What Is the NYS Sales Tax Late Filing Penalty?

Businesses registered to collect New York State sales tax must file returns and pay the tax by designated deadlines. This is a fundamental compliance requirement for any entity conducting business in the state. Failure to meet this schedule can lead to financial penalties.

Breakdown of Penalties and Interest

Penalty for Late Filing

Failing to file a sales tax return on time results in a penalty, even if no tax was due for the period. The penalty is 10% of the tax due for the first month of delinquency. For each additional month or part of a month the return is unfiled, an extra 1% penalty is added, with the total not to exceed 30% of the tax due. If a return is more than 60 days late, the minimum penalty is the lesser of $100 or 100% of the tax due, but it will not be less than $50.

For example, if a business owes $2,000 in sales tax and files two and a half months late, the penalty starts with 10% for the first month ($200). It then adds 1% for the second month ($20) and another 1% for the partial third month ($20), for a total late filing penalty of $240. If a business collected no sales tax but failed to file its “zero” return, it would be subject to a $50 penalty.

Penalty for Late Payment

A separate penalty applies for failing to pay the sales tax owed by the due date. The penalty is 10% of the unpaid tax for the first month, plus 1% for each additional month or part of a month the payment is late. This penalty accrues monthly until the tax is paid, up to a maximum of 30% of the outstanding tax.

For example, if a business files on time with a $5,000 tax liability but pays one month and ten days late, it would incur a penalty for two partial months. The penalty would be 10% for the first month ($500) and 1% for the second month ($50), totaling $550. A business can be subject to both late filing and late payment penalties on the same return.

Interest

Beyond penalties, interest is charged on any tax not paid by the due date, and it is compounded daily on the underpayment amount. Unlike penalties, interest is generally not eligible for waiver because it represents the charge for the use of the state’s money. The interest rate is variable and subject to quarterly adjustments by the Commissioner of Taxation and Finance.

Information Needed to Request Penalty Abatement

Defining Reasonable Cause

The New York State Department of Taxation and Finance may waive penalties if a taxpayer can show that the failure to file or pay on time was due to “reasonable cause” and not willful neglect. Reasonable cause is determined by the facts of each case and requires showing that the taxpayer exercised ordinary business care but was still unable to comply. A taxpayer’s history of compliance may also be considered when evaluating a request.

Examples of reasonable cause include the death or serious illness of the taxpayer or a responsible family member, or the destruction of business records by a casualty like a fire or flood. Receiving erroneous written advice from the Tax Department or having an honest misunderstanding of the law can also be valid reasons.

Required Documentation

A claim of reasonable cause must be substantiated with documentation. For a claim based on death or serious illness, provide copies of death certificates or detailed letters from physicians. If records were destroyed in a fire, a fire department report is necessary.

If the delinquency was due to incorrect advice from the tax department, provide a copy of the written communication you received. For any claim, a detailed timeline of events is helpful to establish the direct link between the circumstances and the inability to meet the tax obligation.

Identifying Key Information

Before submitting a request, gather all specific details related to the penalty from the penalty notice or tax return. You will need the exact filing period in question and the original due date of the return. You also need the date the return was filed, the date the tax was paid, and the precise amount of the penalty being contested.

The Process for Requesting a Waiver

Methods of Submission

A taxpayer can request a penalty waiver by responding directly to the penalty notice, which provides instructions on how to dispute the penalty. The formal method for requesting an abatement is by filing Form AU-290, Request for Conciliation Conference, available on the NYS Tax Department’s website.

Tax professionals with proper authorization can submit waiver requests for clients through their Tax Professional Online Services account. This online method allows for direct upload of supporting documents, while others can mail the completed form and documentation.

Completing the Submission

The core of the submission is the explanation of why the penalty should be waived. This section should present a clear narrative of the facts that constitute reasonable cause and reference the supporting documents submitted with the request. The explanation should focus on how the specific circumstances prevented timely filing or payment, not on the amount of tax due. The statement should be factual, avoid emotional language, and stick to the timeline of events.

What to Expect After Submission

After the request is submitted, the Department of Taxation and Finance will review the case. The department will examine the explanation and evidence against the standards for reasonable cause. It will then issue a written determination granting the abatement in full, in part, or denying the request. Response times can vary, but taxpayers can expect to wait several weeks for a decision.