Key Sales Tax Provisions in New York’s 2017-2018 Budget

This is Part 2 of a multi-part series on the new New York State Budget. Please click to read Part 1 and Part 3. and Part 4.

The 2017-2018 Budget (“Budget”) signed by New York Governor Andrew Cuomo on April 10, 2017 modified a number of key New York sales/use tax provisions, including the following:

• New York tax law has been amended to provide that the “retail sale” of tangible personal property includes a sale to a single member limited liability company or subsidiary for resale to its member or owner where the entity is disregarded for federal tax purposes. Similar rules apply to sales to a partnership or trustee. This amendment is intended to address taxpayers that avoid New York sales tax by purchasing high-dollar value property exempt from sales tax as a resale transaction and subsequently leasing the same property to a member or owner using long-term leases or lease payments that are a small fraction of the fair market value of the property.
• The Budget also narrows the nonresident use tax exemption by providing that the exemption does not apply to non-individuals unless that entity has been doing business outside of New York for at least 6 months prior to the date the entity brought the property or service into New York. The amendment also removes aircraft from the definition of qualified property for purposes of the exemption. This provision is intended to curtail the avoidance of sales tax by forming new entities to purchase property outside of New York and subsequently bringing the property into New York. The amendment is not intended to affect the ability of individuals or ongoing businesses to move to New York without incurring use tax on property or services brought into New York (i.e., the nonresident use tax exemption will continue in such circumstances).