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NYC UBT

  • 1.  NYC UBT

    Posted 07-19-2019 10:59
    I have a client, SMLLC located in Nassau County, who has a contract from a Pennsylvania company to provide programming services to a NYC government agency.

    Most of the services are provided in NYC.

    Is there any chance that the LLC is not subject to the UBT?

    All comments appreciated.

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    John Galli CPA
    Galli & Company CPAs LLC
    Hicksville NY
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  • 2.  RE: NYC UBT

    Platinum Most Valuable Member
    Posted 07-19-2019 12:45
    John:

    The answer to that is no. For years beginning after 1/1/15, New York City uses market based sourcing for service revenues.

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    Robert Brown
    ROBERT N. BROWN, CPA
    Jericho NY
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  • 3.  RE: NYC UBT

    Posted 07-20-2019 10:51
    Thank you Bob.

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    John Galli CPA
    Galli & Company CPAs LLC
    Hicksville NY
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  • 4.  RE: NYC UBT

    Bronze Most Valuable Member
    Posted 07-21-2019 08:55
    I thought when nyc followed nys on the market based approach there was some interpretations that nyc only followed that approach for C Corps and not pass through entities ( even though nyc does not recognize s corps). Articles recently written indicate for pass through entities NYC still followed the Cost of Performance sourcing.

    Vincent J. Preto, CPA
    Senior Partner
    Wagner and Zwerman LLP
    201 Old Country Road, Suite 202
    Melville, NY 11747
    631-777-1000 ext. 340

    Sent from my iPhone




  • 5.  RE: NYC UBT

    Bronze Most Valuable Member
    Posted 07-21-2019 09:04
    NYS law of market based sourcing is only a corporation tax law.  NYC followed, however NYC did not follow the Economic Nexus rule of $1 million in sales.  They are still using physical presence.

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    Brian Gordon CPA
    President
    State Tax Audit Representation
    626 RXR Plaza
    Uniondale, NY 11556
    516-510-6041
    bgordon@statetaxauditrep.com
    www.StateTaxAuditRep.com
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  • 6.  RE: NYC UBT

    Bronze Most Valuable Member
    Posted 07-21-2019 09:25
    Thanks Brian that is what i thought though i did not realize nys was also only for corps though it has not come up yet with any clients. My nyc client was also an llc and market based would have increased his ubt tax but i avoided it based on law.

    Do you concur about s corps for nyc also COP and not market based as I read that in an article but i prefer actual regulations as support.

    Vincent J. Preto, CPA
    Senior Partner
    Wagner and Zwerman LLP
    201 Old Country Road, Suite 202
    Melville, NY 11747
    631-777-1000 ext. 340

    Sent from my iPhone




  • 7.  RE: NYC UBT

    Bronze Most Valuable Member
    Posted 07-21-2019 09:39
    Vincent,
    New York State rules for corporations also apply to s corporations because of course an s corporation is a corporation.  

    For New York City, I don't want to commit without doing research, because New York City treats S corporations differently.





  • 8.  RE: NYC UBT

    Bronze Most Valuable Member
    Posted 07-21-2019 11:27
    Thanks. I knew about NYSand S Corps. Just N YC I have not confirmed yet.

    Vincent J. Preto, CPA
    Senior Partner
    Wagner and Zwerman LLP
    201 Old Country Road, Suite 202
    Melville, NY 11747
    631-777-1000 ext. 340

    Sent from my iPhone




  • 9.  RE: NYC UBT

    Bronze Most Valuable Member
    Posted 07-20-2019 11:57
    John,
    It is important to ask if the LLC files as a partnership (Sched C would be the same), or Corporation, because the rules for nexus are different for Income Tax vs. Corporation tax (although in your case, not much different).

    In either case, your client has nexus in NYC if employees are physically present in NYC on a regular basis.

    In this new era of economic nexus, we sometimes forget that physical presence still applies.

    NYS imposed economic nexus rules in 2015 FOR CORPORATIONS ONLY.  They also imposed market based sourcing for services, meaning:
    even if you are not present in NYS, if  your service is benefiting someone in NYS, that income will be sourced (allocated) to NYS.  The economic nexus part means that if the sales of services sourced to NYS exceed $1 million, you will have nexus in NYS.

    NYC piggy-backed on many of the rule changes in 2015 FOR CORPORATIONS; primarily the allocation rules such as "market based sourcing" for services, HOWEVER they did not adopt economic nexus (the $1 million threshold).
    So... for NYC, market based sourcing is a sourcing (allocation) rule, but it does not cause nexus if there is no physical presence in NYC.

    Brian Gordon

    ------------------------------
    Brian Gordon CPA
    President
    State Tax Audit Representation
    626 RXR Plaza
    Uniondale, NY 11556
    516-510-6041
    bgordon@statetaxauditrep.com
    www.StateTaxAuditRep.com
    ------------------------------



  • 10.  RE: NYC UBT

    Platinum Most Valuable Member
    Posted 07-21-2019 12:52
    You folks are making me think we should make this part of a CPE program.

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    Robert Brown
    ROBERT N. BROWN, CPA
    Jericho NY
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