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okay well Thank You Terrell good afternoon everyone as Tara said thank you for joining us today on our New York attacks update today we wanted to touch on some of the areas that we see some you know frequent questions and concerns when it comes to New York so hopefully maybe some of you have been with us when our some of our other states presentations we have the same presenters today we have Laura Robichaud state's salt senior manager of our Phoenix office Stacie Roberts is our salt senior manager out of our Denver office and I'm Jennifer Edwards a salt manager out of the Sioux Falls office so just to get started can they give a quick overview of what we'll be talking about today I'm gonna start off by talking about just doing business and Nexus hit in general and what does that mean and how is how are those terms defined then we'll discuss a little bit about registering from business or sales tax purposes in New York when who needs to register and win after that Laura will take us into the world of sales tax shield up a little bit more into determining sales tax Nexus in New York she'll also discuss what is and isn't taxable in the sourcing rules for sales tax purposes and then she will also touch on some recent rulings to be considered for sales tax purposes um after that then Stacey will move into income tax and do have some income tax discussion she will again go a little bit more and further in depth into Nexus and doing business in New York for income tax purposes and then also touch on combined reporting apportionment tax the taxes that are imposed on pass-through entities and then I will just wrap it up with just a quick overview of steps that need to be done in order to close out a registration in New York if you have if you have registered to do business and are no longer going to be conducting business so active in the state all right so with that I want to get move are you going to doing business in New York so just quickly a nexus in doing business those are terms we hear frequently really next this is the technical term and that's the sufficient connection that's needed with a state in order to subject an entity to the state tax laws of that state the amount of activity in or connection to a state that's needed to establish Nexus that's basically it's defined by state statutes regulations in case law as such the definition can vary from state to state so what times when we're talking about does this does state after entity have to write a star or are they subject to the state tax laws in that state states use broad terms such as doing business in or deriving income from to describe the connection that's necessary to establish that Nexus and create tax filing requirements those broad terms however are usually not very clearly defined in by the states so it really is up to the taxpayer the business to make some interpretations figure out what they're doing if they do believe they've met that that threshold so for sales tax Nexus standards the general standard in his physical presence and when you think the physical presence that would be the obvious things you know such as having an employee in a state I'm having an office in the state having end up using independent contractors or inventory in the state so that still is the general standard physical presence even though other states you know there's been a number of states over the last couple years that are looking to find ways to subject out more out of states from sellers to their tax laws so some states have looked at putting in place economic presence rules on the sales tax side fortunately or unfortunately at this point none of those economic Nexus rules are really in effect but just last week there was the South Dakota versus Wayfarer case that was heard by the US Supreme Court so we'll kinda just have to wait and see what comes of that but as of now physical presence is the is the general standard from a sales tax sales tax perspective so in addition to physical presence New York New York itself fossil has click-through Nexus as you have some other states in the clicksor Nexus for New York there's really a presumption that certain sellers of tangible personal property or services are vendors and they must then be registered or they're required to register for sales tax purposes so to meet that presumption that the seller or that the it's presumed that the seller is a vendor and they're required to register and collect and remit New York sales tax if they have entered into an agreement with a new residence for which permission is received by the resident for directly or indirectly referring potential customers to the sellers website and if the cumulative gross receipts by the seller to New York customers resulting from those referrals are more than $10,000 during the proceeding for quarterly sales tax periods so even with that click-through Nexus there still is an element of physical presence by having that New York resident in the state New York also has affiliate Nexus and that is under under certain circumstances the definition of a vendor would include a remote out-of-state sellers that are affiliated with business entities in New York the out-of-state seller and a New York business are considered affiliated if one owns directly or indirectly more than 5% of the other or if more than 5% of both of the entities are owned direct indirectly by the same person or an affiliated group of persons so again there even though it's an out-of-state vendor there would still be element of physical presence by being affiliated related to an in-state business um income tax Nexus standards some states many states actually think there's a lower threshold for income tax standard than for her sales sales tax so although physical presence in the state would you know in most cases create Nexus for income franchises and gross receipts tax many states have adopted an economic presence thus saying you don't even have to have physical presence in our state in order to be subject to our incomes franchise and gross receipts tax