N.Y. Tax Law § 9: Electronic funds transfer by certain taxpayers remitting withholding taxes

§ 9. Electronic funds transfer by certain taxpayers remitting

withholding taxes. (a) Definitions. For the purposes of this section:

(1) The term "commissioner" means the commissioner of taxation and

finance.

(2) The term "educational organization" means a higher educational

institution which

(A) is authorized by the New York state board of regents to confer

degrees, or

(B) offers a range of registered undergraduate and graduate curricula

in the liberal arts and sciences, degrees in two or more professional

fields and doctoral programs in at least three academic fields, or

(C) is authorized by the New York state board of regents to offer

undergraduate curricula below the baccalaureate level which normally

lead to the associate degree,

as such higher educational institutions are described in subdivisions

(k), (l) and (m) of section 50.1 of eight New York codes, rules and

regulations.

(3) The term "electronic funds transfer" means any transfer of funds,

other than a transaction originated by check, draft, or similar paper

instrument, which is initiated through an electronic terminal,

telephonic instrument or computer or magnetic tape so as to order,

instruct or authorize a financial institution to debit or credit an

account.

(4) The term "health care provider" means any organization described

in article twenty-eight or thirty-six of the public health law, or in

article thirty-one of the mental hygiene law.

(5) The term "payment of tax" means the amount of tax that is actually

remitted upon the filing of a withholding tax return, or is actually

remitted for the purposes of obtaining an extension to file such a

return.

(6) The term "reconciliation of withholding" means the quarterly

combined withholding, wage reporting and unemployment insurance return

required to be filed for the last calendar quarter of each year, as

prescribed by paragraph four of subsection (a) of section six hundred

seventy-four of this chapter.

(b) General rules. (1) Subject to the requirements contained in

subdivisions (c) and (d) of this section, the commissioner shall require

by regulation that any payment of tax made by a taxpayer who is

required, for either of the semi-annual periods ending June thirtieth or

December thirty-first, to deduct and withhold an aggregate of

thirty-five thousand dollars or more of withholding taxes pursuant to

part V of article twenty-two of this chapter, or pursuant to an

equivalent provision enacted under the authority of article thirty,

thirty-A or thirty-B of this chapter, or article two-E of the general

city law, shall be made, on or before the date prescribed by law, by

electronic funds transfer to a bank, banking house or trust company

designated by the commissioner. The commissioner shall designate only

such banks, banking houses or trust companies as are or shall be

designated by the comptroller as depositories pursuant to section one

hundred seventy-one-a of this chapter, as added by chapter sixty-nine of

the laws of nineteen hundred seventy-eight. Notwithstanding any

provision of law to the contrary, any such payment shall be deemed to be

made on the date the payment is received by the designated depository of

the department; provided, however, that at the election of a taxpayer

subject to the provisions of this subdivision, mailing by the taxpayer

of the applicable withholding tax return and a certified check for the

amount of the tax liability on or before the second business day prior

to the applicable due date otherwise prescribed by law shall fulfill the

requirements of this section and shall be deemed to be timely payment of

such tax liability and timely filing of such return.

(2) (A) On or before the thirtieth calendar day following the date

regulations implementing the provisions of this section become

effective, the commissioner shall, by certified mail, notify taxpayers

required to participate in the electronic funds transfer program of

their responsibilities under such program. The notice shall also specify

that the first payment of tax by electronic funds transfer shall be made

on an applicable due date occurring on or after thirty calendar days

following receipt by the taxpayer of the notice; provided, however, that

the taxpayer may select an optional applicable due date occurring no

later than sixty calendar days following receipt by the taxpayer of the

notice.

(B) (i) By September first, two thousand two, the commissioner shall,

by certified mail, notify taxpayers newly required to participate in the

electronic funds transfer program during the July first, two thousand

two through June thirtieth, two thousand three program period. Such

notice shall contain language advising the taxpayer of the enrollment

procedure and of the consequences of failure to enroll in such program,

as well as of the taxpayer's obligation to enroll in the program within

forty-five calendar days of the mailing of the notice unless such

taxpayer challenges such determination of required participation by

requesting a hearing within forty-five calendar days of the mailing of

such notice. In addition, such notice shall specify that such a taxpayer

shall make its first payment of tax by electronic funds transfer by an

applicable due date in January, two thousand three.

