Governor Andrew Cuomo’s 2015–2016 New York State Executive Budget Bill proposes several significant changes to New York’s sales and use tax statutes. Several of these changes, while touted by Governor Cuomo as “closing certain sales and use tax avoidance strategies,” are much broader and, if enacted, will have a significant impact on the sales and use tax liabilities resulting from routine corporate and partnership formations and reorganizations.

The Nonresident Use Tax Exemption -

Tax Law section 1118(2) currently provides an exemption from use tax for the use within New York of tangible personal property or services purchased by a nonresident (either an individual or a business entity), provided that at the time of purchase the nonresident was not engaged in the conduct of a trade or business in New York in which the property or service was used. The New York State Department of Taxation and Finance’s regulations provide that a “resident” for this purpose includes “[a]ny corporation incorporated under the laws of New York, and any corporation, association, partnership or other entity doing business in [New York] or maintaining a place of business in [New York.]” There is no requirement under current law that a nonresident do business or maintain a place of business outside of New York at the time the nonresident purchases the property or service.