Three at the same time is possible
New York City charges you under a different tax depending on how you are organized, where you rent and what you sell. You can owe three at the same time.
Key takeaways
By entity, three different corporate taxes
Unincorporated businesses pay the unincorporated business tax and S corporations pay the general corporation tax. C corporations have paid the business corporation tax since 2015, not the general corporation tax.
The rent tax is usually the surprise
Rent commercial space in Manhattan south of 96th Street and you may owe the commercial rent tax. The City charges it to you rather than to your landlord, and your lease may say nothing about it.
Have us sort which ones apply to you
Tell us how the business is organized and where it operates and we will tell you what it files and when. Call (212) 641-0673 or use the contact form. We come back within 24 hours, and we are available evenings and weekends. Confidential, and handled by a CPA or EA, not a call center.
How the taxes fit together
Different tax, different trigger, different calendar
New York City charges you under a different tax depending on how you are organized, where you rent and what you sell. You can owe three at the same time and register for each one separately.
Each of these taxes has its own trigger, its own form and its own calendar. The City administers them separately, so you register for each one on its own.
01By how you are organized
Which tax you pay, by how you are organized
City tax by entity type, and where to read further
| How you are organized | The City tax | The form | Where to look next |
|---|---|---|---|
| Sole proprietor, partnership, LLC not taxed as a corporation | Unincorporated business tax | NYC-202 or NYC-204 | Who has to pay the UBT | How to avoid UBT in NYC |
| S corporation, or a qualified subchapter S subsidiary | General corporation tax | NYC-3L or NYC-4S | NYC corporate tax overview |
| C corporation, and most other corporations | Business corporation tax | NYC-2 | NYC corporate tax overview | Corporate & partnership tax services |
| Any of the above, renting in Manhattan below 96th Street | Commercial rent tax | CR-A | Commercial rent tax |
| Any of the above, selling taxable goods or services | State and local sales tax | ST-100 series | NYC sales tax basics |
You can appear in more than one row. A Manhattan design studio organized as an LLC, with a showroom and a $300,000 lease, files NYC-202/204, CR-A, and ST-100.
02What people get wrong
New York City moved C corporations out of the general corporation tax in 2015
What people get wrong
The general corporation tax is not the return most C corporations file
The belief.
If your corporation does business in New York City, it pays the general corporation tax.
What is true.
That was right until the end of 2014. From tax years beginning on or after 1 January 2015 the general corporation tax applies only to S corporations and qualified subchapter S subsidiaries. Everything else moved to the business corporation tax under subchapter 3-A, filed on Form NYC-2.
Why it costs money.
You have filed the wrong return, not an approximately right one. And the rules differ underneath: since 2022 the business corporation tax has included economic nexus, so a corporation with no office or staff here can still be inside it on receipts alone.
03Commercial rent tax
Who pays the NYC commercial rent tax
The City charges the nyc commercial rent tax to you as the tenant, not to your landlord. Your landlord has no obligation to collect it or to mention it, and your lease may say nothing about it. Many tenants first hear of it when the City writes asking why no returns have been filed.
You owe the tax where all three of these apply.
- You rent premises in Manhattan south of the center line of 96th Street. Manhattan only, and the City draws the boundary at the center line rather than at either sidewalk.
- You pay annual or annualized gross rent of at least $250,000. The City annualizes it, so a lease starting mid-year is measured as though it ran the full year.
- You do not qualify for an exemption. Those include short rental periods, residential subtenants, use for theatrical productions, not for profit status, premises in the World Trade Center area, and premises covered by the Lower Manhattan Commercial Revitalization Program.
Who counts as a tenant
The City taxes whoever pays the rent, whatever name the agreement uses. It does not tax an owner of record who occupies space in their own building, and it may ask for a deed or a mortgage receipt as proof. It does not tax an occupant who pays nothing at all.
- Lessees and sub-lessees. Renting from another tenant rather than from the building owner does not remove you. Where a tenant sublets, the City taxes the tenant and the sub-lessee.
- Licensees and concessionaires. Office space, desk space and a leased department inside a store are all taxable premises.
- Subsidiaries and affiliates. A corporation renting from its parent or from an affiliated company is a tenant like any other, so an intercompany lease sits inside the tax.
- Tenant shareholders in co-ops. You are a tenant even though you hold shares rather than a lease. You count only part of your maintenance as rent: fuel, gas, electricity, ordinary repairs and staff wages. You leave out the share covering mortgage, real estate taxes, insurance and capital improvements.
Occupy two or more locations in the same premises and the City treats the combined rents as one taxable premises for filing and computing the tax. The $250,000 threshold then applies to the combined figure rather than to each location.
The commercial rent tax rate, and the two credits you can claim
The City charges 6 percent of base rent and reduces base rent by 35 percent first, so you pay an effective 3.9 percent.
You can then claim two separate credits, and you can qualify for one and not the other:
- The sliding scale credit, for annual taxable rent between $250,000 and $300,000. You claim it whatever your income, and it reduces the tax rather than removing it at a cliff edge.
- The small business tax credit, from June 1, 2018. You take the full credit at total income of $5,000,000 or less with base rent under $500,000. Between $5,000,000 and $10,000,000 of income, with base rent between $500,000 and $550,000, you take a sliding scale credit. At $10,000,000 of income or more, or base rent of $550,000 or more, you take nothing.
Test order
Test the small business credit before the 35 percent reduction, not after. The City measures it against base rent as it stands. Apply the reduction first and you put yourself under a threshold you have not cleared.