taxes in how the states define that economic presence in many ways it can vary from state to state but in general it's really the state's say if a business has an economic presence or it's their economic connection with the state so if they make a market if they have any type of financial gain or benefit from the state then the states are saying that that would be enough to create an economic presence in the state and subjected to that states of taxes then some since I've got a little further in New York is one of those states that have actually established a factor based threshold so a bright-line test so to speak and that would be that there's there's a you know actual factor a bright line that would say if you've reached the this threshold that is what creates Nexus or you have you have created Nexus or established Nexus and would have a filing requirement so effective in 2015 New York established a 1 million dollar sales threshold as their bright line tests so who needs to register and for us tax certificate of authority and collector mat sales tax in New York so the general rule in New York is if you are a vendor and you are selling taxable products and taxable services in New York and you have any of the following you would have a requirement to be registered if you maintain a place the business in the state solicit business from through employees independent contractors or other representatives in this state if you solicit business through catalogues or other advertising material and have another connection with the state or if you make sales of taxable products to your customers and regularly which regularly the state defines at least twelve times per year deliver products and accompany vehicle so as you can see in all these there is an element of physical presence so that that's heat but in addition to that if in order to be able to accept or issue New York sales tax exemptions you do also have to be registered with the New York Department of Taxation so how about for out-of-state businesses out-of-state businesses have really generally the same rules as far as somewhat of a physical presence of your delivering products taxol products into the state at least 12 times a year solicit through employees or independent agents that are located in the stage or visit the state and then also going through catalogs other advertising material and having a presence in the state in addition to that if you as we mentioned earlier and talked about affiliate Nexus if you are an out-of-state business and you are affiliated with New York entity that then you could be considered a vendor and also have requirements to register in the States so in just one thing that I want to mention when we're talking about this it truly is the states looking at your youth doesn't presents but also what is it that you're selling it has to be a taxable service or product so for example if you come into the state and sell at a craft fair for a short period of time and what you're selling is tangible and it's a taxable product in the state you would be required to register and for sales tax in New York and collect and remit the tax however if you come into the state and open a office and you're going to be providing accounting services in the state it wouldn't necessarily be required to register or for sales tax purposes because the service that you're providing is not taxable so again even if your physical presence element but not the taxable service part so you have to have both to have that requirement to register and Laura we'll talk more about examples of things that are taxable tax those services and products but these are just you know some general ideas basically textile products tangible personal property things you can be a little touch see textile services installing repairing maintaining servicing tangible personal property computer repairs these are services that really do are connected with a tangible a tangible item so once it has been determined that you're doing business you have a requirement to be registered what do you need to do well first of all you should register at least 20 days before beginning business in the state of New York there are penalties for operating without being registered so it's really important to register ahead of time before you actually start doing business apply for the sales type certificate through the Department of Taxation and Finance there are two types of certificates of authority in New York there's the regular in the temporary regular would just be what we think of there's no starting and stopping points it's it's just for the duration of your your activities in the States whereas temporary those permits are those certificates of authority have a beginning date and an ending date so depending upon the duration of your times your service or activity in the state what would determine that but one thing to keep in mind that if you're in if your business is something in a show or in entertainment type line of business even if you're only in the state for a short period of time state coming in for a crash or an antique show for a short period of time the state does require you to apply for the regular certificate and not the temporary and as I mentioned there are penalties for failing to register and the maximum penalty for operating without a certain valid certificate of authority is $10,000 that is imposed at a rate of $500 for the first day operating without a valid certificate of authority and then $200 for each day after that so just they can be significant some significant penalties so definitely something to keep in mind and then Europe also has other types of business permits and fees that may be applicable depending on the type of business or industry that you're in but for the purposes of this presentation we're focusing on the sales and use tax makin tax requirements so that that will take us to our first polling question when is an entity required to be registered with a New York tax department and obtain a certificate of authority when the style to usual personal property once a year at a craft