On August 31, 2022, New York Governor Kathy Hochul signed S.B. 9454, which aligns New York City’s nexus standards with New York State’s economic nexus standards. For tax years beginning on or after January 1, 2022, businesses have nexus with New York City and are subject to the City’s business corporation tax if they have at least $1 million in New York City receipts. A corporation also has nexus if it has less than $1 million in New York City receipts, but has at least $10,000 in receipts within the City, and is part of a unitary group that has at least $1 million in New York City receipts. Grants received from the New York State and City’s COVID-19 small business relief programs do not count toward the New York City receipts threshold.
There is an additional nexus threshold for companies in the business of issuing credit card or merchant customer contracts. Under the existing law, the New York City nexus threshold was satisfied for companies that have issued either (1) credit cards to at least 1,000 customers with a mailing address in the city, (2) merchant customer contracts to at least 1,000 or more merchants located in the city, or (3) any combination of these two factors that add up to 1,000 customers. According to the new law, for those companies that do not meet the threshold on their own, New York City nexus can also be satisfied if the companies 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 in the aggregate satisfy the above-referenced 1,000 customer threshold.
| Eversheds Sutherland Observation: Out of state businesses operating in New York City without a physical presence, or New York businesses that have been subject to New York State but not New York City business corporation tax, will need to review their activity in New York City to determine whether their activities in New York City may now create nexus. |
In addition to the nexus provisions, the bill provides that New York State taxes paid based on profits or income do not reduce an entity’s New York City entire net income subject to tax. For entities electing to pay the state and city pass-through entity-level taxes, those optional taxes also do not reduce the entity’s entire net income for purposes of determining its New York City general corporation tax or banking corporation tax liability.