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I have a consultancy firm incorporated in CT but we mainly

Customer Question
Hi, I have a consultancy...
Hi, I have a consultancy firm incorporated in CT but we mainly do business in NYC. Are we subject to any sales tax on either state and how does this work?
I need to invoice client shortly and need to know to add tax or not
We provide IT consultancy- so project managers go into the client and work with their team to meet regulatory commitments, migrate from one system to an enhanced platform, review and improve their operating model etc
Submitted: 1 year ago.Category: Tax
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1/15/2016
Tax Professional: Robin D., Senior Tax Advisor 4 replied 1 year ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,870
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified

Hello

In NY Sales tax does not apply to most services. Examples of services not subject to sales tax are capital improvements to real property, medical care, education, and personal and professional services.

In NYC some services are not exempt from sales tax. Your IT service is not listed in the services that are liable for collection of sales tax in NYC.

In CT there is a sales tax requirement for certain services dealing with computers and consultancy. As your company is incorporated in CT the state expects you to register and charge even if you send the personnel outside the state temporarily.

States that tax business services are Connecticut, Washington DC, Hawaii, Iowa, New Mexico, New York, Ohio, South Dakota, Texas and West Virginia.

After you view my response, please post below if you need more information or if you need no further clarification a positive rating is appreciated.
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Customer reply replied 1 year ago
Hi Robin,
Little confused here, so if I'm working in NYC I need to add on sales tax because I'm incorporated in CT? Even though the services were performed on site in NYC
Need to ensure my client understands this, if I need to add onto the invoiceIf so, what's the sales tax that applies?Thanks
Tax Professional: Robin D., Senior Tax Advisor 4 replied 1 year ago

Yes. CT is the registered place for the company. CT sees this as you sending employees form CT to NYC as a temporary service but they are still CT employees and the CT company is still supplying the service.

The statewide rate of 6.35% applies to the retail sale, lease, or rental of most goods and taxable services.

You are most welcome.
My goal is to give you excellent service.
Your positive rating is thanks enough.

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Customer reply replied 1 year ago
Hi- 95% of my business will be conducted in NY, we created the company in CT purely as I reside there. My attorney never told me of this diffentiation. We sign projects with our client, which are based at their location. Would this still be considered temporary? As its their full time place of work
Tax Professional: Robin D., Senior Tax Advisor 4 replied 1 year ago

Your company is in CT so yes, CT sees your services as services offered in CT.

You can make your request directly to the state. If they allow for an exemption then you may rely on that in writing.

You can request a ruling on your liability as it relates to Conn. Gen. Stat. §12-407(a)(37)(A).

I really enjoyed working with you – please feel free to request me again when you come back to ask another question.
Rating lets Just Answer know you were assisted and credits me for my time.

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Tax Professional: Barbara, Enrolled Agent replied 1 year ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,027
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Different expert here - my name is ***** ***** I have a different answer.

According to the Connecticut Department of Revenue, you would NOT charge sales tax for customers located OUTSIDE OF Connecticut.

http://www.ct.gov/drs/cwp/view.asp?A=1510&Q=266724

As to sales tax for customers located in Connecticut:

Computer and data processing services, including but not limited to, charges for on-line access to computer services, providing computer time, storing and filing of information, retrieving or providing access to information, designing, implementing or converting systems, providing consulting services, and conducting feasibility studies, programming, code writing, modification of existing programs, and installation and implementation of software programs and systems even where such services are rendered in connection with the development, creation or production of canned or custom software or the license of custom software. Computer and data processing services are taxed at 1%. Services rendered in connection with the creation, development, hosting or maintenance of all or part of a Web site which is part of the Internet, commonly referred to as the World Wide Web, are not taxable.

http://www.ct.gov/Drs/cwp/view.asp?a=1477&Q=269930&drsPNavCtr=%7C40829%7C

As to New York, you would register and collect New York sales tax if you have nexus in New York.

“Sales tax nexus” is just a fancy way of saying “significant presence” in a state.

New York considers a seller to have sales tax nexus in the state if you have any of the following in the state:

  • An office or place of business
  • An employee present in the state for more than 2 days per year
  • Goods in a warehouse
  • Ownership of real or personal property
  • Delivery of merchandise in New York in vehicles owned by the taxpayer
  • Independent contractors or other representatives in New York

http://www.taxjar.com/states/new-york-sales-tax-online/

However, computer consultant services are exempt from sales tax.

https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/computer_software.htm

Please let me know if you require further information or clarification.

Thank you and best regards,

Barb

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Tax Professional: Barbara, Enrolled Agent replied 1 year ago

Just following up with you to see if you have any other questions or concerns. If so, please come back to me here, and I will be happy to assist you.

Best regards,

Barb

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Tax Professional: Amanda Russell,
 replied 1 year ago
Amanda Russell
Category: Tax
Satisfied Customers: 11
Experience: Accounting & Tax Educator at Self-Employed/Ut Du LLC
Verified

Hi Robin,

I can help you with this situation. Temporary is determined by the expectation of how long the work will last. If less than 1 year, it's temporary (for purposes of them deducting businesses expenses).

For the business, yes lawyers unfortunately recommend things without understanding the tax side. I work with small businesses and have learned the relevant business law so that I am able to help my clients with the full picture.

There is a sales tax for operating in NYC but I can provide details for how this is calculated and affects you, but I should first know what type of business you formed? And, are your workers employees or contractors?

It sounds like you will file in CT (always) and NY paying NY state income tax on the amounts attributable to the state. Then, the states have a way of giving you credit for the taxes you paid in another states and I believe the tri-states have some reciprocal agreements. I'll need some more details to answer your questions accurately.

What type of business did you form (sole proprietor, LLC with 1 or 2 members, Corporation, partnership)? Let me know if your still here and the details, and I'll get right back to you!

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Amanda Russell
Amanda Russell
Amanda Russell
Category: Tax
Satisfied Customers: 11
11 Satisfied Customers
Experience: Accounting & Tax Educator at Self-Employed/Ut Du LLC

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