With the new year fast approaching, franchisors in New York should begin focusing on updating their franchise disclosure documents, renewing their franchise registrations and preparing their New York state tax filing documents.
Tax Filing Obligations of Franchisors in New York
New York reporting requirement applies where the franchisor-franchisee relationship falls within the broad franchise definition under the New York franchise statute. The statute was created so that New York tax authorities can verify state tax filings submitted by New York franchisees so that the franchisor’s filing matches what the franchisee disclosed.
Franchisors in New York that have at least one franchisee doing business in New York are required to register as a sales tax vendor and must file information returns with the New York State Department of Taxation and Finance. The reporting period is from March 1 to February 28 of the subsequent year – in most cases. The returns are due on March 20. You must file even if the franchisee made no sales in New York during the filing period.
New York franchisors must report specific information, including the identity of, and payments made to, each of your franchisees doing business in New York and certain sales and payment related information. For example, New York franchisors must include the name of each franchisee and the gross sales in New York State for each franchise location as reported to you.
The New York State Department of Taxation provides online filing capability to New York franchisors through its website. Franchisors need only create an online filing account to access the system and follow the instructions provided on the website. Penalties of up to $10,000 may be imposed for failure to comply with the reporting and information requirements.
If you are unsure of the requirements inposed by the NYS Department of Taxation and Finance onto franchisors in New York, we strongly suggest contacting our attorneys who can help you navigate the process.
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