On May 29, 2019, the New York State Department of Taxation and Finance released Technical Memorandum TSB-M-19(1)S highlighting some of the Sales and Use Tax changes enacted in the 2019-2020 NYS Budget.
One such item is the extension of the segregated accounts program through December 31, 2024. The NYS Tax Department encourages all sales tax vendors to voluntarily establish a separate bank account for sales tax deposits to aid in compliance with NYS Sales Tax Laws. However, it is not commonly known that the Tax Department can require certain sales tax vendors to deposit sales tax into a separate bank account. When a vendor fails to file sales tax returns or to remit sales tax collected to NYS on a timely basis, the Tax Department is authorized to require maintenance of a separate account. Once requested, the sales tax vendor must open a checking or savings account in a federally insured bank or credit union located in NYS. Additionally, the bank name and account number must be provided to the Tax Department and deposits to the account must be made weekly. The Tax Department sees the maintenance of separate accounts as an effective tool to assist in maintaining sales tax compliance and has recently increased the number of vendors required to maintain such accounts.
The failure to establish a separate sales tax account upon the Tax Department’s request may lead to the requirement to post a bond at the cost of the vendor, a requirement to file sales tax returns on a monthly basis (if not already required to do so), and in certain situations a revocation of the vendor’s Certificate of Authority. Without the Certificate of Authority, the sales tax vendor will be precluded from selling tangible personal property or provide taxable services.
If you or your client is facing sales tax compliance issues, we encourage the proactive use of separate sales tax accounts before the eventual intervention by the Tax Department. Please feel free to contact our office should you or your clients have any questions or concerns regarding sales tax compliance.
Posted in: Tax