New York State Taxes For Small Businesses: An Overview

  • Accracy
  • 26th Nov, 2023

If you're doing business in the State of New York, in addition to paying federal taxes to the IRS, you'll also have to pay New York State taxes to the Department of Taxation and Finance.

New York State Taxes For Small Businesses: An Overview
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Most New York State businesses are charged either a corporation franchise tax or a filing fee depending on what kind of business entity they're operating. Income from pass-through entities is also subject to the New York State income tax. On top of all that, companies doing business in the city of New York also pay city-specific taxes.

Calculating and paying your taxes in New York can be complicated. Here's how to figure out which ones you need to pay and how much.

The corporation franchise tax

Franchise taxes—or, as they're known in some states, privilege taxes—are taxes that you pay for the privilege of doing business in that particular state.

New York's corporate franchise tax applies to both C and S corporations. To calculate and pay it, you must fill out and file Form CT-3, your New York corporate tax return.

For many businesses, this tax ends up being somewhere around 6.5% of their business income earned in New York. But calculating your exact New York State corporation taxes can take some work.

First, you have to calculate three different amounts:

  1. Your tax on business income
  2. Your tax on capital
  3. Your fixed dollar minimum tax

The final amount that you pay is equal to whichever of these amounts is the greatest.

Calculating tax on business income

Your federal taxable income (FTI) is the starting point for calculating your New York State business income. You can find it on line 28 of your Form 1120, the federal tax form corporations use to report their income to the IRS.

(If you used IRS Form 1120-REIT, 1120-RIC, 1120-C or any other Form 1120 variants to report your corporate taxes instead, consult the instructions to Form CT-3.)

You must then make certain "˜New York State additions and subtractions' to your FTI on lines 2 and 4 in Part 3 of form CT-3.

These adjustments involve things like depreciation, royalty payments, and interest income on U.S. bonds, which are computed using Form CT-225 and are covered in-depth in the instructions to that form.

If you're a multi-state corporation, your final adjustment is to multiply this adjusted amount by the New York apportionment factor, which is calculated in Part 6.

This is the longest and most complicated section of CT-3, and you should have a tax professional help you with it. (See page 17 of the instructions to CT-3 for a full rundown of Part 6.)

Adjusting your federal taxable income in this way will give you your total New York State business income.

Finally, you must multiply your total New York State business income by one of the rates on the tax rates schedule on page 9 of the instructions to Form CT-3-I. Keep in mind that:

  • For most businesses, this rate is 6.5%
  • A lower rate of 4.875% applies to certain qualified emerging technology companies (QETCs)—emerging technology companies that make less than $10 million a year and have been certified by the Commissioner of Taxation and Finance after filing form DTF-620 (instructions)
  • Some qualified New York manufacturers pay a tax rate of 0%

Calculating tax on capital

This tax is based on your total business capital base, which is the fair market value (FMV) of all the assets and investments your business owns in New York State.

(The fair market value of an asset is the price that asset would command if you sold it in the open market.)

You calculate your business' capital base in Part 4 of Form CT-3. Most of the information you need for this step will come from your business' balance sheet. For step by step instructions to completing Part 4 of CT-3, consult Page 16 of the instructions to Form CT-3.

Once you do that, you must multiply your total business capital base by one of the tax rates located on the tax rates schedule on page 9 of the instructions to Form CT-3-I.

  • For most businesses, this rate is 0.025%
  • For some qualified New York manufacturers and QETCs the rate is 0.019%

Calculating fixed dollar minimum tax

This tax is based on a business' New York State receipts—that is, only the money it earns doing business in the state.

You'll calculate this in Part 6 of Form CT-3.

When you complete Part 6, the left hand column of line 55 should contain your total New York receipts. Use that number and the following schedule to determine your fixed dollar minimum tax:

Total New York receipts Fixed dollar minimum tax
Not more than $100,000 $ 25
More than $100,000 but not over $250,000 $ 75
More than $250,000 but not over $500,000 $ 175
More than $500,000 but not over $1,000,000 $ 500
More than $1,000,000 but not over $5,000,000 $ 1,500
More than $5,000,000 but not over $25,000,000 $ 3,500
More than $25,000,000 but not over $50,000,000 $ 5,000
More than $50,000,000 but not over $100,000,000 $ 10,000
More than $100,000,000 but not over $250,000,000 $ 20,000
More than $250,000,000 but not over $500,000,000 $ 50,000
More than $500,000,000 but not over $1,000,000,000 $ 100,000
Over $1,000,000,000 $ 200,000

