Owe New York Sales Tax? A New Program Could Reduce Penalties & Interest

New York businesses with outstanding sales tax liabilities may have an opportunity to resolve them at a significant discount, but the window is short.

The New York State Department of Taxation and Finance has introduced the Penalty and Interest Discount (PAID) program for certain businesses with fixed and final sales tax liabilities that existed as of September 1, 2026. Eligible businesses that pay the required amount by December 31, 2026, can eliminate the penalties associated with those liabilities and pay only 50% of the interest, in addition to the outstanding sales tax.

For a business that has been carrying an older sales tax debt, this could substantially reduce the cost of getting it resolved.

Who May Be Eligible?

The program applies to eligible businesses with an active Certificate of Authority and unpaid sales tax bills that were eligible as of September 1, 2026. The bills must be subject to collection and no longer have formal appeal rights. Bills associated with fraud are not eligible.

If your business qualifies, you don’t need to apply or enroll in the program. The New York State Department of Taxation and Finance is identifying eligible businesses and sending them a letter listing the bills that qualify, along with the amount the business can save by participating.

To receive the discount, the business must electronically pay the reduced amount due on all of the PAID-eligible bills by December 31, 2026. Businesses can make smaller payments between now and then without establishing a payment plan, but the entire eligible balance must be paid by the deadline.

If you believe your business has eligible sales tax bills, but you haven’t received a letter, the Tax Department recommends contacting it to discuss your account and eligibility.

You can find additional details about eligibility and the program through the New York State Department of Taxation and Finance.

Why Is New York Offering the Program Now?

The timing of PAID is connected to a broader change coming to New York’s sales tax registration system.

Beginning in summer 2027, New York will require businesses that hold a sales tax Certificate of Authority to re-register with the state. The process will take place in phases over three years, and businesses will receive notice from the Tax Department at least 180 days before their current certificate expires.

Businesses cannot re-register early. They will need to wait until they receive their notice from the state and then apply for a new Certificate of Authority during their assigned re-registration period.

More importantly, before an application for a new Certificate of Authority can be approved, a business must pay all fixed and final New York tax liabilities in full, regardless of the type of tax involved.

That makes PAID particularly relevant for businesses with outstanding sales tax debt. It provides an opportunity to address eligible liabilities at a reduced cost before the re-registration process begins.

Don’t Wait Until December

If your business has an outstanding New York sales tax liability, now is the time to determine whether it qualifies for PAID and what it would cost to resolve the debt under the program.

Even businesses that aren’t eligible for PAID should be aware of the upcoming re-registration requirement. Every current Certificate of Authority holder will eventually need to re-register, even businesses without outstanding tax liabilities.

If you have questions about an outstanding New York tax liability or whether the PAID program may apply to your business, contact us. We can help you review the situation and determine what steps make sense before the December 31 deadline.