Relates to the imposition of the personal income tax upon foreign limited partnerships.
TITLE OF BILL: An act to amend the tax law, in relation to the imposition of the personal income tax upon foreign partnerships
PURPOSE OF THE BILL: Under current law, foreign partnerships and out-ofstate limited liability companies taxed as a partnership are discouraged from doing business with New York fulfillment service providers because of the potentially adverse tax consequences they may face. The concern is that an LLC or partnership that would not otherwise be subject to New York State taxes will become subject to taxation in New York because of its purchase of services from a New York fulfillment service provider. The purpose of this bill is to grant the same exemptions to partnerships and LLCs that are taxed as partnerships that are granted to corporations under Article 9-A of the Tax law.
SUMMARY OF PROVISIONS: Section 1: Amends subsection (f) of section 601 of the tax law by designating subdivision (1) and adding a new subdivision (2) to provide that foreign partnerships and non-resident partners of foreign partnerships will not have nexus with the state because they use fulfillment services of an entity or person of the state.
Section 2: Provides that this act shall take effect immediately and shall apply to taxable years beginning on or after January 1, 2015.
JUSTIFICATION: The purpose of this bill is to provide a level playing field for partnerships and LLCs with the same advantages currently granted to 9-A corporations. This legislation assures out-of-state businesses that their use of New York fulfillment services will not result in adverse tax consequences, regardless of whether the business is formed as a corporation, partnership, or LLC. This encourages out-ofstate businesses in New York and demonstrates the commitment that New York is truly "Open for Business."
PRIOR LEGISLATIVE HISTORY: 2012 - S.7542.
BUDGET IMPLICATIONS AND LOCAL IMPACT: Fiscal Note attached.
EFFECTIVE DATE: The bill would take effect immediately.
STATE OF NEW YORK ________________________________________________________________________ 3473--A 2013-2014 Regular Sessions IN SENATE February 4, 2013 ___________Introduced by Sen. O'MARA -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Govern- ment Operations -- recommitted to the Committee on Investigations and Government Operations in accordance with Senate Rule 6, sec. 8 -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the tax law, in relation to the imposition of the personal income tax upon foreign partnerships THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subsection (f) of section 601 of the tax law, as amended by chapter 248 of the laws of 1997, is amended to read as follows: (f) Partners and partnerships. (1) A partnership as such shall not be subject to tax under this article. Persons carrying on business as part- ners shall be liable for tax under this article only in their separate or individual capacities. As used in this article, the term "partner- ship" shall include, unless a different meaning is clearly required, a subchapter K limited liability company. The term "subchapter K limited liability company" shall mean a limited liability company classified as a partnership for federal income tax purposes. The term "limited liabil- ity company" means a domestic limited liability company or a foreign limited liability company, as defined in section one hundred two of the limited liability company law, a limited liability investment company formed pursuant to section five hundred seven of the banking law, or a limited liability trust company formed pursuant to section one hundred two-a of the banking law. (2) A FOREIGN PARTNERSHIP SHALL NOT BE DEEMED TO HAVE NEXUS IN THIS STATE, AND THE NON-RESIDENT PARTNERS OF SUCH FOREIGN PARTNERSHIP SHALL NOT BE DEEMED TO HAVE NEW YORK-SOURCE INCOME, BY REASON OF SUCH FOREIGN PARTNERSHIP USING FULFILLMENT SERVICES OF A PERSON OR ENTITY AND OWNING PROPERTY STORED ON THE PREMISES OF SUCH PERSON OR ENTITY IN CONJUNCTIONEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD08544-02-4 S. 3473--A 2
WITH SUCH SERVICES. THE TERM "FULFILLMENT SERVICES" SHALL MEAN ANY OF THE FOLLOWING SERVICES PERFORMED BY AN ENTITY ON ITS PREMISES ON BEHALF OF A PURCHASER: (I) THE ACCEPTANCE OF ORDERS ELECTRONICALLY OR BY MAIL, TELEPHONE, TELEFAX OR INTERNET; (II) RESPONSES TO CONSUMER CORRESPOND- ENCE OR INQUIRIES ELECTRONICALLY OR BY MAIL, TELEPHONE, TELEFAX OR INTERNET; (III) BILLING AND COLLECTION ACTIVITIES; OR (IV) THE SHIPMENT OF ORDERS FROM AN INVENTORY OF PRODUCTS OFFERED FOR SALE BY THE PURCHAS- ER. S 2. This act shall take effect immediately and shall apply to taxable years beginning on or after January 1, 2015. FISCAL NOTE.-- Pursuant to Legislative Law, Section 50: This bill would provide that foreign partnerships and non-resident partners of foreign partnerships will not have nexus with the State because they use fulfillment services of an entity or person in the State and own property stored on the premises of such person or entity. We estimate that this bill would result in an annual revenue loss of $10 million beginning in SFY 2016-17. This estimate, dated January 30, 2014 and intended only for use during the 2014 legislative session, was prepared by Scott Palladino, Assistant Deputy Commissioner, Department of Taxation and Finance.