Sales Tax Tips for New York’s PrompTax

If you have more than $500,000 in annual sales tax liability in the state of New York, then you are likely familiar with their PrompTax. The PrompTax is a prepayment for large taxpayers.

Here’s how NYS PrompTax works:

• Program – A taxpayer is required to participate in the PrompTax program if their liability for the June 1 – May 31 period of the preceding year is more than $500,000.

• PrompTax Filing Requirements – The payment is made up of two parts. First, is the “true-up” payment. This payment is associated with the previous month for days 23 through the end of the month. Second, is the prepayment of days 1 through 22 of the current month. Both parts are identified in the total payment which is due no later than three business days following day 22 of the month.
• How to Calculate – There are two methods, Actual and Estimated.

• Actual method: Payment must be equal to at least 90% of your actual sales and use tax liability for days 1 through 22 of the current month.

• Estimated method: Payment must be at least 75% of one-third of your liability for the comparable quarter of the preceding year.   Simple right?

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Here’s an example from the state website on how to calculate your New York sales tax payment using the estimated method:

“Company B uses the estimated method to calculate the PrompTax payment due January 2014. The tax liability for the comparable quarter of the previous year (December 2012 through February 2013) was $3 million. The calculation would be as follows: ($3,000,000 ÷ 3) x .75 = $750,000.” Sales tax participants must also electronically pay the balance of their monthly tax liability for day 23 through the end of the month by the PrompTax due date in the succeeding month. For example, the payment submitted for February 1 through February 22 would also include the tax liability for January 23 through January 31. For a payment due in the month of March, June, September, or December, sales tax participants must pay the balance of any remaining quarterly tax liabilities by the applicable PrompTax due date.

• Payment Methods – ACH Debit, ACH Credit, Fedwire or Certified Check

• Enrollment – If you received From TR-680.1, Notification of Required Participation – Electronic Filing and Payment Program (PrompTax for Prepaid Sales Tax), you must enroll online within 40 days of the postmark date. You will then receive notification confirming your enrollment and a 6-digit access code (including payment option and start date).

• Benefits – Are there really any? In fact there are a few.

•  You no longer have to file the ST-809, just the ST-810 at the end of the quarter.
•  You can schedule ACH debit payments in advance.
•  You can get automated tax information directly to your email address.
•  Promptax has its own phone number to help answer any questions for taxpayers enrolled in Promptax. Call toll-free (866) 744-1391 or (518) 457-2332 anytime Monday through Friday; 7 am to 7 pm. (I have made good friends here over the years!)

Please see the following tax bulletin for full details.