Sales Tax

Free Seminar:  Why Lawyers Kill Commercial Real Estate Deals and How to Spot a Bad Deal in Advance
When:  Wednesday, March 15, 2017 from 5:30pm – 7:00pm
Where:  NYC Small Business Solutions, 110 William Street, New York, NY (7th Floor Boardroom)
Seminar Description: Are you tired of spending countless hours showing a property and negotiating a deal, only to have lawyers get involved and kill the transaction?  How can this be avoided?  This seminar is designed to assist commercial real estate brokers identify problematic deal terms before their time is wasted.  The seminar will focus on:

• Is your ‘non-binding’ letter of intent actually binding?
• How to properly structure a letter of intent for various transactions (e.g. sale, lease, investment)
• Identifying hidden lease expenses (i.e.

This Thursday August 28, 2014 from 5:30 to 7:30 p.m. I’ll be giving a seminar in the Restaurant Management Bootcamp 2.0 Series that is hosted by NYC Small Business Solutions.  The Course Description is copied below:

Restaurant Management Bootcamp 2.0: Legal Considerations when Opening a Bar or Restaurant
An insider look at tips, tricks, and best practices to start your first restaurant in NYC, presented by Restaurant Attorney James D. DiPasquale.  To start and run a successful restaurant you must understand many different legal considerations which make operating in New York City, particularly unique.  Whether you are a new or existing restaurant owner, this special follow-up to the Restaurant Management Bootcamp class will help you gain a deeper understanding of all of the basic requirements to get your business up and running.

Business owners form legal entities such as corporations and limited liability companies in order to protect themselves from personal liability. Before you choose which type of business entity is best for you and your company, consider the different types of protections offered by each of the business forms.

Corporations

New York does not allow corporate shareholders to be completely shielded from liability for their corporate debts. New York is the only state in the country that holds a corporation’s top ten shareholders personally liable for the unpaid wages of the corporation. Section 630(a) of the New York Business Corporation Law states, in relevant part:

“The ten largest shareholders …shall jointly and severally be personally liable for all debts, wages, or salaries due and owing to any of its laborers, servants or employees other than contractors, for services performed by them for such corporation.”

The following is courtesy of the New York State Division of Taxation and Finance.

If you're starting a new business or purchasing an existing one, there's a publication you might want to add to your reading list, the "Tax Guide for New Businesses" (Publication 20) from the New York State Department of Taxation and Finance.

This practical guide, freshly updated from cover to cover, provides basic information about New York State's tax laws and regulations for business of all sizes.

It highlights tax responsibilities related to sole proprietorships, partnerships, and corporations. It spells out filing requirements for employers and provides guidance on sales tax, the Metropolitan Commuter Transportation Mobility Tax, and other taxes such as the alcoholic beverage tax. It also provides information on New York City licenses, permits, and dozens of other tax-related topics.

At this time of year, we all feel the crunch that comes with the filing of our annual tax return. Unfortunately, several businesses are struggling to keep their doors open and when that belt starts to tighten, several owners make horrible decisions that hurt more than help. Initially, the worst thing to do is to not pay your taxes. That includes property, sales and income tax. Not only will Uncle Sam continue to pursue you personally long after your business is dissolved, you will get hit with interest and penalties and could even face criminal charges. The New York State Department of Taxation and Finance issued a press release two past weeks identifying twelve individuals that were arrested and charged with felonies for failing to file tax returns. Is that a risk you are willing to take?

There is a common misconception among restaurant owners that if you purchase the assets of an existing restaurant (as opposed to purchasing the Corporation itself) you will not inherit the debts or obligations of the seller.  That is not always the case. 

New York State has a bulk sales liability provision which requires the buyer of part or all of the assets of an existing business to complete and file a bulk sales notice with the New York State Division Of Taxation And Finance.  If you fail to provide this notice and/or withhold sufficient funds from the purchase price (pending determination by the Tax Department) the buyer will be held personally liable for the seller’s unpaid sales and use taxes.  More specifically the buyer must, at least 10 days before taking possession or paying for the assets, first notify the Tax Department of the proposed agreement. The Tax Department then has 90 days to notify all parties of the total amount due, if any. If the Tax Department fails to notify the parties within 90 days, then the buyer will be absolved from the seller’s unpaid sales tax liability. Often however, the parties do not want to wait 90 days until they receive notification from the Tax Department to close on their purchase agreement. In that instance an amount sufficient to pay the outstanding tax liability must be held in escrow until the Tax Department responds.

Ramesh Bhatia, is the 65 year old owner of a Subway and Papa John's Restaurant located in Midtown Manhattan.  According to the New York State Department of Taxation and Finance, Ms. Bhatia admitted to stealing $337,000 in sales tax revenue from 2004 through 2010 and having filed a false New York City corporate tax return in an effort to intentionally defraud the City out of $76,000.  According to District Attorney Cyrus R. Vance, Jr., Bhatia will serve thirty extended weekends in prison and will be liable to repay the City and State the 3.4 million they calculate that he swindled over the past seven years. 

In a rare demonstration of clarity New York State's Department of Taxation and Finance recently released an interpretive bulletin for restaurants, bars, taverns, cafes and other fodd service establishments which they hope will clarify when sales tax is to be charged. 

The release of this bulletin follows New York's 2010 audit of Bruegger's Bagel Bakery Franchises for their failure to remit sales tax on "ready-to-eat" food.  The rule is that "ready-to-eat" food is subject to sales tax, but never before was there a clear definition of what "ready-to-eat" meant.