Three clients come into your office. Client Number 1, a resident and domiciliary of New Jersey, is the president of a New York S-corporation. During the taxable year, the taxpayer performs services for the S-corporation both in New York and in New Jersey. Although the taxpayer performs services in New York on behalf of the corporation, the taxpayer does not spend more than 183 days in New York in any given year. All other services performed on behalf of the corporation are performed at the taxpayer’s home office in New Jersey.
The taxpayer is paid yearly by the S-corporation. The payment the taxpayer receives at year’s end is comprised of two components: (1) compensation for services rendered for the 5- corporation and (2) and his distributive share of the S-corporation’s yearly profits.
The taxpayer also has two sons. His younger son is a student in NYU and his older son is an engineer for a New York based engineering company. During the school year, his youngest son lives at the NYU dorms, and then moves home during his summer and winter breaks. During the school year, the son works at NYU as a clerk in the financial aid office. As for his older son, he still lives at his home in New Jersey and commutes into New York each day for work.
The taxpayers request advice as to what extent the income they receive, is subject to New York Taxation.
In particular discuss:
- How NY residents and nonresidents are taxed, including the source of income principal;
- Whether the taxpayer is a NY resident or nonresident for the year(s) at issue;
- Discuss allocation and apportionment of income;
- How allocation and apportionment of income is affected by the “Convenience of the Employer Test”
- And whether and to what extent the “Convenience of the Employer Test” applies based on this fact pattern
Please provide specific references to statutes, regulations and case law to support your advice.
New York State imposes a use tax on property or services used within New York State that are not subject to the New York sales tax. Please discuss the following issues as it relates to the imposition of the use tax:
- How is a use defined under New York law? Provide at least 2 examples of a use that creates a use tax liability
- Provide 1 example of how residents and non-residents are treated similarly and differently under the use tax laws?
- How is the use tax computed?
- What is the current use tax rate?
- What is the use tax rate applied to, in determining a taxpayer’s use tax liability?
- Is there a difference in calculating the taxpayer’s use tax liability if the property is immediately brought back to NY, or if the taxpayer keeps the property outside of NY for more than 6 months after the purchase and then brings it back to NY after the 6 months has elapsed. If so, please explain.
- Are taxpayer’s eligible for credits for sales tax paid in another State for a use tax liability? If so, please briefly explain.