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Tax Law

Principally Engaged: New York Looks to 50% of Gross Receipts for Determining Filing Status

The New York Department of Taxation and Finance recently published an advisory opinion stating that a taxpayer’s New York corporate income tax filing status should be determined by “what activity [a taxpayer] is principally engaged in” and by whether 50% of its aggregate gross receipts in a taxable reporting period are from such activities. The Department concluded that the purpose of a taxpayer’s formation was not dispositive of whether it is an Article 9 or Article 9-A filer for New York state purposes.

The petitioner was a limited liability company providing long-distance telecommunications services and an Article 9 filer, which merged with an Article 9-A franchise tax filing company. Following the merger, the petitioner asserted that it will derive more than 50% of its receipts from activities subject to taxation under Article 9-A. Under the Department’s advisory, to the extent that more than 50% of the Petitioner’s aggregate gross receipts in a taxable reporting period were derived from other than Article 9 activities, it should therefore be classified as an Article 9-A filer.

Advisory Op. TSB-A-20(1)C, N.Y.S. Dep’t of Tax. & Fin. (Jan. 8, 2019) (published April 20, 2020).