When Do New York Sales Tax Rates Change?
- Mar 14, 2014 | Gail Cole
When can sales tax rate changes occur in the Empire State of New York? Once a rate change has been announced, when should the new New York sales tax rate be applied? What about transactions that are “outside the box” of normal “pay for item at time of sale” sales?
Local jurisdictions in New York typically change local sales and use tax rates on March 1, September 1, or December 1. According to New York Department of Taxation and Finance tax bulletin ST-895, new rates are generally applied to all taxable transactions on the day of the rate change, and subsequently. For example, a book purchased just after midnight on March first would be subject to the rate that took effect on March 1.
Of course, it just wouldn’t be sales tax if there weren’t at least one exception to the rule. In this case, there are a few.
When an item is purchased on layaway, the seller transfers the title of the merchandise to the purchaser at the time of the first payment, but does not transfer the actual merchandise until the final payment.
When a sales tax rate increase takes place while an item is on layaway, the prior lower rate applies to the sale if all of the following conditions are met:
- A written agreement for the sale is made and the item sold is segregated from other similar inventory a minimum of four months prior to the rate increase; and
- The purchaser paid at least 10% of the sales price before the effective date of the rate increase.
If the above conditions are not met, the purchaser must pay the sales tax rate in effect “when the customer makes final payment and takes delivery of the merchandise.”
In the event a sales tax rate decrease occurs while an item is on layaway, “the sales tax is due at the new lower rate in effect when the customer takes delivery of the merchandise.” No special conditions apply.
Utility bills based on meter readings
Sales tax rate changes sometimes occur in the middle of a utility billing period. When that happens, the rate applied to that billing period “depends on the number of days during the period before and after the effective date of the rate change.” If more than half of the days in the billing period fell under the old rate, the old rate applies to the whole bill. If more than half of the days in the billing period took place under the new rate, the new rate applies to the whole bill.
The taxation of telephone bills is a bit different. As the Department of Taxation and Finance explains:
“Charges for services provided on or after the date of the first bill issued to the customer after a rate change takes effect should be calculated at the new tax rate.
Charges for services furnished before the date of the first bill issued to the customer after a rate change should be calculated at the prior rate, even though the service may have been provided after the effective date of the rate change.”
Confused? The tax bulletin provides several examples to help illustrate how to handle rate changes.
It also clarifies how rate changes impact the following businesses:
- Telephone answering services;
- Social and athletic club dues;
- Admissions; and
- Hotel occupancy.