New York Sales Tax Nexus
New York Risk Profile
The Trigger: $500,000 in gross sales AND 100 separate transactions.
(Note: Unlike most states, New York requires BOTH thresholds to be met. However, the $500,000 is one of the highest in the country.)
Physical Nexus: Standard triggers apply (offices, employees, inventory). New York pioneered “Click-Through Nexus”—if you have affiliates in the state referring more than $10,000 in sales, you have physical nexus.
Effective Date: June 21, 2018 (Post-Wayfair).
Look-back Exposure: Generally 3 years. New York is NOT a member of the Streamlined Sales Tax (SST) agreement and is widely considered one of the most aggressive states in the country for sales tax audits.
Danger Level: SEVERE (The Audit Risk)
New York’s Department of Taxation and Finance is legendary for its data-mining capabilities. They frequently cross-reference marketplace data and customs records to find out-of-state businesses that have failed to register despite meeting the high $500,000 threshold.
The Trap: The $110 Clothing Rule
New York has a unique “per item” exemption for clothing under $110. This applies to the state tax and some—but not all—local taxes. If your tax software isn’t perfectly calibrated for New York’s specific local jurisdictions, you will almost certainly under-collect or over-collect, which is a primary target during audits.
New York State Tax Nexus Summary
New York has some of the most complex and strictly enforced tax laws in the nation. While its economic threshold is higher than the national average, its enforcement is far more intense.
Sales Tax Nexus
Remote sellers and marketplace facilitators establish nexus in New York if they meet BOTH of the following criteria in the immediately preceding four sales tax quarters:
- Economic Threshold: More than $500,000 in gross sales of tangible personal property delivered into New York.
- Transaction Threshold: More than 100 separate transactions delivered into the state.
Physical nexus is triggered by an office, remote employees, or inventory stored in a New York warehouse (including Amazon FBA). New York also enforces Click-Through Nexus for referral sales exceeding $10,000.
Income Tax Nexus
New York imposes a corporate franchise tax. A corporation generally establishes economic nexus for income tax if its New York-sourced receipts exceed $1.138 million (adjusted for inflation). New York City maintains separate and additional tax requirements for businesses operating within its limits.
Taxability of Clothing and SaaS
New York offers a state tax exemption for clothing and footwear priced under $110 per item. However, the state is aggressive in taxing digital products; Software-as-a-Service (SaaS) is generally treated as taxable prewritten computer software.
Conclusion
Because New York is not an SST member, they do not follow uniform definitions used by other states. We recommend a meticulous review of your New York sales quarter-by-quarter, as the state frequently audits remote sellers who cross the $500,000 mark.
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