If one has a New York S Corporation that is ran out of NYC with no employees and 1 person who owns 100% of the stock what needs to be filed in terms of quarterly payroll & sales tax returns? My guess is since there are no employees there is no need to file quarterly payroll tax returns. However, how does quarterly sales tax returns work? Since it is flow through status do they even need to be filed? Would the 100% owner just pay his/her quarterly estimated payments for Federal and State?

Furthermore, is it true that if you are an employee of the S Corp you would only pay FICA & Social Security taxes on your salary and not on your distributions? Meaning let's say you take a $70,000 salary from the S Corp and at the end of the year the S Corp has a profit of $20,000 and so you take a $20,000 distribution. Would that distribution not be subject to the FICA & Social Security taxes? I guess to revert back than if I am an employee would the S Corp have to file a payroll tax returns or again just the individual would because of the flow through structure?

asked 17 Jun '10, 17:26

Frank's gravatar image

accept rate: 0%

edited 17 Jun '10, 19:12

Tom's gravatar image


You should find yourself a tax professional (with S Corp return experience).

An S Corporation owner has to pay him/herself reasonable wages. Therefore there WILL be federal and state payroll taxes -- payments must be remitted and returns filed.

If the S Corp sells goods or services that are subject to sales tax, the corp has to obtain a certificate of authority to collect sales tax prior to doing any business. You absolutely have to file sales tax returns quarterly, even if there is no sales tax to remit. This is true forever, until the certificate is surrendered, or until New York gives you permission to file annually. Sales tax is completely separate from income tax and not paid through estimates.

S Corp distributions are currently not subject to FICA withholding. It is very likely that Congress will close this loophole by 2011. In the meantime, this is an area that the IRS keeps a close eye on. If the profit is due to your sales or services, then it very likely should be paid out to you as salary. If the IRS investigates and re-characterizes your distributions as salary, it could be very expensive. You should work with a professional to make intelligent decisions. If your sole reason to be an S Corp is to avoid FICA tax, that's not a good reason. If you're concerned about liability protection, an LLC may be a simpler alternative.

I'm not an expert on NYC taxes, but there are City issues as well, including (depending on your business type) the Unincorporated Business Tax and the General Corporation Tax. You would also be subject to the MCTMT.


answered 17 Jun '10, 19:11

Tom's gravatar image

accept rate: 8%

Interesting, did not know you needed to apply for a certificate of authority to collect sales tax prior to doing business either. Sounds like I definately need to consult an S Corp expert. Thanks for you help.

(17 Jun '10, 20:56) Frank

Collecting NY sales tax without a certificate is subject to a penalty of up to $10,000. I still suggest consulting a professional, but I would also advise you read NY Pubs 750 and 20: http://www.tax.state.ny.us/pubs_and_bulls/publications/sales_pubs.htm

(27 Jun '10, 02:20) Tom
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Asked: 17 Jun '10, 17:26

Seen: 3,087 times

Last updated: 17 Jun '10, 19:12