Commercial Rent Tax New York City: A Guide to Understanding

What is the Commercial Rent Tax New York City?

This commercial rent tax new york city – also known as occupancy tax – is a compulsory 6% tax on
rent that tenants pay to occupy a property for commercial use in Manhattan,
south of 96^th Street.

Who is Required to Pay the Commercial Rent Tax?

Rules for commercial rent tax New York City

Everyone who owns a business and rents property to conduct business in the specified
commercial rent tax zone – and who pays a minimum of $250,000 rent per year – pays
this tax.  However, non-profits and businesses whose leases are under $200,000 per year are exempt.

As of 2005, New York City waives the obligation of rent tax for the World Trade Center
Area. This exception applies for businesses that sell tangible goods directly to
customers, as part of the Commercial Revitalization Program.

How is the Commercial Rent Tax Calculated?

That depends on the amount remitted. The commercial rent tax can be filed quarterly
or annually. The deadline for annual returns is on June 20 of each year and for
quarterly returns, it is on September 20, December 20, and March 20.

Commercial rent tax New York City – important

This tax only applies to businesses that rent property below 96^th Street, and
it is based on a percentage of the annual rent. Tenants are proactively expected
to pay this tax, it is their responsibility.

If a business closes or a tenant stops using the premises for business, the tax is
due straightaway, and from the date that the tenant ceases his business
operations, he/she has 20 days to file a return for the whole year.

Are there any Exemptions or Deductions Available?

Taxpayers get a 35% base rent reduction, which lowers the tax rate to 3.9%. The City of
New York also offers a tax credit if the annual base rent before the reduction
is between $250,000 and $300,000 US.

Commercial rent tax New York City – credit

Credit can be available for small business owners. The amount of rent paid, the income,
and the expenses of the business form the basis of that credit. To obtain the
35% tax rent reduction businesses must have less than $5 million US in gross
income and pay less than $500,000 in rent. They must qualify with both these
requirements.

What are the Implications of the Commercial Rent Tax for Businesses in NYC?

It is important to be aware of this law and the specific zone where this law applies. The NYC
Department of Finance has been busy chasing taxpayers who didn’t pay this
commercial rent tax. Trouble with the Department is Finance is not a pleasant
experience and should be avoided. So, always be informed before starting a
business in Manhattan below 96^th Street.

Commercial rent tax New York City – Things to know

One must also pay attention to what else this rent tax refers to. In general, expenses
for the repair or maintenance of the property are not included in the tax.
Nonetheless, it is included IF a lease contract stipulates a certain amount to
be paid for improvements that the property owner must provide. In that case,
the tenant’s payments for said work are subject to the commercial rent tax.

Commercial rent tax New York City – What else is important?

Bear in mind that not only the office space is subject to this tax, but also other
space that a business may occupy, such as a garage or a parking space.

According to the New York City Bar Association, buildings and lots that are designed for the
use of business and not for living spaces are considered commercial property.
So, that could include a warehouse, for example. Other examples are retail
stores, shopping centers, restaurants, bars, etc.

Base rent may also include electricity, heat, and cleaning, but to know if they are or
aren’t subject to this tax depends greatly on how these services are given. Let’s
say, electricity is provided by the landlord or it is metered separately. To be
sure not to make a mistake, it is recommended to consult with a tax
professional.

In conclusion, one should not assume what is subject to this tax law and what isn’t. The
implications of not knowing or not being informed could get you in trouble with
the Department of Finance.

Commercial rent tax New York City can seem an unusual tax and – as mentioned
before – it is always imperative to do research first and find out about one’s
obligations as a business owner before starting a business. Regarding taxes,
one should never just assume what is or isn’t taxable. It’s best to speak to a
tax consultant to know what your responsibilities are.