What's happening
This bill requires vendors to deposit collected sales taxes into mandatory escrow accounts, giving the state immediate access to the funds.
Why it matters
Shifts control of sales tax proceeds. By requiring immediate deposit of collected sales taxes into escrow accounts controlled by or accessible to the state, the bill removes vendors’ ability to use these funds for cash flow purposes before remitting them, which may alter how businesses manage daily finances.
Creates new administrative burdens and compliance risks. Vendors must establish specific escrow accounts—potentially with certified algorithmic calculations for mixed cash/card sales—and face new documentation and professional certification requirements. Failure to comply triggers harsh penalties and possible license suspension or revocation.
Introduces strict and escalating penalties. The bill imposes significant financial penalties (10% to 30% of taxes due for not funding escrow accounts, plus a 50% penalty for large shortfalls) and gives the state power to forcibly increase withholding rates for vendors with deficiencies, raising the stakes for mistakes or noncompliance.
Potentially streamlines state cash flow and enforcement. By enabling the state to access funds as soon as they're collected, the state gains more predictable and immediate revenue, and can more easily identify underreporting or non-payment, which may aid in combating tax evasion and improve state budgeting.
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Who cares
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Require Sales Tax Escrow Accounts
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History
- Referred to ways and means
- Referred to ways and means
Full text
7 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
692
2017-2018 Regular Sessions
IN ASSEMBLY
January 9, 2017
Introduced by M. of A. PERRY -- read once and referred to the Committee on Ways and Means
AN ACT to amend the tax law, in relation to requiring vendors to establish mandatory escrow accounts for sales taxes collected, establish the mechanism for those accounts and provide the state with the authority to have immediate access to their collected taxes; and to repeal certain provisions of such law relating thereto
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Paragraph 1 of subdivision (a) of section 1132 of the tax law, as amended by chapter 255 of the laws of 1998, is amended to read as follows:
(1) (i) Every person required to collect the tax shall collect the tax from the customer when collecting the price, amusement charge or rent to which it applies. If the customer is given any sales slip, invoice, receipt or other statement or memorandum of the price, amusement charge or rent paid or payable, the tax shall be stated, charged and shown separately on the first of such documents given to him. The tax shall be paid to the person required to collect it as trustee for and on account of the state.
(ii) Every person required to collect the tax shall deposit such tax upon collection into a separate account, in trust for and payable to the commissioner, as provided by subparagraphs (iii) and (iv) of this paragraph at a time and in a manner as determined by the commissioner. All amounts deposited in such account shall be kept in such account until paid over to the commissioner.
(iii) If the person required to collect the tax does not accept payments from customers through credit or debit card banking transactions, the person required to collect the tax shall establish an account in any banking institution approved by the commissioner and located in this state the deposits in which are insured by an agency of
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06447-01-7
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the federal government. The account shall be held in trust for and payable to the commissioner and the amount of such tax collected shall be kept in such account until payment over to the commissioner. The person required to collect the tax shall authorize the commissioner to debit such account in a manner determined by the commissioner.
(iv) If the person required to collect the tax accepts payments from customers using credit or debit cards, the person required to collect the tax shall establish a separate escrow account through an approved credit card processing company (ACCPC) and not through an escrow account of the type described in subparagraph (iii) of this paragraph. The commissioner shall by regulation establish standards for approving credit card processing companies for opening and establishing ACCPC escrow accounts for persons required to pay the tax. Persons collecting the tax and required to use ACCPC escrow accounts under this subparagraph shall make daily deposits into their ACCPC escrow account that are an estimate of the amount of taxes they collected that day for all of their taxable sales, both those paid in cash and those paid by credit or debit card. To effectuate the deposit, the ACCPC shall deduct the estimated sales taxes owed from the day's credit and debit card transactions before paying over the receipts from such transactions to the person required to collect the tax. The amount deducted shall be determined by multiplying the day's credit and debit card sales by an algorithmic rate which shall be determined when the ACCPC escrow account is established and at least once a year thereafter. The algorithmic rate shall represent an estimated calculation of the amount of taxes collected and owed each day for both cash and credit and debit card sales. The calculation of the person's algorithmic rate shall be certified by a certified public accountant licensed in this state, an attorney licensed in this state or an enrolled agent or registered tax return preparer who has been authorized by the department to certify the algorithmic rate, as an accurate estimate of the ratio of the person's cash to credit transactions and taxable to non-taxable sales. The commissioner shall promulgate regulations defining how the algorithmic rate shall be calculated, setting standards for that calculation, and identifying the process by which licensed or registered professionals may be approved or disapproved by the department to certify the accuracy of the algorithmic rate. Amounts deposited in an ACCPC escrow account shall be held in trust for and payable to the commissioner and shall be kept in such accounts until payment over to the commissioner. Persons collecting the tax and required to use an ACCPC escrow account under this subparagraph shall, upon establishing the account, authorize the commissioner to debit such account in a manner and frequency to be determined by the commissioner.