fair they contract with independent agents from noir New York State to facilitate taxable sales if they accept sales tax certificate from customers in New York State or all of the above [Music] all right oh great looks like you got the majority guy right the answer would be all of the above all right thank you and with that I will turn it over to Laura can you hear me okay thanks Jennifer um so what I'm gonna talk about is sales tax within New York now Jennifer touched on some pretty high-level you know this is what determines Nexus for sales tax and then also for income tax but my focus is actually going to be specifically on services because I think that the taxability of tangible personal property is pretty straightforward where things kind of get gray is you know I provide the service or software and a service and you don't really think that's taxable so I'm gonna talk a little bit about that and then I do have a couple of interesting cases that I'm gonna go through with everyone if I can get this to move forward okay there we go so to pick you back on what Jennifer said obviously if you're selling taxable items specifically what we call TPP which is tangible personal property in New York that would give you Nexus if you happen to be one of those vendors that's delivering you know like a repair part and maybe you're just the company that goes in and you know does the repair or you're the one hiring someone who's local because maybe you don't have a person there to fix the repair that would automatically give you Nexus you know it New York is probably a little bit more of one of the more aggressive states where they have this new reporting requirement for those of you that sell any of your property online so for example I physically sit in Arizona let's say you know I've got a great online business all my inventories here I've got everything in a warehouse here nothing actually goes into New York except for when somebody purchases something from me so you can see the bottom kind of little block there talks about internet sales that are from someone clicking on my website and I fulfill an order and this can kind of get tricky because $10,000 it really isn't a lot of money but what you don't realize is New York as one of many states that has this reporting requirement so let's say you know you ship one thing and it's $15,000 well New York would come back and say well that one invoice for $15,000 because I'm a manufacturer now I have Nexus in New York and I have to file so you kind of have to be careful especially if you're one of those companies that tends to maybe go into a state I would say you're probably gonna be ok if you're going maybe once you went into the state once yes it will technically give you Nexus but you know it that might be a one-off situation but if you find that as your business is growing and you're starting to expand it to different markets if you're noticing that you're having higher sales or more frequent sales in New York City or New York State you you may want to look at you know because you probably have created Nexus somehow um so for what's taxable and what's not taxable obviously you know anything that's tangible personal property is going to be taxable in New York especially in New York City has that that caveat for those of you that do have or have ever shopped in New York City some of the clothing or footwear is because it's gonna be exempt it's not subject to tax but only up to a certain amount and that's per item you know any type of plumbing electrical repairs even removal services are gonna be taxable as New York is one of the few states that does tax services but also just like with all the other states they have several exemptions you know any type of anything that's prescription is going to be especially prescription medication and even some levels of medical devices or durable medical equipment are gonna be exempt obviously any sales to nonprofits are gonna be exempt so as long as you have documentation to support that exemption then you're fine from an audit standpoint but just because somebody says over a non-prof t that doesn't necessarily mean that they're exempt from sales tax they actually have to provide some sort of information that proves that they are so sourcing this is one of the ones that kind of trips everyone up a little bit so there's two different types of sourcing in the sales tax world there is origin and destination based so origin is your sales tax rate is going to be dependent on where you're shipping from and then destination is gonna be based upon where you're shipping to and New York is actually a destination based State so you could be an upstate New York like Saratoga and if you're shipping something into New York City then you need to apply the new york city sales tax rate because you're gonna apply your sales tax rate on ship to not ship from and this is kind of confusing for a lot of clients especially if you're in a state that is you're used to charging your sales tax based off of well our location is you know in Phoenix Arizona so I'm gonna charge the Phoenix Arizona rate well that's not actually accurate so that's one thing that for those of you that do ship in products or even services you're gonna want to do that off of where the customers location is or where that actually serve that service is occurring so that that can be tricky unfortunately if you don't really have a sophisticated system it can get really messy because you have different rates and rates can change so if you're doing a lot of ship twos then you're gonna have to keep track of all those things I'd Bailey as a firm we partner with a valera and a Valera is one of the great software systems that helps clients in this type of situation where you realize oh my gosh you know we're a manufacturer and we're shipping stuff all over the place I can't keep track of this software like a Valera would be able to help determine those rates and keep them updated so you wouldn't have to worry about it so if you find that you are growing I would really strongly suggest that you reach out to whoever