Similar to the other two tax types, qualified New York manufacturers and QETCs follow a different schedule:

New York receipts Fixed dollar minimum tax
Not more than $100,000 $ 19
More than $100,000 but not over $250,000 $ 56
More than $250,000 but not over $500,000 $ 131
More than $500,000 but not over $1,000,000 $ 375
More than $1,000,000 but not over $5,000,000 $ 1,125
More than $5,000,000 but not over $25,000,000 $ 2,625
Over $25,000,000 $ 3,750

Finishing the calculation

Once you've calculated the above three taxes, pick whichever amount is the greatest and input it into line 2 of Part 2 of Form CT-3.

This is your total New York corporation franchise tax amount.

Remember to file for S corporation status

"˜S corporation is a special federal tax status' granted by the IRS. A corporation meeting the qualifications can get it by successfully filing IRS Form 2553. If you've done this, many states will recognize your S corporation status when you file your state taxes. New York State however, will not.

Even if you have successfully filed a Form 2553 with the IRS, you must file another separate form with New York State to be considered a New York S corporation: Form CT-6 (instructions).

If you fail to file a CT-6, you will be taxed like a traditional C corporation, which pays a slightly higher New York franchise tax than S corporations do and misses out on the other tax advantages of S corps.

Further reading: S Corps vs C Corps: Advantages and Disadvantages

The filing fee

Partnerships, LLCs and LLPs doing business in the State of New York don't pay the corporation franchise tax. They instead are required to pay an annual filing fee, which is based on their New York gross income.

Your New York gross income is similar to the federal gross income you reported on line 1c of your partnership tax return, IRS Form 1065. The difference is that it's adjusted to only account for income you earn doing business in New York State.

You make these adjustments using the aptly named "˜New York source gross income worksheet,' which you can find on page 8 of the instructions to Form IT-204.

You must then record your New York gross income on Form IT-204-LL and use the following schedule to determine your filing fee (from the Form IT-204-LL instructions).

Your LLC or LLP's New York gross income The filing fee you pay
Not more than $100,000 $ 25
More than $100,000 but not over $250,000 $ 50
More than $250,000 but not over $500,000 $ 175
More than $500,000 but not over $1,000,000 $ 500
More than $1,000,000 but not over $5,000,000 $ 1,500
More than $5,000,000 but not over $25,000,000 $ 3,000
Over $25,000,000 $ 4,500

Regular partnerships pay a $500 filing fee if gross income is $1,000,000, and $0 if their gross income is less than that.

If gross income is more than $1,000,000, they use the following schedule:

Your Partnership's New York gross income The filing fee you pay
More than $1,000,000 but not over $5,000,000 $ 1,500
More than $5,000,000 but not over $25,000,000 $ 3,000
Over $25,000,000 $ 4,500

New York State income tax

Self-employed workers, independent contractors and sole proprietorship New York businesses might not have to pay the corporation franchise tax or the filing fee. But they do still have to pay personal income tax on the income they earn, which ranges from 4.00-8.82%.

To calculate and pay your NYS income tax, you'll have to file your New York resident tax return, Form IT-201 (or Form IT-203 if you're a nonresident, or only live in New York for part of the year).

If your annual income is between $0 and $65,000, use the NY tax table on page 49 of the instructions to Form IT-201 to calculate your income tax.

If it's between $65,000 and $107,650, use the tax rate schedule on page 57 to calculate it.

If it's over $107,650, use the tax computation worksheets on page 58 to calculate it.

