How Long Is the Statute of Limitations for Sales Tax in New York State?

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If you sell or resell goods in New York, you must obtain a sales and use tax license and collect sales tax from your customers to pay on a quarterly basis. In general, the New York Department of Taxation and Finance has three years after you submit a quarterly sales tax report to audit your business and assess additional taxes, although exceptions exist based on your behavior towards the department.

Three Year Limitation

  • As of 2011, New York state has a three-year statute of limitations for all tax returns, including sales and use taxes. Thus, if you reported a particular amount of sales tax on one of your quarterly returns, New York has three years to audit that return and require changes. However, auditors may request extra time in writing before the statute of limitations expires; you must consent to the extension.

Exceptions

  • The statute of limitations does not apply to any tax return that you failed to file as required. Thus, if you did not file a sales and use tax, the state of New York may collect sales tax and assess penalties for late filing or non-payment for an indefinite period of time. The statute of limitations also does not apply if you file a fraudulent return or if you fail to report any changes the IRS made to your federal tax return, including adding taxes on sales you did not report.

Federal Changes

  • If the IRS makes any changes to your federal return, you must report them to the New York State Department of Revenue within 90 days so that New York can make appropriate changes to your tax return. For example, if you underreported income from sales and the IRS audits your business, it can assess taxes and penalties for the unreported income, and you must report these changes to New York. If you fail to do so, New York will make the changes anyway, but you will not be protected by the statute of limitations on state taxes.

Other Audit Laws

  • If New York audits your tax return, you have the right to be represented by an attorney or other tax expert during the audit process. Your representative may not have worked for the Department of Taxation and Finance for two years prior to representing you at an audit, and he may not represent you at all if he was involved in collecting your tax or ordering an audit while he was working for the department.

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