New York City's 4% tax on the business itself
New York City taxes the business, not just the owner. The Unincorporated Business Tax takes 4% of an LLC's, partnership's or sole proprietor's city-allocated income — on top of federal tax, on top of New York State tax, and on top of the owner's own New York City income tax. It is assessed on the entity, so choosing an LLC rather than a corporation is what puts you in its path. The good news is a credit that wipes it out entirely for a small firm. This page is where that line falls, and what else the city charges once you have staff.
Outside the five boroughs, most of this page does not apply to you: New York State has no municipal income tax elsewhere, apart from Yonkers, which levies its own income tax surcharge at a rate we did not confirm. Inside the city, the Unincorporated Business Tax is the single biggest thing that separates running a business in New York from running the same business anywhere else.
It is 4% of income allocated to the city, and it falls on sole proprietors, partnerships and LLCs. Two or more unincorporated businesses owned by the same person are treated as one for the purpose, so you cannot split a practice in half to sit under a threshold. Employees are outside it, as are passive property investors and owners merely holding or leasing their own real property. S-corporations and certain investment entities are exempt or partly exempt — which is not an argument for incorporating on its own, because a corporation meets the city's other business taxes instead. That is a conversation with an accountant, not a decision to make from a web page.
- Sales tax
- 4% state + Roughly 3%–4.875% depending on county and city local · typically About 8% across much of the state; 8.875% in New York City
- Local income tax
- Yes — 4% NYC Unincorporated Business Tax on LLCs, partnerships and sole proprietors
- State business licence
- Not required statewide
- Workers' comp from
- 1 employee
- Formation approved in
- Articles of organisation are filed with the Department of State's Division of Corporations; the published turnaround was not confirmed in this pass
- First 90 days, all in
- $700–$2,200 · $620 of it to the state
Official portals: New York Department of State — Corporations · NY Department of Taxation and Finance — business taxes · NYC Business — Unincorporated Business Tax and city requirements. Figures checked September 2026; the portal always wins.
The credit that means most small firms pay nothing
The UBT has a small business credit, and it is generous at the bottom. A liability of $3,400 or less is wiped out completely. Between $3,401 and $5,400 the credit partly offsets what is owed, tapering out above that.
At the 4% rate, a $3,400 liability is roughly $85,000 of city-allocated business income. So a consultant or small studio billing under about that, allocated to New York City, owes the UBT nothing at all — while still being inside the tax, and still having a return in their life once they are registered.
| UBT liability before the credit | What the credit does |
|---|---|
| $3,400 or less — roughly the first $85,000 of city income at 4% | Fully eliminated. Nothing to pay. |
| $3,401 to $5,400 | Partly offset, on a taper. |
| Above $5,400 | Payable in full. |
One more relief worth claiming: a New York City resident who is a sole proprietor can claim part of the UBT back as a credit against their city personal income tax, which softens the double hit of being taxed as a business and as a person in the same city.
Sales tax is a real patchwork here
New York is one of the states where the rate genuinely depends on the address. The state charges 4%, a county or city adds roughly 3% to 4.875% on top, and inside the Metropolitan Commuter Transportation District there is a further transit district rate. The result is about 8% across much of the state and 8.875% in New York City.
Those are the widely published figures and they are the right shape, but we could not re-confirm them against the Tax Department's own rate table in our last check — so look up the current publication before you quote a rate to a customer or hard-code one into a checkout. A rate that is a quarter-point stale is a liability you carry, not the customer.
Two practical points. Most professional services are not taxable in New York, so a consultancy or agency frequently has nothing to collect. And a Certificate of Authority — free, from the Department of Taxation and Finance — must be in hand before the first taxable sale, not before the first return. It is a registration rather than a licence, but selling without it is the thing that turns a small problem into a penalty.
Payroll: the commuter tax, and three separate insurances
Withholding, wage reporting and unemployment insurance all go on one form in New York, the NYS-45, filed with the Department of Labor and the Tax Department together. That part is tidier than most states.