your accounting advisor is to talk about you know maybe we can put some automation into this because too many band-aids be it becomes a nightmare down the road just from personal experience so that's that's pretty much the source engine so New York is destination and they're not origin everything is based off a ship - ok so here's to what I would think kind of landmark or milestone rulings they're actually called advisory opinions so New York like all of the other states have allow for tax payers to write into the department about questions and then the department has a specific item a specific amount of time to respond so if I had a question let's say I sell a durable medical equipment product or device and I don't know if it's taxable in New York because I my company's based on the West Coast you could write in to the New York Department of Revenue or taxation and then they would provide you a response of you based off the facts that you provided them so they're somewhat binding but they are a case-by-case basis so the two examples I'm going to go through our different companies that wrote in to New York and said hey this is what we're doing are we taxable it's great if you're planning on expanding in New York or you're getting ready to absorb another company that happens to be located in New York and this way you kind of you you have some basis of information but again it's really dependent upon the information you provide them because one little piece of data could absolutely change the outcome of whether what you're doing or selling is taxable or not so in this situation the Department of Taxation and Finance in New York they received a letter from the software training company so this company they delivered interactive training programs they had customers that were had locations in New York but those same customers also had locations out-of-state there they had a product code so this is a software company they had a product cold it was called skin for retailers so in this advisory opinion opinion they were describing the quote-unquote skinning as the customizing of the core code within their customers network that you know reflected the logo reflected the name and also they helped with pre recording like training products for their clients so a lot of you probably have like HR and HR department that you know has these wonderful pre-recorded training videos this company did something very similar to that except they also wrote the code behind it so it was a little bit more interactive so this company charged their clients for this quote-unquote pre-written software also when it was it was essentially an app so they charged them for this the pre-written software and they charged them for the creation of the media programs the training videos their billing and this is the part that really becomes crucial when it comes to tax ability so this company kind of bundled in their billing so they would you know like in they did fifteen thousand dollars worth of service and it could have been four different things well they put it all on one line that that is never good a good idea in like any billing situation I would highly recommend that you break everything out on your invoice if you can because if you don't then the state might view the whole thing is taxable which is kind of what happened here so because they didn't break out the billing New York said well if you can't break out the bundled stuff that becomes taxable but the part that got this company well some of their activities were not taxable New York said because you have a subscription fee and your customers pay you a monthly fixed fee to use your software even though part of it was canned it's considered taxable so the the parts where they modified for each customer that was exempt as long as they could break it out but it was the subscription fee that caused them to be like oh no okay this is now taxable what we're going to do and a lot of companies especially the tech companies add a subscription fee because it's a revenue generator and it's a bonus for the customers because within that fee you know they might have like 24/7 phone support or whatever the case may be so the reason I wanted to bring this up and thought this would be a really good case or advisory opinion to share is that there is this misconception in the IT industry that I noticed is probably a little bit more lately than normal that the the business of what they're doing is not subject to tax and what we're seeing across multiple states including New York is that any type of software as a service is becoming taxable so right now there's about 16 states that tax software as a service and anything that you you you custom do specifically just for one customer that's not going to be taxable but anything that you're you're doing that's what they call can cost canned software instead of custom that's gonna be taxable so you kind of have to really if I were to give any you know advice I would say understand everything that you're doing break it out into different buckets and then look at each of those things to determine whether it's taxable or not because in software as a service there you know this company is a great example they were writing code they had canned software they did bulk billing and they had a subscription fee so that was just one example and then my last example is another tech company they're actually a pretty large telecommunications firm and what they did is they also wrote into the New York Department and they wanted to find out okay we're offering these online solutions for software basically VoIP which is voice over Internet Protocol and we don't know if we're taxable the reason why is every single thing they did was outside of New York they didn't have servers in New York they didn't have people in New York they didn't nothing all they had was the customers that were using their quote unquote service on servers that were not in New York and I thought it would be good because you know a lot of times you know we as businesses evolving a lot of stuff is being put up in the cloud and