What counts as base rent
Your base rent is not the number on the lease. You deduct rent you receive from a subtenant, and depending on your lease you may exclude some tenant improvement costs as well. Near a threshold, you clear or miss it on that deduction alone.
When you file, and the tax year the City uses
The City runs the NYC commercial rent tax on its own calendar.
- The tax year is June 1 to May 31, not your calendar or fiscal year end.
- You file the annual return by June 20.
- You file three quarterly returns in between.
A business that files everything else in April can be a year late here without noticing.
04Never filed
If you have never filed a commercial rent tax return
Answer one question before you do anything else: has the Department of Finance written to you about this tax? You take a different route depending on the answer, and you keep the penalty waiver on only one of them.
If the City has not contacted you, and you are not under audit
You may qualify for the Voluntary Disclosure and Compliance Program. Approach the City before you file anything.
- DOF waives the delinquency penalties when you sign the agreement. You do not argue them afterwards.
- The agreement fixes how many years you file. Three in most circumstances, six where the tax is a trust fund tax or the City alleges intentional evasion.
- You can approach anonymously. Your representative negotiates the terms before you give your name.
File the delinquent returns yourself and you no longer qualify. The City’s own procedure says a taxpayer who files every delinquent year and pays the resulting liability does not come under the program. You give up the waiver, the limited look-back and the anonymity together.
If the City has already written to you, or you are under audit
The City closes the program to you once it makes contact, so you work in this order.
- Work out what you owe. You claim the 35 percent rent reduction, the sliding scale credit and the small business tax credit on each year. You compute the small business credit on that year’s total income, not this year’s.
- File the returns. You stop the failure to file penalty by filing: the City charges 5 percent of the tax a month up to a 25 percent cap. It charges a separate failure to pay penalty at half a percent a month, to its own 25 percent cap, so file without paying and you still owe the second.
- Then take up the penalties. You can argue reasonable cause against both, so you argue why the returns went unfiled rather than the arithmetic.
No limitation period
The City can assess a never-filer at any time. No limitation period applies where you filed no return. You limit the exposure only by agreeing a look-back period, so check the first route before you take the second.
The number in the City's letter is a determination made from whatever information the City had, without your lease, your subtenant income or your credits. The Commissioner's certificate that no return was filed is prima facie evidence, so you displace that estimate with documents.
05Sales tax
Register for a Certificate of Authority before your first taxable sale
You need a Certificate of Authority in hand before your first taxable sale, not before your first return. New York State issues it, despite the name people search for, so you register with the State Tax Department rather than with the City.
The combined rate in the five boroughs is 8.875 percent: the state rate, the City rate and the transit district surcharge. New York State decides what is taxable and how you file, on the ST-100 series.
06Where to read next
We answer these on other pages
Four questions have their own pages:
- Whether you actually owe the unincorporated business tax.
- What the UBT rate and the credit do.
- Whether real estate held for your own account is exempt.
- What a corporation pays once you know which corporate tax it is in.
New York State administers two more. The State collects sales tax on a state registration and return, at a rate that includes a City component, and it charges a corporate franchise tax alongside the City one.
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Check the ones you are already in
Businesses often turn out to be inside more of these than they thought, and the rent tax is usually the surprise. Call (212) 641-0673 or send the contact form. No charge for the conversation.
07FAQ
Common questions about New York City business taxes
Do I have to file if my business made less than $10,000?
That figure does not decide it. New York City's taxes trigger on how you are organized, where you rent and what you sell. A business with no profit can still owe the commercial rent tax and collect sales tax. The unincorporated business tax has its own income threshold, covered on the UBT pages.
Does the commercial rent tax apply outside Manhattan?
No. The City repealed it for premises north of the center line of 96th Street in Manhattan, and for the Bronx, Brooklyn, Queens and Staten Island. A business with space in Midtown and in Brooklyn counts only the Manhattan rent, and the boundary runs down the center line rather than along either sidewalk.
My landlord never mentioned the commercial rent tax. Am I still liable?
Yes. The City charges the tax to you as the tenant, and your landlord has no duty to collect it or to raise it with you. Your lease can be silent on it. Where you have filed no return, no limitation period runs, so the Department of Finance can assess you at any time.
My rent is under $250,000. Do I still have to file a return?
Possibly. The City drops the return requirement for a premises only where your annualized gross rent is $200,000 or less and no subtenant pays you more than $200,000. Between those two figures you can be required to file a return on which no tax is due.
I sublet part of my space. Does that reduce what I owe?
Yes. A prime tenant deducts rent received from subtenants when computing base rent, whatever the amount. Close to a threshold you can clear it or miss it on that deduction alone, so work the base rent out before you conclude you are outside the tax.
Do I register these with the City or with the State?
Both. The City administers the unincorporated business tax, the general corporation tax, the business corporation tax and the commercial rent tax, and you register for each one separately. New York State runs sales tax and issues the Certificate of Authority despite its name, though the rate you charge carries a City component.
One call, all the City taxes at once
Have a CPA tell you what your business files, and when
Send us how the business is organized and where it operates. We will tell you which NYC taxes reach you, which forms to file, and what the calendar looks like across all of them. Call (212) 641-0673 or send the contact form. No charge for the conversation.
Reviewed by George Dimov, CPAGeorge Dimov, CPA, New York, NY. Serving clients in all 50 states, 15+ years advising businesses on New York City and New York State tax. President of George Dimov, CPA, a New York City firm serving clients across the five boroughs and nationwide.