§ 2. Paragraph 1 of subdivision (a) of section 1134 of the tax law, as amended by section 160 of part A of chapter 389 of the laws of 1997, subparagraph (iii) as amended by section 44 of part K of chapter 61 of the laws of 2011, is amended to read as follows:
(1) (i) Every person required to collect any tax imposed by this article, other than a person who is a vendor solely by reason of clause (D), (E) or (F) of subparagraph (i) of paragraph eight of subdivision (b) of section eleven hundred one of this article, commencing business or opening a new place of business, (ii) every person purchasing or selling tangible personal property for resale commencing business or opening a new place of business, (iii) every person selling petroleum products including persons who or which are not distributors, (iv) every person described in this subdivision who takes possession of or pays for business assets under circumstances requiring notification by such person to
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the commissioner pursuant to subdivision (c) of section eleven hundred forty-one of this [chapter] part, (v) every person selling cigarettes including persons who or which are not agents, and (vi) every person described in subparagraph (i), (ii), (iii), (iv) or (v) of this paragraph or every person who is a vendor solely by reason of clause (D), (E) or (F) of subparagraph (i) of paragraph eight of subdivision (b) of section eleven hundred one of this article who or which has had its certificate of authority revoked under paragraph four of this subdivision, shall file with the commissioner a certificate of registration, in a form prescribed by the commissioner, at least twenty days prior to commencing business or opening a new place of business or such purchasing, selling or taking of possession or payment, whichever comes first. Every person who is a vendor solely by reason of clause (D) of subparagraph (i) of paragraph eight of subdivision (b) of section eleven hundred one of this article shall file with the commissioner a certificate of registration, in a form prescribed by such commissioner, within thirty days after the day on which the cumulative total number of occasions that such person came into the state to deliver property or services, for the immediately preceding four quarterly periods ending on the last day of February, May, August and November, exceeds twelve. Every person who is a vendor solely by reason of clause (E) of subparagraph (i) of paragraph eight of subdivision (b) of section eleven hundred one of this article shall file with the commissioner a certificate of registration, in a form prescribed by such commissioner, within thirty days after the day on which the cumulative total, for the immediately preceding four quarterly periods ending on the last day of February, May, August and November, of such person's gross receipts from sales of property delivered in this state exceeds three hundred thousand dollars and number of such sales exceeds one hundred. Every person who is a vendor solely by reason of clause (F) of subparagraph (i) of paragraph eight of subdivision (b) of section eleven hundred one of this article shall file with the commissioner a certificate of registration, in a form prescribed by such commissioner, within thirty days after the day on which tangible personal property in which such person retains an ownership interest is brought into this state by the person to whom such property is sold, where the person to whom such property is sold becomes or is a resident or uses such property in any manner in carrying on in this state any employment, trade, business or profession. A person required to file a certificate of registration and who is required to collect the tax as required by subparagraph (i) of paragraph one of subdivision (a) of section eleven hundred thirty-two of this part shall, at the time such certificate is filed, establish an escrow account as required by subparagraphs (ii), (iii) and (iv) of paragraph one of subdivision (a) of section eleven hundred thirty-two of this part. Persons required to establish an escrow account through an approved credit card processing company pursuant to subparagraph (iv) of paragraph one of subdivision (a) of section eleven hundred thirty-two of this part shall establish an algorithmic formula for payment of the estimated collected sales tax and shall file, within three months of filing their certificate of registration a certification from a licensed, registered or approved professional of the type specified in subparagraph (iv) of paragraph one of subdivision (a) of section eleven hundred thirty-two of this part certifying to the accuracy of their method of estimating their daily collection of sales taxes as provided in subparagraph (iv) of paragraph one of subdivision (a) of section eleven hundred thirty-two of this part. Information with respect to the
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notice requirements of a purchaser, transferee or assignee and such person's liability pursuant to the provisions of subdivision (c) of section eleven hundred forty-one of this [chapter] part shall be included in or accompany the certificate of registration form furnished the applicant. The commissioner shall also include with such information furnished to each applicant general information about the tax imposed under this article including information on records to be kept, returns and payments, notification requirements and forms. Such certificate of registration may be amended in accordance with rules promulgated by the commissioner.