everything that's in the cloud or stored in the cloud has to be accessed somehow so in this advisory opinion you know the the company they didn't they don't really do their customers don't download everything every it's just like your email you type in your password and you log in so their product doesn't really move it just is the service of moving messages so you know like web conferencing and you know telephone webinars like what we're all on right now that is kind of what they were trying to find is all right well we charge a start-up fee we kind of charge for storage charges or any changes they want us to make to their system we kind of touch that but we don't really think we have Nexus because we don't really go in New York and we just have customers there well New York had a different way of putting it they said that all of the license fees were taxable as pre-written software even though that light that software was never downloaded so that was kind of epic and then also the startup fees were not taxable because they were associated with like some of the custom software but if the start-up fee was not associated with the custom software that became taxable so just just an interesting case that I thought was you know it all goes back down to how are you breaking out your billing and then what are you doing even the little thing between custom software versus a pre-written software makes a difference so that's that's kind of a summary for that and I'm gonna pass it over to Stacey in our Denver office and she's gonna go over the income tax ID for New York thanks Laura so yes I'm gonna change gears here for a few moments and talk about income tax of New York and some of you might be aware of New York and Comm taxation and that has in recent years well previously had been a little bit more complicated a few years ago they did enact some legislation and changing things where they tried to make it a little bit more uncomplicated however they do still have some nuances in their tax law and some things that we just want to make sure we highlighted for everybody today so first and foremost what is income tax mixes Jennifer had touched on this earlier but from an administrative and policy standpoint New York says that taxpayers have an income tax Nexus if they are doing business in New York which we'll talk about a little bit more what that means if they maintain an office in New York that they're owning or leasing property in New York if they're employing capital in New York and we'll talk a little bit more about that it's to or if they're deriving receipts from activity of New York and we'll talk more about that too so what is doing business so from an administrative standpoint what they what they determine as doing a business and these are just some examples and some things that they will take into consideration for taxpayers but basically they're going to look and see what the nature and frequency of the activities in the state why was the corporation organized and the location of the Corporations offices and other places of business they're going to look to see if there's an employment of agents officers employees in the state and then the actual seat of management so basically they're looking at the company's activities as a whole and not just a few activities on their own and what's employing capital well it is basically as it sounds it is basically using assets in the state and that can mean maintaining raw materials and inventories in the state or owning materials and equipment that's assembled for construction in the state and then as I mentioned before - there's the deriving receipts which goes back to what Jennifer had mentioned early on about factor presents and so that bright-line test that New York has is a where they say that if you have receipts of a million dollars or more in the taxable year then receipts of a million dollars or more in New York and the taxable year then you would be you have Memphis in New York they do have some special rules for credit card issuers as you can imagine with New York being quite a financial financial hot place credit card issuers have a lot of customers in New York so they put some rules around credit card issuers and the fact that they could have some different Nexus standards but I do want to highlight the last bullet here with respect to the million dollars of receipts because we have a situation where we could have a single taxpayer that would exceeds a million dollars and that's one thing however what if you have a group of taxpayers that file a combined return in New York which we will talk more about what that is but the way that New York employs that million dollar rule is that if you have a corporation that's part of a combined group and that corporation has between 10,000 and $1,000,000 receipts in New York then they look to all of the members of the group to determine whether they will in total meet or exceed the million dollar threshold on a combined basis to determine the nexus so that's some of the Nexus drivers I just want to you know highlight here on the factor presence and the fact that we've got this million dollar threshold suffice it to say that that is one test and so if you have you know capital in the state like I mentioned employing capital and some of the other physical presence standards that this million dollar threshold I wouldn't hang your hat on and necessarily okay so also complicating matters is our federal law public ID six to 72 which most everybody is probably familiar with and New York follows this for purposes of the income tax and we'll talk about all the different bases that they have to tax taxpayers however on their their income tax base they do employ public I to sixty seventy two so for those of you who may or may not know what that is just as a reminder if the only activities that a taxpayer has in New York is the solicitation of sales of tangible goods and those goods are those orders are approved and shipped from outside New York into New York then that income would be protected from income tax so they do follow that so just keep that in