New York Sales Tax Guide for SaaS and E-Commerce Businesses

2025-07-08

New York taxes most goods and software but exempts most services and digital goods. The state rate is 4%, with local taxes pushing combined rates to 8.875% in some areas. Incorrect collection leads to penalties and interest.

Quick Reference

Item	Details
State Tax Rate	4%
Local Tax Range	0% - 4.875%
Combined Rate Range	4% - 8.875%
Economic Nexus	$500,000 AND 100+ transactions in previous 4 quarters
Physical Nexus	Any presence in New York
SaaS Taxable	Yes (as prewritten software)
Registration Portal	New York Business Express

Nexus in New York

Physical nexus

Physical presence creates immediate collection obligations:

Office, warehouse, inventory, or employees in New York
Independent contractors or affiliates soliciting sales
Trade show attendance or temporary pop-ups
Click-through affiliates with >$10,000 in referral sales over four quarters

Economic nexus

Gross receipts into NY exceed $500,000
More than 100 separate sales into NY

Registration and Filing

Apply for a Certificate of Authority through New York Business Express. Submit at least 20 days before your first taxable sale.
Display the certificate in any NY place of business.
Filing frequency (monthly, quarterly, annually) is assigned by NY DTF and may change with volume.
Returns are due on the 20th of the month following the period. Zero returns are mandatory when no tax is due.
Penalties for operating without a certificate range from $500 on day 1 to $10,000 maximum.

Taxability of Goods and Services

Tangible personal property

Taxable unless specifically exempt. Key exemptions:

Most unprepared food
Clothing or footwear under $110 per item (state and most local tax exempt)

Digital goods and software

Category	NY Taxability	Notes
Prewritten software (downloaded, disk, cloud, SaaS)	Taxable	Treated as tangible property
Custom software written exclusively for one client	Exempt	Must be separately stated and reasonable
Music, videos, e-books delivered electronically	Not taxable	NY doesn't classify digital content as tangible property

Services

Services are exempt unless specifically taxable. Information services (database access, credit reporting) are taxable unless data is wholly personal or individualized. Implementation, training, and consulting tied to software remain exempt when separately invoiced.

Shipping and handling

If any item in the shipment is taxable and you charge one delivery fee, the entire shipping charge is taxable. Allocate only when you have practical documentation.

SaaS

Requirement	Detail
Tax status	SaaS is "prewritten software" - taxable
Sourcing	Destination-based. Use purchaser location or billing address
Customizations	Separately stated custom work is exempt; subscription fee remains taxable
Exempt purchasers	Accept Form ST-119.1 (exempt org) or ST-120 (resale)
IaaS/PaaS	Raw computing power or storage is generally not taxed

E-Commerce

Marketplace facilitator rule

Marketplaces (Amazon, Etsy, eBay, Walmart, Shopify Marketplace) must collect NY sales tax on facilitated transactions. You remain responsible for:

Tracking gross NY sales for nexus determination
Registering once nexus exists, even if marketplaces remit all tax
Filing returns that report marketplace sales as "marketplace-collected"

NY sales tax rates

State rate: 4%
Local add-ons push combined rates to 7%–8.875% (NYC highest)

Use NY DTF address-based lookup or automated tools like Stripe Tax.

Product specific rules

Product	Tax status
Clothing/footwear under $110	Exempt (state and most local)
Dietary supplements	Exempt as food
Physical software (game cartridges, boxed software)	Taxable
Digital download of software	Taxable
E-book	Not taxable