§ 3. Subparagraph (A) of paragraph 4 of subdivision (a) of section 1134 of the tax law, as amended by section 21-a of part U of chapter 61 of the laws of 2011, is amended to read as follows:
(A) Where a person who holds a certificate of authority (i) willfully fails to file a report or return required by this article, (ii) willfully files, causes to be filed, gives or causes to be given a report, return, certificate or affidavit required under this article which is false, (iii) willfully fails to comply with the provisions of paragraph two or three of subdivision (e) of section eleven hundred thirty-seven of this [article] part, (iv) willfully fails to prepay, collect, truthfully account for or pay over any tax imposed under this article or pursuant to the authority of article twenty-nine of this chapter, (v) fails to obtain a bond pursuant to paragraph two of subdivision (e) of section eleven hundred thirty-seven of this part, or willfully fails to [comply with a notice issued by the commissioner pursuant to paragraph three of such subdivision] establish or properly fund an escrow account as required by paragraph one of subdivision (a) of section eleven hundred thirty-two of this part or otherwise willfully fails to comply with the requirements of that section, or (vi) has been convicted of a crime provided for in this chapter, the commissioner may revoke or suspend such certificate of authority and all duplicates thereof. Provided, however, that the commissioner may revoke or suspend a certificate of authority based on the grounds set forth in clause (vi) of this subparagraph only where the conviction referred to occurred not more than one year prior to the date of revocation or suspension.
§ 4. Subparagraph (A) of paragraph 4 of subdivision (a) of section 1134 of the tax law, as amended by chapter 2 of the laws of 1995, is amended to read as follows:
(A) Where a person who holds a certificate of authority (i) willfully fails to file a report or return required by this article, (ii) willfully files, causes to be filed, gives or causes to be given a report, return, certificate or affidavit required under this article which is false, (iii) willfully fails to comply with the provisions of paragraph two or three of subdivision (e) of section eleven hundred thirty-seven of this [article] part, (iv) willfully fails to prepay, collect, truthfully account for or pay over any tax imposed under this article or pursuant to the authority of article twenty-nine of this chapter, [or] (v) willfully fails to establish or properly fund an escrow account as required by paragraph one of subdivision (a) of section eleven hundred thirty-two of this part or otherwise willfully fails to comply with the requirements of that section, or (vi) has been convicted of a crime provided for in this chapter, the commissioner may revoke or suspend such certificate of authority and all duplicates thereof. Provided, however, that the commissioner may revoke or suspend a certificate of authority based on the grounds set forth in clause (v) of this subpara-
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graph only where the conviction referred to occurred not more than one year prior to the date of revocation or suspension.
§ 5. Paragraph 1 of subdivision (a) of section 1136 of the tax law is REPEALED.
§ 6. Subdivision (c) of section 1136 of the tax law, as added by chapter 93 of the laws of 1965, is amended to read as follows:
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
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