New York Sales Tax on Invoices: A Practical Guide
Last verified: · Verify with the New York State Department of Taxation and Finance before relying on a specific rate.
New York is one of the more nuanced US states for sales tax compliance: a relatively low 4% state base rate offset by significant local additions (8.875% in NYC), broader services taxation than most states, taxable SaaS, and a rare dual-prong economic-nexus test that requires both a dollar threshold and a transaction count. This guide covers what small businesses and out-of-state sellers need to know.
The headline rate
New York's state sales tax is 4.0%. Local jurisdictions add their own rates, producing combined rates typically between 7.0% and 8.875%:
- NYC: 8.875% (4% state + 4.5% NYC + 0.375% MCTD)
- Most upstate counties: 7.5% to 8.0%
- Some downstate suburbs (Westchester, Long Island): 8.375% to 8.875%
Use the NY DOR's Publication 718 for the current combined rate by jurisdiction.
Do you need to register? The dual-prong test
NY-based businesses selling taxable goods or services must register for a New York Certificate of Authority before making taxable sales.
Out-of-state sellers must register and collect New York sales tax once they have both:
- $500,000 or more in New York sales AND
- 100 or more separate transactions
...in the prior four sales tax quarters. Both thresholds must be met — this is an "AND" test, not "OR". New York is one of the few states that retained the 100-transaction prong from the original Wayfair decision (most states have dropped or raised it). The dual-prong design means high-volume / low-dollar sellers (e.g., $99 SaaS subscriptions × 100+ NY customers ≈ $10K but 100 transactions) don't automatically trigger nexus, while $500K+ in fewer transactions also doesn't.
What's taxable, what isn't
New York taxes tangible personal property and a broader list of services than most states. The most commercially-relevant taxable services for invoicing:
- Information services — paid news subscriptions, market data, financial information feeds, paid research reports.
- Maintenance, servicing, and repair of tangible personal property — taxable in most cases.
- Beauty and barber services — taxable.
- Parking services — taxable, with additional NYC parking tax.
- SaaS and prewritten software — generally taxable as a license of taxable software.
Most professional services — accounting, legal, consulting, design, copywriting, photography services — are not taxed in New York. Custom software developed for a single customer is also not taxable.
The SaaS rule
New York treats SaaS, prewritten software, and most cloud services as taxable software licenses under DOR Advisory Opinion TSB-A-08(62)S. SaaS subscriptions are generally taxable at the combined rate of the customer's location. This is a meaningful difference from California and Florida (which don't tax SaaS) and aligns with Texas, Pennsylvania, and several others (which do).
For invoices to NY customers, SaaS providers should apply the combined sales tax rate of the customer's billing address (or shipping address if it differs from billing) to the SaaS subscription line item.
Frequently asked questions
What is New York's state sales tax rate?
New York's state sales tax rate is 4.0%. Local jurisdictions (counties, cities, school districts, and the Metropolitan Commuter Transportation District) add their own rates, with combined rates typically ranging from 7.0% to 8.875%. New York City has a combined rate of 8.875% (4% state + 4.5% city + 0.375% MCTD). Most upstate counties combine to 7.5% to 8.0%. NY's Department of Taxation and Finance publishes the current combined rate by jurisdiction at tax.ny.gov.
What's New York's economic nexus threshold?
New York is one of the few states that uses BOTH a dollar threshold AND a transaction-count threshold (the original Wayfair model). Out-of-state sellers must register and collect New York sales tax once they have $500,000 or more in New York sales AND 100 or more separate transactions in the prior four sales tax quarters. Both thresholds must be met (it's an 'AND' test, not 'OR'). This is one of the highest dollar thresholds in the nation, but the 100-transaction prong catches sellers with smaller dollar volumes who exceed transaction counts.
Does New York tax services?
More services than most states, but not as many as Texas. Taxable services in New York include: information services (paid news subscriptions, market data, financial information), parking services, hotel occupancy (separate hotel tax also applies), beauty and barber services, certain repair services, security services, and several others. Most professional services — accounting, legal, consulting, design, freelance work — are NOT taxed. New York Tax Law §1105 lists taxable services. The state also taxes maintenance, servicing, and repair of tangible personal property in many cases.
Is SaaS taxable in New York?
Yes, in most cases. New York treats prewritten software, including SaaS, as a license of taxable software. SaaS subscriptions are generally taxable at the combined rate of the buyer's location. New York DOR Advisory Opinion TSB-A-08(62)S established this position in 2008, and subsequent rulings have largely maintained it. Custom software developed for a single customer is generally not taxable. The taxability test focuses on whether the customer receives 'constructive possession' of the software functionality, which most SaaS does.
What about NYC sales tax specifically?
New York City applies the highest combined rate in the state: 8.875% in most of NYC (4% state + 4.5% NYC + 0.375% MCTD). NYC also has additional taxes that apply on top of (or instead of) sales tax in specific contexts: a 4.0% NYC parking tax (in addition to state and city sales tax on parking), a 5.875% NYC hotel occupancy tax (combined with state sales tax for a substantial total), and others. For invoicing purposes, the 8.875% combined rate applies to most taxable goods and services delivered to NYC addresses.
How do I claim a New York resale exemption?
B2B sales to New York-registered resellers can be exempt with a valid Resale Certificate (form ST-120). The seller retains the certificate (typically a one-time submission) and applies zero tax on qualifying sales. The invoice should reference the buyer's NY Certificate of Authority number and note 'Sale for resale; ST-120 on file.' New York also offers exemption certificates for various categories: ST-119.1 (government/exempt organization), ST-121 (production machinery), and others. Make sure the right certificate is used for the transaction type.
Where can I verify New York sales tax rates and rules?
New York State Department of Taxation and Finance at tax.ny.gov — the official tax authority. Look for: Publication 718 (Local Sales and Use Tax Rates by Jurisdiction), Publication 750 (A Guide to Sales Tax in New York State), Form DTF-17 (Application for Authority to Collect Sales Tax), and the Sales Tax Web File system for registered businesses. The DOR also publishes Tax Bulletins and Advisory Opinions on transaction-specific questions.
Sources
- NY State Department of Taxation and Finance (tax.ny.gov)
- Publication 718 — Local Sales and Use Tax Rates
- Publication 750 — A Guide to Sales Tax in New York State
This page is general information, not tax advice. For specific transactions, consult a New York-licensed CPA or tax attorney, or request a written Advisory Opinion from the NY DOR.