NYS S Corp Franchise Tax: How to Calculate and File
Gain clarity on the New York S Corp franchise tax. This guide explains the different calculation methods and procedural obligations for state compliance.
New York State imposes a franchise tax on S corporations for the privilege of operating in the state. While the federal government recognizes S corporations as pass-through entities, where income and losses pass directly to shareholders, New York’s tax law is different. The state acknowledges the federal S corporation election but still levies a tax at the corporate level.
This entity-level tax requires the business to calculate and remit a payment to the state, separate from the personal income tax obligations of its shareholders.
Calculating the NYS Franchise Tax
The New York franchise tax for an S corporation is a fixed dollar minimum tax based on the corporation’s New York source gross receipts for the tax year. The tax is based on a graduated scale:
- $25 for receipts of $100,000 or less.
- $50 for receipts over $100,000 up to $250,000.
- $175 for receipts over $250,000 up to $500,000.
- $300 for receipts over $500,000 up to $1,000,000.
- $1,000 for receipts over $1,000,000 up to $5,000,000.
- $3,000 for receipts over $5,000,000 up to $25,000,000.
- $4,500 for receipts over $25,000,000.
The Metropolitan Commuter Transportation Mobility Tax
Beyond the statewide franchise tax, S corporations operating in the Metropolitan Commuter Transportation District (MCTD) are subject to the Metropolitan Commuter Transportation Mobility Tax (MCTMT). This geographic area includes the five boroughs of New York City and the suburban counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester.
The MCTMT applies to S corporations with net earnings sourced to the MCTD exceeding $50,000 for the tax year. For this tax, the S corporation’s net earnings are passed through to the shareholders. The shareholders are then responsible for paying the MCTMT on their personal income tax returns based on their share of the earnings.
The tax rate on these earnings depends on where the business activity occurs. For net earnings sourced to New York City, the rate is 0.60%. For earnings sourced to the suburban counties, the rate is 0.34%. This tax is a separate liability from the corporate franchise tax and is intended to fund transportation infrastructure in the region.
Required Information and Tax Forms
The primary document for this filing is Form CT-3-S, New York S Corporation Franchise Tax Return. Before beginning this form, the corporation should have a completed federal Form 1120-S, U.S. Income Tax Return for an S Corporation, as much of the information, such as ordinary business income and deductions, transfers directly. To complete the return, the corporation must have its precise New York State gross receipts figure.
For businesses newly electing S corporation status, Form CT-6, Election by a Federal S Corporation to be Treated as a New York S Corporation, must be filed to ensure the state recognizes the federal election. This is a one-time filing that must be submitted within the first two and a half months of the first tax year it is intended to cover. All necessary forms can be found on the New York State Department of Taxation and Finance website.
Filing and Payment Procedures
For calendar-year filers, the annual franchise tax return is due on or before March 15th of the following year. If the corporation operates on a fiscal year, the return is due two and a half months after the close of its fiscal year. Meeting these deadlines is necessary to avoid penalties and interest.
Many S corporations are also required to make quarterly estimated tax payments throughout the year. These payments are based on the expected amount of franchise tax and MCTMT for the current year. For calendar-year filers, payments are due on March 15, June 15, September 15, and December 15. Failure to make timely payments can result in underpayment penalties.
New York mandates that corporations file their franchise tax returns electronically, using approved tax software or the state’s Online Services portal. Payments can also be made electronically through the state’s website via electronic funds transfer (EFT) or a direct debit from a bank account.