New York State’s Department of Taxation and Finance issues Certificates of Authority to businesses which authorize them to collect sales tax from customers. This also allows them to honor the tax-exempt status of non-profit agencies with whom they do business. You might be wondering when and if you need a Certificate of Authority for your startup or business to do business in New York City; especially if you are a foreign (whether U.S. or international) entity.
Below I will explain Certificates of Authority and how they differ from reseller’s permits in New York City. This includes when you need each of them, how to apply for them, and the legal consequences of not applying.
Types of Certificates of Authority
New York State issues two types of Certificates of Authority: regular and temporary certificates. If your startup or business will be making taxable sales from your home, a cart, a stand, or any other brick and mortar location, you must apply for a regular Certificate of Authority. Temporary Certificates of Authority are reserved for businesses that won’t be making sales for more than two consecutive sales tax quarters in a 12-month period. Startups and businesses who apply for temporary certificates must specify the start and end dates of their business.
In the earliest stages of your startup, you still need to do an office build-out, hire employees, and go through a battery of other setup tasks. In this case, you might consider a temporary Certificate of Authority if you have a good idea of when you will start offering goods or services. Yet, keep in mind you have to reapply for a new certificate or another temporary one. Depending on how far away you are from conducting full-on business, you might want to go ahead and apply for the standard Certificate of Authority instead of paying more fees.
Reseller’s Permits in NYC
Once New York has issued you a Certificate of Authority, you are eligible to use a Resale Certificate, sometimes referred to as Resellers’ Permits. A New York Resale Certificate is a tax exemption that allows you to make purchases of tangible personal property or services that you resell to your customers, making it different than a Certificate of Authority. This means, if you aren’t making your own product in-house or providing your own intellectual property or service, you will also need to present a Resale Certificate to the seller you are purchasing from.
How Do You Apply?
Although you can apply in person, the easiest way to apply for a New York Certificate of Authority is for you to do so online at New York Business Express. This site is operated by New York State. You do have to apply for a Certificate of Authority at least 20 days prior to doing any taxable business transactions. This is because you must have your certificate in hand to display at your business.
Legal Consequences of Not Obtaining Proper Business Documents
If you are doing business without a Certificate of Authority or a Resale Permit, you aren’t properly reporting your tax exemptions or remitting sales tax you should have collected from customers. New York imposes up to a $10,000 fine for operating a business without a Certificate of Authority. You will get fined $500 on the first day and $200 each additional day until you get your certificate.
International Startups Need Legal Counsel for Business in NYC
Internationally-based startups or other non-NYS entities already have challenges by doing business in another country or state. New York City poses special challenges for new businesses that may not be easy to deal with from abroad. If you have a startup or business based outside of New York, contact us today for legal counsel. We can help you navigate the complexities of bringing your business to New York.