mind however it is a very limited exception it is limited to the sale of tangible goods and if you're doing anything that would potentially be an unprotected activity for example maintaining stock of goods in the state maintaining stock of goods in the state or providing services then that could kick you out of any public value sixty seventy two protection so it's very limited however it still is alive and well in New York does does use it interestingly enough from administrative standpoint New York does provide some examples of activities not creating access which some of these may be surprising to some of you on here but just a few things to keep in mind maintaining cash balances with banks or trust companies that might surprise some people that you know that you may have what's considered an intangible in the state however the state doesn't determine doesn't deem that to be Nexus creating you can need to maintain an office in New York by one or more officers or directors however those officers are directors not be an employee and obviously that corporation that that they are officer director of cannot be otherwise doing business in New York through those other activities that I mentioned employee capital owning property in the state etc also what's interesting is that taxpayers can participate in trade shows in New York for 14 days or less and the ones they're not doing anything out and we mentioned so they do actually have a bright line when it comes to trade shows again keep in mind is participating in trade shows so once you know let's say for example you start selling something at that trade show on the spot and that can put you into a different category however participation for 14 days or less is not being to exceed that nexus threshold so just some things to kind of keep in mind I think it's kind of nice that they do provide some examples however and these are not all-inclusive of course however we just have to be careful on not getting are not hang our hats on some of these and being careful about what our activities are and ow they may or may not meet these examples that are on this page okay so that's going to bring us to our next polling question so the for income tax purposes the state of New York does not follow public law 86 to 72 true or false answer is oh they do follow okay so now we're going to just jump into the corporate tax regime and well I'll talk about pass-throughs and a little bit but some of you like I said at the outset might be familiar with some of these tax bases that you you know has she's done business in New York or from New York returns some of you may be familiar with what used to be subsidiary capital base and I know that in my experience reviewing and preparing New York tax returns these returns to be it used to be I would say it more complicated when when they did pass a legislation a few years ago they did ease up on a few things however it's still they still have a lot of nuances and so I just want to touch on these of it nobody's surprised so three different tax bases using before now they have three business income base which is the net income based capital base and then the six dollar minimum and we'll talk a little bit more about each of these so business income base like I said the net income tax base so when we were talking about public ID 1672 this is the base that that would potentially apply here depending on your situation New York has a whole slew of different tax rates that will apply and not only for the business income base but for the other bases that I'm going to talk about as well for qualified New York manufacturers they have qualified emerging technology companies and small businesses these are all defined and very specific tax payers in New York so generally speaking you know most of the rest of the population and the rest of tax payers out there they're just kind of general C corporation tax payers doing business they fall into the last category at six and a half percent just for your information a qualified and merging technology company is actually some company that does a lot of Rd in New Yor and they have total product sales 10 million dollars or less there's some other rules around that but some examples could include computer integrated manufacturing robotics equipment micro processors medical and scientific instruments so again very specific and a qualified New York manufacturer is also very specific and then on the capital base so the capital base is kind of what it sounds like basically you're looking at your assets left your liabilities so your your net asset and then you're going to apportion that and then take it times the tax rate a quick note though is for what could comprise business capital is that you could have to include loans to twist the city airy if the sub is actually allowed to take an interest deduction for purposes of the New York franchise tax basically they're just saying that they don't believe it that loan that or that loan is really more equity and so therefore they want to they want that amount of the loan to be included in the capital base again depending on what type of entity you are you could have a different rate they have all these different rates all over the place and so for our manufacturers and our qualified emerging technology companies that's one thing for all other tax payers again kind of skip into that third bullet down for most of the you know the rest of the population the rates are actually fairly low and then just a note on small business taxpayers at the bottom small business taxpayers these are again this is a defined term they're actually exempt from the capital base tax in the first two years but what is a small business taxpayer maybe this could maybe apply to you or your clients but you'd have to have entire net income which is basically a just you know your new your new york adjusted income of less than or equal to three hundred ninety thousand you wouldn't may have to make sure that your equity is not an excess of a million dollars you'd have to have full-time employees of 100 or fewer and then not part of