When it comes to New York sales tax, size matters. Or at least it will if Assembly Bill 8256 becomes law.
A.B. 8256 is a pint-sized powerhouse. In just two paragraphs, it reduces the sales tax rate for retail sales of tangible personal property sold by a qualifying small business from the standard state rate of 4% to 2.5%.
To qualify for the reduced rate, a business must:
- Be resident in New York state
- Be independently owned and operated
- Be "not dominant in its field"
- Employ 50 persons or less
- Earn less than a to-be-determined amount in gross sales tax revenue
The reduced rate would not apply to sales of alcoholic beverages, cigarettes and tobacco products, firearms (including rifles and shotguns), motor fuel, or any other product or class of product taxed at a specific rate under Section 1105 of New York law.
Local sales tax isn’t mentioned in the bill and presumably would apply to sales subject to the reduced state rate.
Being able to charge a lower rate would give qualifying small businesses a competitive edge over nonresident businesses and larger businesses located in the state. That could prove problematic. “The in-state residency requirement could lead to a legal challenge by a similar out-of-state business who is required to collect at the higher rate,” notes Scott Peterson, VP of Government Relations at Avalara. “The state would have to prove there was a state interest that justified unequal treatment.”
If enacted, the lower rate would take effect on the first day of January after the bill becomes law.
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