All franchisors that have at least one franchisee operating in New York State should be aware that they must file an annual information return next month under a state tax law. This annual report is due on or before March 20th of each year, and must cover the period from March 1st of the previous year through February 28th (29th, if a leap year) of the current year.
The report is designed to assist New York’s tax authorities in tracking and verifying state and local income and sales tax payments by in-state franchisees. The information that a franchisor is required to provide on the return includes the gross sales of the each New York franchisee as reported to the franchisor, the total amount of sales by the franchisor to the franchisee, and any income reported to the franchisor by the franchisee. The franchisor is also required to give each franchisee listed on the report a summary statement showing the information the company reported to the state. Any franchise company with New York franchisees that fails to file the information return may be assessed a fine for each one of its franchisees operating in the state, with a maximum fine of $10,000 per reporting period.
To avoid penalties, franchise companies with one or more New York franchisees should file the information return on or before March 20th. If a franchisor is unable to file the return by that date, it can seek a 90-day extension. Extensions are automatically granted if a request is made before the March 20th deadline.
For more information about the annual information report and to file the return or a request for extension electronically, visit the New York State Department of Taxation and Finance’s website at http://www.tax.ny.gov/enforcement/audit/fran.htm.© Copyright 2014 Armstrong Teasdale LLP. All rights reserved