January 27, 2020

New York Introduces Bill for a 5% Gross Receipts Tax

By Paul Graney, Partner, Tax & Business Services

Related Services State & Local Tax, State-by-State Tax Credits & Incentives, Tax Advisory Services, Tax & Business

New York Introduces Bill for a 5% Gross Receipts Tax State & Local Tax

On January 21, 2020, the New York General Assembly introduced A. 9122, a companion bill to S. 6102 in the Senate, which would impose an additional 5% tax on the gross income of “every corporation which derives income from the data individuals of this state share with such corporations.” The language in the bill does not provide further detail or limitation on the scope of the proposed new tax, nor does it provide for an effective date.

There are many problems with the bill’s language as currently crafted that will hopefully be addressed as it moves through the legislature. For instance, the bill currently applies to all worldwide income of a corporation related to the use of data obtained from individuals in New York State. Since it would be difficult for a company to determine what data was derived solely from New York individuals, it is not clear how this 5% tax would be applied.

The bill is so broadly written that it would apply to every business that collects any information from customers in New York and uses that to generate revenue. Consider a company that sends out email blasts from customer lists or partners with other firms to cross-sell customers. How revenue generated from those customers would be tracked and/or treated as New York income is not addressed in the bill’s language.

This issue follows a trend by states enacting new taxes on digital companies that sell to customers within their borders, but A. 9122 extends that to brick-and-mortar companies that use digital information to generate revenue. The issue bears watching as it moves through the legislature. Hopefully, industry groups can help narrow the language to provide a more reasonable outcome.

The tax professionals at Marcum are following this bill and will keep you updated. For questions as to how A. 9122 may affect your New York filing requirement, please contact your Marcum State and Local Tax professional.