepts your exemption certificate, you may use a blanket certificate, which allows you to make repeated purchases and use a single exemption certificate to cover all these purchases.

Although you will probably be using the exemption certificate, for the most part, you might find yourself at the other end of the line as a seller. In that case, as long as the buyer provides you with a completed certificate within the 90 days of making a purchase, you are not required to charge sales tax. Although you have the right to refuse the exemption certificate, if you do accept it, you must keep it on record for at least three years.

While this article can serve as a guide for you to set up your business and a roadmap through the registration process, it is best you consult with professional business advisors or attorneys to help you with the process to avoid any possible issues.

Contact Details

Department of State

Division of Corporations
One Commerce Plaza, 99 Washington Avenue
Albany, NY 12231-0001
Phone: (518) 473-2492

New York State Department of Taxation and Finance

Technical Services Division
Sales Tax I&I
W. A. Harriman Campus
Albany, New York 12227

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Henley Johnson

Henley currently works as a sales representative for Direct Liquidation, assisting businesses with product sourcing of liquidated merchandise from the largest retailers in the world. Whether you are looking for a pallet or a truckload Henley is here to help you grow your business.

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