Other Taxes guide for expats & digital nomads living in New York City or planning to move.
Sales Tax on Goods and Services
New York City doesn’t have a VAT tax but it imposes a sales and use tax on various goods and services. Details of all the services that are subject to this tax can be found on the mayor’s website at (https://www1.nyc.gov/site/finance/taxes/business.page).
As of 1st August 2009 the combined state and local sales and use tax imposed in New York City has been increased from 8.375% to 8.875%. This rate includes the 4% state tax, the 3/8% Metropolitan Commuter Transportation District (MCTD) tax, and the 4½% New York City local tax.
This tax change has also repealed the exemption of tax on clothing and footwear that applied to apparel and shoes that cost $110 or more per item or per pair. After 1st August 2009, purchases of clothing and footwear costing $110 or more per item or pair in New York City are subject to the full 8.875% rate of tax. Purchases that cost less than $110 continue, however, to remain fully exempt from sales tax.
The Department of Finance of New York City collects property taxes as it values all New York City residential and commercial properties every year. Tax rates are set each year by the City Council and applied to property values to determine each homeowner’s annual tax liability. Additionally NY State and City real estate law is also applied in the calculation of these property taxes. The property tax year typically begins on July 1st. The Finance Department releases a tentative assessment of the approximately one million properties in New York City every January. If there are no changes, the final assessment is released in May every year.
New York City divides property into four “classes” for assessment purposes:
- Class 1 refers to one to three-family structures, vacant land zoned for residential use, and small co-op and condominium apartment buildings
- Class 2 refers to residential rentals, co-ops, and condos
- Class 3 refers to utilities
- Class 4 refers to all commercial and manufacturing properties in the city, including the major office buildings in Manhattan and Brooklyn
Three factors determine the amount of tax imposed on a property: the assessment ratio (the fraction of the assessed value on which the taxes are to be paid) and the tax rate for the property’s class, plus the market valuation of the property itself.
These property taxes are included in the maintenance charges which are charged every month to home owners in coop buildings. In the case of condominium units, since they are owned individually and constitute real property, each unit appears in the property tax rolls as a separate entity. As a result, each owner of a condominium is taxed separately. In a coop building the corporation pays the property taxes and then distributes the costs amongst the various shareholders as a part of the monthly maintenance fee. Property taxes are generally lower in coops than condominiums and it is for this reason that condominiums are generally more expensive than coops in New York City.