New York State business taxes: a brief overview

Business Entity Type New York State Taxes You Need to Pay Applicable New York State Tax Forms Federal Tax Forms You'll Need To Refer To
C corporation Corporation Franchise Tax Form CT-3, Form CT-225 Form 1120, Balance sheet
S corporation Corporation Franchise Tax Form CT-3, Form CT-225, Form CT-6 Form 1120-S
Partnership, LLC, LLP Filing fee Form IT-204-LL IRS Form 1065
Individual/sole proprietor Income Tax Form IT-201 IRS Form 1040

The MCTMT

The Metropolitan Commuter Transportation Mobility Tax (MCTMT) is a tax imposed on certain employers and self-employed individuals doing business in the Metropolitan Commuter Transportation District (MCTD), which includes the counties of:

  • New York (Manhattan)
  • Bronx
  • Kings (Brooklyn)
  • Queens
  • Richmond (Staten Island)
  • Rockland
  • Nassau
  • Suffolk
  • Orange
  • Putnam
  • Dutchess
  • Westchester
MCTD Map New York State

*Map of the MCTD generated using [https://mapchart.net/usa-counties.html](https://mapchart.net/usa-counties.html)*
If you're an **employer**, the MCTMT kicks in if your total payroll expenses for employees working in the MCTD exceed $312,500 in any calendar quarter. You pay the following rates:

Payroll expense MCTMT Rate
Over $312,500 but not over $375,000 0.11% (.0011)
Over $375,000 but not over $437,500 0.23% (.0023)
Over $437,500 0.34% (.0034)

If you owe MCMT taxes, you must pay them quarterly according to the schedule on the New York State Department of Taxation and Finance website.

If you're self-employed, the MCTMT kicks in when your net earnings from doing business in the MCTD exceed $50,000. The tax rate you pay on those earnings is 0.34%.

If you're self-employed and expect to owe any MCTMT this year, you must make quarterly payments towards it on the same days as your quarterly estimated income tax payments are due (see below).

Quarterly payments

Similar to the quarterly payments you make to the IRS, individuals and business entities must make estimated tax payments if you expect to owe $300 or more in New York State taxes this year.

For individuals, if you expect to owe $300 or more, your 2022 quarterly New York State income tax estimates are due on the following dates:

NYS income tax estimates Payment due date
Payment 1 April 18, 2022
Payment 2 June 15, 2022
Payment 3 September 15, 2022
Payment 4 January 17, 2023

If you're a corporation and you expect to owe more than $1,000 in franchise tax, in addition to making quarterly payments, you must also file the estimated tax form for corporations, Form CT-400.

Payments for New York State business corporation franchise tax are due on the following dates in 2022 for calendar year taxpayers:

NYS corporation franchise tax estimates Payment due date
Payment 1 March 15, 2022
Payment 2 June 15, 2022
Payment 3 September 15, 2022
Payment 4 December 15, 2022

If your business follows a fiscal year, your first payment is due three and a half months after your fiscal year end.

Tax deductions

The standard deduction amount available to New York State residents filing their 2021 state tax return (filed. in2022) depends on their filing status:

Filing status Standard deduction amount
Single (and can be claimed as a dependent on another taxpayer's federal return) $3,100
Single (and cannot be claimed as a dependent on another taxpayer's federal return) $8,000
Married filing joint return $16,050
Married filing separate return $8,000
Head of household (with qualifying person) $11,200
Qualifying widow(er) $16,050

How do I file and pay my NYS taxes?

New York State encourages businesses and individuals to file their personal returns online through one of the e-filing partners listed on this site.

The due date for filing and paying your 2021 New York personal and corporate tax return is April 18, 2022.

The due date for Form IT-204-LL (the form for Partnerships, LLCs, LLPs) is 3.5 months after the fiscal year end. (If the fiscal year end is December 31st, this due date will fall on March 15.)

Form CT-3 and tax payments for corporations are due 3.5 months after their fiscal year end as well, and the filing date may be extended by 6 months. (Payment remains due by the 3.5 month date, however.)

New York City taxes

If you're located in New York City, in addition to the state taxes we discussed above, there are a few city-specific taxes you have to pay as well.

These are collected by the City of New York Department of Finance, and you'll have to file a separate return for them.

New York City general corporation tax

Your NYC corporate tax rate is similar to the state franchise tax we discussed above. Similar to that tax, it's equal to the highest of:

  1. Your New York City tax on business income
  2. Your New York City tax on capital
  3. Your New York City fixed dollar minimum tax

Unincorporated Business Tax (UBT)

This is a 4% tax imposed on owners of some unincorporated businesses in New York City. Read more about the UBT here.

Yonkers tax

On top of all the other taxes we listed above, people who live or work in Yonkers might also have to pay the Yonkers income tax, which you calculate using the "˜Yonkers worksheet' on page 26 of the instructions to Form IT-201.

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