New York State imposes a sales and use tax on the sale, rental, or use of tangible personal property, as well as on certain services. This means that most goods you buy, whether in a store or online, and some services like repairs or installation, may be subject to taxation. For businesses, this tax must be collected from customers and remitted to the state, while consumers may also be responsible for use tax on out-of-state purchases. Understanding how sales and use tax works is essential for both businesses and individuals to stay compliant with state tax laws, avoid costly penalties, and accurately plan for expenses.
Sales Tax in New York
The New York State sales tax applies to most tangible goods and certain services purchased within the state, including items like electronics, clothing over certain amounts, furniture, and some repair or installation services. As of 2025, the statewide base rate is 4%, but local counties and cities can add their own sales taxes, resulting in a total combined rate of up to 8.875% in some areas, such as New York City.
Retailers are legally responsible for collecting sales tax from customers at the point of sale and remitting it to the New York State Department of Taxation and Finance. Businesses must also track taxable versus exempt items and ensure proper reporting to avoid fines or audits.
Use Tax Explained
The use tax is a tax that goes hand in hand with sales tax. It is for people who willingly and knowingly purchase taxable goods outside New York and then bring those goods into New York and use and/or store them within New York. It equalizes tax consequences on purchases made from within and outside New York and stops businesses and consumers from avoiding taxes by making purchases in other states.
Example: If you are a New York resident and purchase office equipment from an out-of-state vendor with no New York sales tax charged, you owe New York use tax on that transaction. Businesses are supposed to self-report use tax, while New York residents may have an obligation to report and pay use tax on certain purchases made over the internet or by mail.
There is little risk of incurring use tax liabilities, and consumers and businesses can more easily budget for expenses, if there is an understanding of both the sales tax and use tax.
Who Must Pay Sales and Use Tax
- Consumers pay the tax at the time of purchase.
- Businesses must collect sales tax on taxable items and report it to the New York State Department of Taxation and Finance.
- Businesses that make taxable purchases from out-of-state vendors must also self-assess and remit use tax.
Exemptions and Special Cases
Not all purchases in New York are subject to sales or use tax. Certain items are exempt, meaning buyers do not have to pay tax on them. Common exemptions include:
- Most groceries such as fresh produce, bread, and dairy products
- Prescription medications and some over-the-counter drugs
- Clothing and footwear under $110 per item
- Medical equipment in certain cases
- Purchases by nonprofit organizations, government agencies, and other tax-exempt entities
Businesses can also apply for a resale certificate if they intend to sell goods to customers without collecting sales tax. This allows for tax-free purchases of items that will be resold, preventing double taxation.
Special cases may include temporary exemptions, such as sales tax holidays or exemptions for specific events, which businesses and consumers should monitor to take advantage of tax-saving opportunities.
Filing and Compliance
Businesses in New York must file sales and use tax returns based on the volume of their taxable sales:
- Monthly for large-volume sellers
- Quarterly for medium-volume sellers
- Annually for small-volume sellers
Proper filing ensures that taxes collected from customers are remitted to the state on time. Failing to collect, report, or pay sales or use tax can result in penalties, interest charges, or audits by the New York State Department of Taxation and Finance.
Why Understanding Sales and Use Tax Matters
Understanding New York’s sales and use tax rules is essential for both consumers and business owners. Consumers benefit by knowing which purchases are taxable, which are exempt, and when they may owe use tax on out-of-state purchases. Businesses benefit by ensuring proper tax collection, avoiding costly penalties, and maintaining accurate records for compliance and financial planning.
FAQ
What is a use tax vs sales tax?
Sales tax is collected by retailers when you purchase taxable goods or services within New York State. Use tax applies when you buy taxable items outside New York (for example, online or in another state) but use, store, or consume them in New York. The use tax ensures out-of-state purchases are taxed fairly, similar to in-state purchases.
Example:
- Buying a laptop in New Jersey without paying NY sales tax → You owe use tax in NY.
- Buying the same laptop in a NY store → The retailer collects sales tax at checkout.
What is non-taxable merchandise in New York?
Non-taxable merchandise refers to items that are exempt from New York sales and use tax. These items are legally not subject to taxation when purchased for personal or business use.
Common examples include:
- Most grocery food and beverages
- Prescription and certain over-the-counter drugs
- Clothing and footwear under $110
- Certain medical equipment
- Items purchased by qualified nonprofits or government agencies
What can I buy without tax in New York?
You can buy certain goods without paying sales tax if they fall under NY exemptions.
Examples of tax-free purchases:
- Groceries such as fruits, vegetables, dairy, and bread
- Prescription medications
- Clothing and footwear priced under $110 per item
- Items for resale (with a valid resale certificate)
- Equipment purchased by tax-exempt organizations
Tip: Always check whether a specific product or purchase qualifies as exempt to avoid unexpected tax liabilities.
If you’re unsure which of your New York transactions are taxable or worried about hidden use tax exposure, Dimov NYC CPA can review your records, set up compliant systems and help you avoid costly penalties or audits. Contact us today for 360-degree professional support.
