As the saying goes, “if you can make it there, you can make it anywhere.” New York is a notoriously expensive city — both to live in and to conduct business. Not only do corporate owners pay exuberant commercial rents, but they are also subjected to significant corporate and business-related taxes. While there are many advantages to conducting business in New York City, the sole disadvantage may be the costly and complex tax requirements.
NYC’s Business Corporation Tax
Starting with the tax year beginning on January 1, 2015, a new corporate tax was imposed on corporations and banks that conduct business in New York City, with the exclusion of federal S-corporations. This tax is referred to as the “business corporation tax.” Generally, the tax must be paid by corporations that engage in the following activities within New York City:
- Conduct business
- Employ capital
- Own property
- Lease property
- Maintain an office in the city
By definition, the term “corporation” includes any entity taxable as a corporation for federal tax purposes, such as LLCs, joint stock companies or associations, and businesses conducted by trusts. In addition, publicly traded partnerships that chose not to elect out of City corporate taxation in 1996 are classified as corporations.
A corporation is also considered to conduct business activities within the city if it issues credit cards to 1,000 or more customers with a New York City mailing address or has merchant customer contracts with 1,000 or more merchants located in the city.
S-corporations are exempt from New York City’s business corporate tax. However, they must still pay the general corporation tax or the banking corporation tax, if applicable.
New York City’s General Corporation Tax
Any domestic or foreign S-corp or qualified S subsidiary that does business, employs capital, owns or leases property, or maintains an office in New York City must pay the general corporation tax. Notably, New York City does not have an S-corp election or recognize New York State’s S-corp designation. Rather, federal S-corps and qualified subchapter S subsidiaries are subject to this particular tax.
New York City’s Banking Corporation Tax
New York City defines a banking corporation as a corporation or association authorized to do banking business. The category includes commercial and savings banks, savings and loan associations, trust companies, and bank holding companies included in combined banking corporation tax returns. Also included are corporations owned by a bank, or bank holding companies engaged in business a bank would conduct.
Critically, certain organizations are exempt from the city’s banking corporation tax, such as trust companies where 20 or more savings banks are organized under the laws of New York and own all capital stock. Also excluded from the tax are corporations that must pay the general corporation tax, real estate mortgage investment conduits, and corporations subject to tax as insurance companies pursuant to Article 33 of the New York State Tax Law — apart from savings and insurance banks.
The MCTMT Tax
The metropolitan commuter transportation mobility tax (MCTMT) is a tax imposed on employers and self-employed individuals who are engaged in conducting business within the metropolitan commuter transportation district. This district includes Manhattan, the Bronx, Brooklyn, Queens, Staten Island, Rockland County, Long Island, Orange County, Putnam County, and Westchester County.
Specifically, the tax applies to employers who are required to withhold New York State income tax from wages and have payroll expenses exceeding $312,500 in any calendar quarter. For employers with payroll expenses between $312,500 and $375,000, the rate is .11%. It increases to .23% for payroll expenses over $375,000 but not more than $437,500. For payroll expenses over $437,500, employers must pay a rate of .34%.
Contact a Knowledgeable Business Tax Attorney to Learn More
The above are just a few of the taxes you should be familiar with if you conduct business in New York City. It’s important to ensure you fully understand your tax obligations to avoid unintended consequences. Offering skillful advice and diligent counsel, Brinen & Associates provides strategic guidance for clients regarding a wide variety of tax matters. Call (212) 330-8151 or send us a message to learn more about how we can assist you and your business.