foreign (out-of-state) S Corp Taxes in NYS/NYC

I fully own and run a small software subchapter S-Corp entirely based in Massachusetts currently with four employees, the most valuable of whom is planning an upcoming move to New York City for personal reasons.

I'm investigating the possibility of retaining him on in the company by setting up a basic New York City office and letting him work remotely, but am confused and concerned about the New York State and City setup and tax treatment.

Best as I can tell regarding just the corporate taxes (I'm following up separately re his payroll, tax witholding taxes, UI, health insurance, etc.) and assuming we don't do any other new business in NYC, we'd need to:

Initially file for authority in New York State per http://www.dos.state.ny.us/forms/corporations/1335-f-l.pdf .
Possibly pay an initial License Fee.
Make an NYS S corp election http://www.tax.state.ny.us/pdf/2007/fillin/corp/ct6_707_fill_in.pdf
Annually file the NYS Maintenance fee (currently a minimum $300) per http://www.tax.state.ny.us/pdf/publications/multi/pub35_300.pdf
Annually file the NYC General Corporation Tax, apparently based on the third bullet of http://www.nyc.gov/html/dof/html/pdf/tax_rates/general_corp_tax_rates.pdf based on the "Alternative tax base", at 0.15 * 0.0885 * (my MA salary + corporate net income).

Is this generally right and/or am I missing anything?

Specifically for the NYC GCT would NYC really tax my Massachusetts-based company at ~1.33% of my total MA income (?!?) or is there some (apparently undocumented at the link above or other documents such as http://home2.nyc.gov/html/dof/html/pdf/09pdf/business%20tax%20forms/nyc-3l_instr_2009.pdf) exemption for non-NYC owner salaries and net income?

asked 11 Aug '10, 04:49

OutOfState
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edited 17 Aug '10, 15:46

TaxQueries ♦♦
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One Answer:

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Generally the way state taxes are treated for corporations is they are based on apportioned income. An apportionment is a proration of income among states in which the corporation conducts business. General approaches to apportionment factors are business income x state apportionment factor = business income apportioned to state. State apportionment factor—generally based on average of: Sales factor (In-state sales/total sales), Property factor (In-state property/total property) Payroll factor (In-state payroll/total payroll). However some states have alternative approaches which include double-weighting of sales factor and single factor apportionment using sales factor. I believe if I’m not mistaken that NYS has moved to a single factor apportionment using sales factor, I am not sure if NYC has done the same.

link

answered 11 Aug '10, 13:48

Franklyn
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Thanks Franklyn! Great to have more color re apportionment generally, and it could be relevant for the "Entire net income basis" method of NYC GCT summarized at http://www.nyc.gov/html/dof/html/pdf/tax_rates/general_corp_tax_rates.pdf ... but I'm still not clear whether or not apportionment applies to the third "Alternative tax base" method, which could mean thousands of dollars of NYC GCT on the S-Corp even without any NYC revenue or property.

(12 Aug '10, 00:15) OutOfState

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