New York – Reciprocal Credit for Sales or Use Taxes Paid to Another Jurisdiction

SALT Report 3066 – The New York Department of Taxation and Finance released a bulletin that explains the reciprocal use tax credit that may be allowed for sales or use tax paid to another state, or to another locality in New York. The bulletin provides that if a New York resident pays sales or use tax to another state and/or to another locality in New York because they purchased and took possession of an item or service, they may be allowed a reciprocal credit for sales or use tax paid to that state and/or locality if certain conditions are met.

For example, New York will offer a reciprocal credit for sales or use taxes paid to another state if the other state provides a reciprocal credit for sales or use taxes paid to New York state and/or its localities. Therefore, a New York reciprocal credit is available when:

  • Both the state and local sales and use taxes paid in another state,
  • Only state sales and use taxes paid in another state, or
  • Only local sales and use taxes paid in another state

If another state allows a reciprocal credit for both New York’s state tax and its local taxes, New York’s reciprocal credit will be the sum of the other state’s state and local taxes. However, if the total tax paid in the other state exceeds the total use tax due in New York, no New York use tax will be due, but the purchaser may not claim a refund of the difference.

Partial Credits

If another state allows a reciprocal credit for New York’s state tax only, the reciprocal credit may only be taken against New York’s state tax and only for the amount of the other state’s state tax. If the state tax paid in the other state exceeds the state use tax due in New York, no New York state use tax will be due, but the purchaser may not claim a refund of the difference, and it cannot be used to reduce the amount of local use tax due in New York.

Similarly, if another state allows a reciprocal credit only for New York’s local taxes, New York’s reciprocal credit may only be taken against New York’s local taxes and only for the amount of the other state’s local tax. If the local tax paid in the other state exceeds the local use tax due in New York, no New York local use tax will be due, but the purchaser may not claim a refund of the difference, and it cannot be used to reduce the amount of State use tax due in New York.

To claim a reciprocal credit, the taxpayer will need to establish:

  • Proof of payment to the other state, such as a receipt showing the amount of sales or use tax paid to the other state and/or locality,
  • That the state and/or locality where the purchase was made allows a credit for sales or use tax paid to New York state and/or its localities,
  • That you were legally liable for the tax and paid the tax to the other state and/or locality, and
  • That you have no right to a refund or credit of the tax paid to the other state and/or locality

Lastly, the bulletin explains that in certain situations the New York state and local use taxes due for items purchased and brought into the State by a New York resident will not be based on the item’s purchase price.  For example,

If an item is used outside of New York, or the taxpayer’s city of residence, for more than six months prior to the New York resident bringing the item or service into New York, the amount subject to tax is the lesser of the purchase price, or the fair market value at the time the item is brought into New York, or

If the tangible personal property brought into New York will be used in the performance of a contract for a period of less than six months, the user may elect to base the amount of tax due on the fair rental value of the property for the period in which it is used in New York.  However, this method may only be used if the property is not completely consumed in New York, or is not incorporated into real property in New York.

For Further Information

New York Department of Taxation and Finance – TB-ST-765