New York City updates corporate tax nexus standards

On August 31, 2022, New York Governor Kathy Hochul signed SB 9454, which aligns New York City’s Connection Standards with New York State’s Economic Connection Standards. For tax years beginning on or after January 1, 2022, businesses have a New York City connection and are subject to the city’s corporation tax if they have at least $1 million in revenue of New York City. A corporation is also related if it has less than $1 million in revenue in New York, but has at least $10,000 in revenue in the city and is part of a unitary group that has at least $1 million in recipes in New York. Grants received from the New York State and City COVID-19 Small Business Relief Programs do not count toward New York City’s revenue threshold.

There is an additional nexus threshold for businesses that are in the business of issuing credit cards or contracts with merchant customers. Under existing law, New York’s nexus threshold was met for companies that had issued either (1) credit cards to at least 1,000 customers with a mailing address in the city, (2) contracts merchant customers with at least 1,000 or more merchants located in the city, or (3) any combination of these two factors that total up to 1,000 customers. Under the new law, for businesses that do not meet the threshold on their own, New York City tie-up may also be satisfied if the businesses have at least (1) 10 customers with a mailing address in the city. , (2) merchant customer contracts with at least 10 merchants located in the city, or (3) any combination of these two factors that add up to 10 customers, and are part of a unitary group whose members as a whole satisfy the threshold of 1,000 customers mentioned above.

Eversheds Sutherland sighting: Out-of-state businesses operating in New York without a physical presence, or New York businesses that have been subject to New York State but not New York City corporation tax, will be required to review their New York business to determine if their New York business can now link.

In addition to the nexus provisions, the bill provides that New York State taxes paid on the basis of profits or income shall not reduce New York City’s aggregate net income subject to the ‘tax. For entities that choose to pay state and city taxes at the entity level, these optional taxes also do not reduce the entity’s entire net income for purposes of determining its general tax on New York corporations or bank corporation tax payable.

Luisa D. Fuller