New York Codes, Rules and Regulations › Title 20 - DEPARTMENT OF TAXATION AND FINANCE › Chapter IV - Sales And Use And Other Miscellaneous Taxes › Subchapter A - Sales And Use Taxes › Part 536 - Penalties And Interest › Section 536.1 - Penalties and interest

Current through Register Vol. 46, No. 28, July 10, 2024
Tax Law, §§ 1142, 1145
(a)
Penalty.
Any person failing to file a return or to pay or pay over
					 any tax to the Department of Taxation and Finance within the time required by
					 Part 533 of this Title (determined with regard to any extension of time for
					 filing or paying) shall be subject to a penalty of 10 percent of the amount of
					 tax due if such failure is for not more than one month, with an additional one
					 percent for each additional month or fraction thereof during which such failure
					 continues, not exceeding 30 percent in the aggregate. However, where any person
					 fails to file a return within 60 days of the date such return was required to
					 be filed (determined with regard to any extension of time for filing), the
					 minimum penalty for failure to file provided for in the foregoing provisions
					 shall not be less than the lesser of $100 or 100 percent of the amount required
					 to be shown as tax on such return. The amount of tax required to be shown on
					 the return shall be reduced by the amount of any part of the tax which is paid
					 on or before the date prescribed for payment of the tax and by the amount of
					 any credit against the tax which may be claimed upon the return. In no event,
					 however, shall the penalty for failure to file a return be less than
					 $50.
(b)
Interest.
If any amount of tax is not paid on or before the last date
					 that payment is required, interest shall be paid on such unpaid amount at the
					 rate specified in section 1145 (a)(1)(ii)  of the Tax
					 Law or at the underpayment rate set by the Commissioner of Taxation and Finance
					 (see Part 2393 of this Title) pursuant to section 1142 (9)  of the Tax Law,
					 whichever is greater. Interest shall be paid for the period from the last date
					 that payment is required to the date payment is made, whether or not any
					 extension of time for payment was granted. Interest shall not be paid if the
					 amount thereof is less than one dollar.
(c) If a person required to collect tax can
				  establish that the failure or delay to file a return or to pay or pay over any
				  tax was due to reasonable cause and not due to willful neglect (see section
				  2392.1  of this
				  Title), all of such penalty and that portion of the interest that exceeds the
				  amount that would be payable if such interest were computed at the underpayment
				  rate set by the Commissioner of Taxation and Finance (see Part 2393 of this
				  Title) pursuant to section 1142 (9)  of the Tax Law
				  shall be waived.
Cross-reference:
See section
					 2392.1  of this
					 Title for examples of whether reasonable cause and not willful neglect does or
					 does not exist.
Example 1:
A review of a vendor's books and records of a retail
					 clothing store operation disclosed that the vendor reported a larger amount of
					 sales on his Federal income tax return than that reported on his sales and use
					 tax return. The review also revealed the vendor made no out-of-state sales and
					 exempt sales were minimal. As the vendor did not explain or show reasonable
					 cause for the irreconcilable discrepancies, penalty and maximum interest are
					 due on the additional sales and use tax determined.
Example 2:
In the course of examining, with a third party, information
					 supplied by a liquor store, it was discovered that the liquor store's records
					 failed to disclose a number of different purchases made from its suppliers.
					 Since the records of the liquor were incomplete and inadequate, a mark-up test
					 was performed on purchases from all suppliers. Because the audited taxable
					 sales exceeded the taxable sales reported due to the numerous omissions of
					 proper recordkeeping, it was evident that not all of the items purchased from
					 the suppliers were included in the vendor's sales records. Because of the
					 nature of the understatement of the tax due, it could be concluded that the
					 vendor did not make a conscientious and diligent effort to collect and remit
					 the correct amount of tax. Penalty and maximum interest are due because the
					 vendor has not shown that reasonable cause existed for the
					 understatement.
Example 3:
A vendor who is a manufacturer has continuously filed
					 timely returns. The records indicate that on a prior audit the vendor was
					 assessed tax of $75,000 as a result of purchases used by the vendor and
					 therefore subject to tax. The prior audit report disclosed that the vendor was
					 informed of the taxable status of these purchases. The current audit discloses
					 the same type of discrepancies that the prior audit showed. Additional tax of
					 $80,000 is determined to be due for the period being audited. Since the vendor
					 failed to pay sales and use tax on these purchases, after having been advised
					 of their taxable status on the prior audit, the vendor cannot show reasonable
					 cause existed. Therefore, penalty and maximum interest are due.
Example 4:
A registered vendor is a manufacturer with production
					 facilities located both in and out of New York State. Its corporate
					 headquarters and accounting offices are located outside the State. Audited
					 liability consisted of tax due on equipment and various supply items located in
					 New York State which were used by it but not used directly in production. The
					 vendor made no attempt to determine the taxability of these items in New York
					 State. The vendor assumed that these items were not taxable because they would
					 have been exempt in the state where the vendor's corporate offices are located.
					 Penalty and maximum interest are due since the vendor has not demonstrated that
					 failure to pay was due to reasonable cause and not due to willful
					 neglect.
Example 5:
A vendor is located outside New York State. Initially the
					 only connection with the State had been soliciting sales by mail and making
					 deliveries by mail of electronics equipment. Gradual expansion of the business
					 resulted in providing repairs to the equipment in this State and hiring sales
					 persons who solicit sales in New York. The vendor was complying with the
					 withholding tax requirements of the New York State personal income tax but was
					 not a registered vendor and did not file sales and use tax returns. Since the
					 vendor failed to comply with the Sales and Use Tax Law, the vendor cannot show
					 that reasonable cause existed. Therefore, penalties and maximum interest are
					 due.
Example 6:
In an audit conducted for the period December 1, 1980
					 through November 30, 1983, the auditor found that the vendor had failed to file
					 a return for the quarter ended August 31, 1983. Accounting records provided
					 during the audit showed recorded taxable sales of $12,000 for the delinquent
					 quarter ended August 31, 1983. Reasonable cause existed, as described in
					 section
					 2392.1  of this
					 Title, for the waiving of penalty and maximum interest on the tax due for the
					 quarter ended August 31, 1983. In addition, the audit results disclosed
					 additional taxable sales of $8,000 for each remaining quarter of the audit
					 period. The vendor furnished no basis for the department to find that
					 reasonable cause existed for not reporting these additional taxable sales for
					 such quarters. In this situation, penalty and maximum interest would not be
					 determined on the tax owed on the unreported taxable liability of $12,000 for
					 the delinquent quarter ended August 31, 1983, but would be due on the audited
					 taxable liability of $8,000 for each of the remaining quarters of the audit
					 period.
(d)
Rate of
				  interest imposed.
Except as provided in subdivision (b) of this section, the
					 amount of interest to be added to taxes that are underpaid or overpaid shall be
					 based on the interest rates set by the commissioner (see Part 2393 of this
					 Title) that are in effect while such taxes remain underpaid or
					 overpaid.
(e)
Daily
				  compounding of interest.
Interest required to be paid either by the department on
					 overpayments of sales and use taxes or by the taxpayer on underpayments of
					 sales and use taxes shall be compounded daily.