What is the payroll nexus in NY?

Payroll Nexus in New York State

The concept of payroll nexus for tax purposes in New York State refers to the connection between an employer's payroll expenses and the state's taxing authority. This connection determines the employer's tax liability to the state for payroll expenses. The nexus is established when an employer has a sufficient physical presence or economic connection to New York State, which obligates them to comply with state tax laws, including those related to payroll taxes.

Relevant New York State Tax Law Provisions

- Tax Imposition on Payroll Expense: According to [New York Consolidated Laws, Tax Law - TAX § 852], a tax is imposed on the payroll expense paid by electing employers to covered employees. The rate of this tax varies depending on the year, with specific thresholds and rates applied to the payroll expenses.

- Payment of Payroll Tax: As per [New York Consolidated Laws, Tax Law - TAX § 854], employers with payroll expenses are required to pay the imposed tax at specified times, which align with the requirements for remitting payments under other sections of the New York Tax Law.

- Quarterly Payment Requirement: The [New York Consolidated Laws, Tax Law - TAX § 804] stipulates that the tax on payroll expenses must be paid quarterly, coinciding with the statewide wage reporting system report, except for certain employers who must follow a different schedule as per section nine of the chapter.

Establishing Payroll Nexus

To establish payroll nexus in New York State, the following criteria are generally considered:

1. Physical Presence: Having an office, warehouse, or other physical location within the state.

2. Employee Location: Employing individuals who work within the state, whether from a fixed location or remotely.

3. Economic Presence: Conducting significant business within the state, which can include generating revenue from services provided in the state.

Nexus and Payroll Factor

While the provided information does not directly define payroll nexus for New York State, it is similar to the payroll factor concept described in the [Kansas Statutes Chapter 79. Taxation § 79-1132], which considers the location of employee services and the employer's operations in determining the payroll factor for tax purposes. Although the specifics may vary, the underlying principle of attributing payroll expenses to the state where the employee's services are performed or managed is a common thread in establishing nexus for payroll tax purposes.

Conclusion

In summary, payroll nexus for tax purposes in New York State is defined by the presence of payroll expenses incurred by employers for services rendered by employees within the state. The nexus is established through physical presence, employee location, and economic activities within the state, which then subjects the employer to New York State's payroll tax laws and reporting requirements.

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Sources:

North Carolina General Statutes Chapter 105. Taxation § 105-163.1. Definitions 2023-01-01

Kansas Statutes Chapter 79. Taxation § 79-1132. Same; payroll factor defined and described 2023-01-01

New York Consolidated Laws, Tax Law - TAX § 854. Payment of tax 2021-01-01

New York Consolidated Laws, Tax Law - TAX § 852. Imposition and rate of tax 2021-01-01

New York Consolidated Laws, Tax Law - TAX § 804. Payment of tax 2021-01-01