a billion Pervis defined under the IRC so again very specific however you know we do have taxpayers out there that do apply or do qualify for this and so it's good to know that there are some additional tax breaks that New York does provide for certain taxpayers and then the fixed $6 minimum so basically the $6 minimum is based upon and it's on the scale it's basically based upon your New York receipts so if your New York receipts range from a hundred thousand to over a billions and you're your $50 minimum could be $25 to $200,000 I'm going to talk a little bit more about s corpse in a bit when I when I talk about pass throughs but they have a different scale and so they're they're wrote their New York receipts the rates are just a little bit different then c-corp so you know something to keep in mind again they have some different $6 minimums you know depending upon whether you're one of the qualified emerging technology companies or new york manufacturer and and then they have some special rules around if you're a captive or I kind of read or a captive rent and what you know what your fixed dollar minimum would be for that interestingly enough they also have certain certain tax payers that might be in what they call innovation hotspots and they may only have to pay the fixed dollar minimum and to be in a bad you have to be certified by the state and there's a whole bunch of other qualifications but again just back to my point that New York does provide some breaks depending upon your industry and how big you are and so it's just something maybe keep in mind if you are going to enter the state and Deuce and you are in a certain type of Industry okay I mentioned escort having a different base or graduated scale so here's what that looks like I'm gonna talk a little bit more like I said about just kind of Oscorp taxation in general and I want to get to pass-throughs but so nice to say that they they're fixed dollar minimum thresholds are a little different okay and so some of you may also be aware that if taxpayers are doing business and what is termed the Metropolitan commuter transportation district that there's what's termed the Metropolitan Transportation business tax or this MTA surcharge that in addition to the other tax bases that I mentioned so this MTA MTA surcharge the rate is twenty eight point three percent for seventeen and then it jumps to twenty eight point six for 2018 don't expect that rates change however just you never know and then the base of the MTA surcharge is the New York state tax before credits the same primarily the same nexus standards apply to the MTA surcharge as they do for this state including the million dollar receipts threshold if you were wondering whether the MTA surcharge may apply to you this metropolitan commuter transportation district includes the counties of New York Bronx King kings queens Richmond Dutchess Nassau orange Putnam Rockland supple and Westchester so it very well could apply to you you know you're you're doing business in New York the other caveat here is that do not get this empty a surcharge confused with the New York City tax that's completely different and could also apply and we're you know we're only talking about New York State today so just suffice to say that don't forget about New York City because it very well could apply to you okay now on to our next polling question what is the current corporate income tax rate for regular C Corp taxpayers in New York all right yeah the majority's got it right and this was almost a little bit of a trick question so I apologize but six and a half percent is correct okay I'm going to go quickly over combined reporting because New York is a mandatory combined and reporting state if you've got taxpayers who are engaged in a unitary business and it's a water's edge combined reporting they have some carve outs for who's included and who's excluded typically if you are taxed when there's some different article then you would not be included in a combined return and article nine and article 33 years specific taxpayer taxpayers of fall under article 9 and article 33 are specific so article mine would include like transportation companies utilities telecom article 33 is insurance companies so those are taxed under or something else they pay a different tax but therefore they're not part of a would not be part of a unitary group and then somebody who may be familiar with how over time New York had they were not mandatory unitary and then they changed their regime a little bit several years ago and one of the things that they really honed in on and they technique they typically still do for purposes of unitary our substantial inter corporate transaction but basically when you're trying to determine whether your unitary some of these wasn't some of these items that I have on this slide here would be what they would look at to determine whether your unitary and a lot of it is just what it what are you what are you doing with your be related companies in the group you know are you selling good back and forth you know our employees performing services on behalf of each other you do have common facilities are you transferring assets including accounts receivable trademarks etc between companies and then they also look at our tax payers actually engaged in the same or related lines of business which is fairly common for our unitary States but these this is not an exhaustive list and what they look at to determine whether you're going to Terry but these are just some things that they definitely highlight in their regs and in their statutes that they look at to determine unitary from an enforcement standpoint New York is a single sales factor Laura meant introduced TPP earlier and that's a tangible personal property type typically source to destination New York does not have a throwback rule so if you're not taxable as jurisdiction in which the items are shipped then it doesn't have to come back to New York sales of services are typically sourced to where the benefit is received which means a lot of different things to a lot of different states