New York State Tax Laws are never static and 2015 did not prove otherwise. The following is a reader’s digest of the more significant changes for Brody Wilkinson’s New York- and certain Connecticut- based clients to mind.

Economic Nexus. Commencing in 2015, a non-New York corporation is subject to the New York corporate franchise tax if it has at least $1,000,000 in New York receipts, regardless of whether the non-New York corporation does business, employs capital, or owns or leases property in New York. The New York State Department of Taxation and Finance has proposed regulations that will apply this economic nexus test expansively to corporate general partners and members of limited liability companies. In the case of a non-New York partnership with at least $1,000,000 in New York receipts, a corporate general partner will be subject to the New York corporate franchise tax even if its share of the partnership’s receipts is less than $1,000,000. In the case of a non-New York limited liability company with at least $1,000,000 in New York receipts, all corporate members of the LLC will be subject to the New York corporate franchise tax regardless of their respective ownership percentages. These proposed regulations have not yet been finalized.

Sales Tax “Delivery Rules.” The New York State sales tax is a “destination tax.” A sale is subject to sales tax when the property or service is received by the purchaser in New York. The New York Department of Taxation and Finance has clarified the rules on where property or services are delivered to a purchaser for purposes of the sales tax. For sales of tangible personal property, such as works of art, delivery to the purchaser occurs where there is transfer of possession of the item to the purchaser, not where legal title passes to the purchaser. If the item is delivered to a private carrier hired by the purchaser, the location of that delivery to the private carrier will determine if New York State sales tax applies. For example, suppose a New York resident purchases a painting at a California art gallery and hires a private carrier to pick up the painting and transport it to his New York house. Since the transfer of possession to the private carrier occurs in California, the sale is not subject to New York State sales tax. In contrast, if the painting is picked up in California and delivered in New York by a common carrier, such as Federal Express or United Parcel Service, the point of delivery will be where the common carrier delivers the painting, resulting in the imposition of the New York State sales tax. New York purchasers should keep in mind that even if the sales tax is avoided by hiring a private carrier, New York State use tax will be due when the purchased item is delivered in New York.

Sales Tax Liability Of LLC Members. New York law provides that a member of a limited liability company is generally not personally responsible for the LLC’s liabilities. At the same time, New York tax law imposes on LLC members personal liability for sales taxes unpaid by the LLC. The New York State Tax Appeals Tribunal has held that the sales tax law supersedes the general liability shield. As a result, LLC members are personally liable for the LLC’s unpaid sale taxes. The New York State Department of Taxation and Finance has tried to mitigate the adverse effect of this result by providing that LLC members who hold less than a 50% interest in the LLC will be liable for only their proportionate share of unpaid sales taxes.

Disregarded Entities And Estate Tax. New York imposes its estate tax on non-residents who own real estate and tangible property in New York. In contrast, non-residents are not subject to estate tax on intangible property, such as limited liability company interests. For New York income tax purposes, a limited liability company owned by a single member is disregarded, and the assets owned by such an LLC are treated as owned by the LLC’s owner. The New York State Department of Taxation and Finance has held that for New York estate tax purposes, it will also disregard a single-member LLC owning New York real estate, and will impose the estate tax on the non-resident owner of the LLC. One strategy to address this issue is to elect to have the LLC treated as a corporation under check-the-box rules so that the corporate stock, which is intangible property, will not be subject to New York estate tax. If, however, the resulting corporation also elects to be an S corporation (in order to avoid corporate-level income tax), the corporation will have to demonstrate a business purpose or it will be disregarded by the New York State Department of Taxation and Finance. For more information, please contact Robert L. Teicher (rteicher@brodywilk.com).