What sits on top is the Metropolitan Commuter Transportation Mobility Tax, owed by an employer in the MCTD once payroll expense for covered employees passes $312,500 in a calendar quarter. Below that, nothing. Above it, the rate is banded — and inside New York City the top bands are steep.
| Quarterly payroll expense | In New York City |
|---|---|
| Up to $312,500 | No tax |
| Over $312,500 to $375,000 | 0.055% |
| Over $375,000 to $437,500 | 0.115% |
| Over $437,500 to $2,500,000 | 0.60% |
| Over $2,500,000 | 0.895% |
In the suburban counties of the district the same bands top out lower, at 0.34% and 0.635%. A quarterly payroll of $312,500 is roughly $1.25m a year — a team of a dozen or so on New York salaries — so this is a tax that arrives with the second office, not the first hire.
- Workers' compensation
- Required for essentially all employers with employees. The precise commencement rule and the officer and LLC-member exemptions could not be confirmed against the Workers' Compensation Board's own pages in our last check — confirm yours with the Board rather than assuming an owner is excluded.
- Statutory disability benefits (DBL)
- A separate cover, bought from a private carrier or the State Insurance Fund — not a state payroll fund you contribute to.
- New York Paid Family Leave
- Also a policy, usually a rider on the DBL cover, rather than a deduction remitted to the state. It is funded by employee contributions, but the cover is something you buy.
That structure is worth understanding before your first hire: in New York you are buying three insurance products from a carrier, not registering for three state funds. Get quotes early, because the policy has to be in force on day one.
What the entity itself costs each year
Small, and predictable, once you are past formation. The biennial statement is $9 every two years. The annual LLC filing fee on Form IT-204-LL is a flat $25 for a single-member LLC; for multi-member LLCs it runs on a scale from $25 to $4,500 by New York-source income.
Formation is the expensive part of New York, because of the newspaper publication requirement — six weeks in two newspapers the county clerk chooses, at whatever those papers charge, which is a few hundred dollars upstate and can be over $1,000 in Manhattan, plus the $50 Certificate of Publication. It is real and enforced: without the certificate the LLC's authority to do business is suspended. That whole bill, priced by county, is on the New York LLC page, and the hub compares all fifty states.
Common questions
What is the New York City Unincorporated Business Tax?
A 4% city tax on income allocated to New York City, assessed on the business itself rather than the owner. It applies to sole proprietors, partnerships and LLCs; employees, passive property investors and owners merely holding or leasing their own real property are exempt, and S-corporations and certain investment entities are exempt or partly exempt. Two or more unincorporated businesses owned by the same person are treated as one.
How much can I earn before I actually pay the UBT?
The small business credit fully eliminates a liability of $3,400 or less, which at the 4% rate is roughly the first $85,000 of city-allocated business income. Between $3,401 and $5,400 the credit partly offsets the tax; above that it is payable in full. A New York City resident who is a sole proprietor can also claim part of the UBT back as a credit against their city personal income tax.
Does the UBT apply outside New York City?
No. It is a New York City tax. Yonkers levies its own income tax surcharge, at a rate we have not confirmed here, but the rest of New York State has no municipal income tax on business.
When does an employer owe the MCTMT?
Once payroll expense for covered employees in the Metropolitan Commuter Transportation District exceeds $312,500 in a calendar quarter — roughly $1.25m of annual payroll. For quarters beginning on or after 1 July 2025 the New York City rates run 0.055% up to $375,000 of quarterly payroll, 0.115% to $437,500, 0.60% to $2.5m and 0.895% above; the suburban counties top out at 0.34% and 0.635%.
What is the sales tax rate in New York?
4% state, plus roughly 3% to 4.875% county or city, plus a transit district rate inside the Metropolitan Commuter Transportation District — about 8% across much of the state and 8.875% in New York City. Those are the published figures but we could not re-confirm them against the Tax Department's rate table in our last check, so look up the current rate for your address before quoting it.
Do I need a Certificate of Authority before I start selling?
Yes, if you will make taxable sales. It is free from the Department of Taxation and Finance and must be in hand before the first taxable sale rather than before the first return. Most professional services are not taxable in New York, so many consultancies and agencies never need one.
What does a New York LLC cost every year?
A $9 biennial statement every two years, and the annual LLC filing fee on Form IT-204-LL — a flat $25 for a single-member LLC, or $25 to $4,500 for multi-member LLCs on a scale set by New York-source income. The expensive part of New York is formation, because of the newspaper publication requirement.
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