but they tend to view it as where that sort where that service is delivered and then that's in New York then that would be sourced to New York similarly for sales of digital products interestingly enough they have a special rule on that that if the customers primary use of location of that digital product occurs in New York then that would be that would be sourced to New York again location where the digital product is received so that's what they typically look at and that's that occurs in New York that that sale of the digital product would be sourced in New York a couple notes about pass-throughs we do have a situation where they are particularly for our partnerships our limited partnerships our limited liability partnerships our LLC's are active partnerships they have an annual filing fee which looks a lot like the $6 minimum tax and it's and is based upon your New York gross income so whatever you've sourced in New York and again on this graduated scale here so don't forget that our blow throughs are subject to this be a couple notes about escorts there is a separate S corp election in New York that's not typical for all the states but please don't forget that New York does have a separate election and they have some specific rules around it that a corporation may elect to be in New York s only if it means these qualifications that again has to be a federal escort already so that makes a lot of sense the corporation is an eligible corporation and then all of the Corporations shareholders have to agree to make the New York s election that election is due on or before the 15th day of the third month of the year the election is to apply so if you wanted it to be effective for 18 it would have been due 3:15 if your calendar year if that election is not accepted or it's not made then that S corp is taxed as a regular C Corp so this sometimes can be surprising for some of our taxpayers out there there are some limited circumstances where retroactive elections can be made we have lots of tax payers that we help even do voluntary disclosures in New York and that's one of the things that you can do is you can go go back as part of the VDA process and be an S for New York if you're an S for fun and then I mentioned earlier but if you are a ballad New York S corp you've made that election then you're subject to the $6 minimum and I had mentioned that in a few earlier slides so just want to make sure everybody's aware about that S corp election because that can be missed and again now we're back to or now we're on to our next polling question which is New York imposes which taxes on pass-through entities the $6 minimum and annual filing fee all of the above or none of the above and keep in mind that this says pass-through entities so that includes everybody and I know we're running out of time and I just want to mention something about tax reform because New York has enacted legislation it's you know it's most of you are probably aware it's you know the states are trickling in and what they're going to do with this and the guidance is sometimes good sometimes bad but or not necessarily good and bad but it's sometimes clear sometimes not so clear and New York has enacted legislation to decouple from the standard and itemized deductions for on the personal side and then they also have expanded the definition of exempt CFC income so if you've got income coming in that's 965 related it's possible that you may not have to include that in taxable income and get taxed on it so just keep that in mind that is something that we're following and on our holy question majority everybody got it right 70 percent all of the above so I'm going to now turn it over to Jennifer who's going to quickly talk to us about closing out of business all right Suzy Thank You Stacy just really quickly just wanted to touch on a couple of things basically you know the steps are about the same if you're going to you know no longer going to be doing business in this state and really what that means is I mean not only would you not have employees there anymore I mean you truly are not doing business in the state anymore you're not planning to have any activity in the state not planning to make sales to customers in the state so if that is truly your case we want to surrender the authority to stiphu get us part of authority excuse me make sure that all outstanding tax returns out tax liability everything is paid including any penalties any interest make sure that everything is paid and submitted into the state there is a form that is the surrender of authority for foreign corporations if that is applicable the tr1 93.1 and once you submit everything into the states the city will actually provide a a written response they will provide a written consent saying that everything has been filed everything has been paid and in the entity is now could be withdrawn from the state or looking no longer be transacting business their certificate of authority is no longer valid in them so that certificate would need to be destroyed but just keep in mind that until you get that written notice you know you you still are technically registered and one thing on the sales tax side just keep in mind that even if you've ceased doing business but you are still registered with the Department of Taxation you must continue to file your sales and sales and use tax returns until the business is officially discontinued and that is even if you don't have any you don't have any taxable sales or you don't own any tax there's still that requirement to file the return so if you haven't those would be outstanding and there could be some penalties for that so just wanted to quickly touch on that and I think with that we will wrap up our presentation so on behalf of Stacey and Lauren myself we want to thank you all for joining us today I hope that having some good information on New York and if there are any questions I think Tara we can open it up for questions now or if you've our contact information should be included here and if you feel free to email us if you have any questions after the presentation