(ii) By June first, two thousand three and by each succeeding June

first, the commissioner shall, by certified mail, notify taxpayers newly

required to participate in the electronic funds transfer program. Such

notice shall contain language advising the taxpayer of the enrollment

procedure and of the consequences of failure to enroll in such program,

as well as of the taxpayer's right to challenge such determination of

required participation provided a hearing is requested within twenty

calendar days of the mailing of such notice. In addition, such notice

shall specify that such a taxpayer shall make its first payment of tax

by electronic funds transfer by an applicable due date occurring on or

after thirty calendar days following receipt by the taxpayer of the

notice but no later than sixty calendar days following receipt by the

taxpayer of the notice.

(iii) If a taxpayer does not enroll within forty-five or twenty

calendar days (as the case may be) of the mailing of the notice provided

for in clause (i) or (ii) of this subparagraph or where a taxpayer's

challenge to mandatory participation is not sustained and the taxpayer

has not enrolled within ten calendar days of notification thereof, the

commissioner shall mail another notice, in addition to making other

reasonable attempts, to inform the taxpayer of the civil penalty that

has been assessed pursuant to subdivision (h) of this section, of the

opportunity for abatement of such penalty, and of the future penalties

that may result from continued failure to enroll.

(3) Subject to the provisions of subdivision (f) of this section, an

electronic funds transfer shall serve as a substitute for the filing of

a withholding tax return.

(c) Special rules with respect to health care providers and

educational organizations.

(1) The provisions of subdivision (b) of this section shall not apply

to health care providers.

(2) All of the provisions of this section shall apply to educational

organizations; provided, however, that any payment of tax which is made

by an educational organization shall be made by electronic funds

transfer on or before the third business day following the date

otherwise prescribed by law; and, provided further, that at the election

of a taxpayer subject to the provisions of this subdivision, mailing by

the taxpayer of the applicable withholding tax return and a certified

check for the amount of the tax liability on or before the first

business day following the applicable due date otherwise prescribed by

law shall fulfill the requirements of this section and shall be deemed

to be timely payment of such tax liability and timely filing of such

return.

(d) Exemptions. A taxpayer shall be exempt from the requirements

contained in subdivision (b) of this section if such taxpayer proves to

the satisfaction of the commissioner that aggregate tax withheld,

pursuant to the most recent reconciliation of withholding, is less than

one hundred thousand dollars.

(e) Voluntary participation. A taxpayer may file a request with the

commissioner to pay any tax administered by such commissioner by

electronic funds transfer in accordance with the provisions of this

section. Such request shall be in such form as the commissioner shall

require and shall be granted under such conditions as the commissioner,

by regulation, deems necessary.

* (f) Return substitution. An electronic funds transfer shall not

serve as a substitute for the filing of a withholding tax return if the

commissioner determines that such substitution will not ensure the

proper receipt and crediting of a payment of tax.

* NB Expired December 31, 1992

(g) Confidentiality. The department shall assure the confidentiality

of information supplied by taxpayers in effecting electronic funds

transfers in accordance with the provisions of section six hundred

ninety-seven of this chapter or other applicable provisions of this

chapter. The provisions of article six of the public officers law shall

not apply to any such information supplied by taxpayers subject to the

requirements of this section.

(h) Civil penalty for failure to enroll. If a taxpayer required to

participate in the electronic funds transfer program prescribed by this

section fails to enroll in such program in accordance with the terms of

subparagraph (B) of paragraph two of subdivision (b) of this section,

such taxpayer shall pay a penalty equal to five thousand dollars;

provided, however, that if such taxpayer enrolls in the program within

twenty calendar days after notification of assessment of such penalty is

sent by the department by certified mail for program periods beginning

on or after July first, two thousand two, then such penalty shall be

abated. If such taxpayer continues to fail to enroll in the program

after such twenty calendar day period, the taxpayer shall pay an

additional penalty of five hundred dollars if the failure is for not

more than one month with an additional five hundred dollars for each

additional month or fraction thereof during which such failure

continues. The penalty provided by this section shall be paid upon

notice and demand and shall be assessed, collected and paid in the same

manner as the withholding taxes referred to in paragraph one of

subdivision (b) of this section; and any reference in the provisions of

part VI of article twenty-two of this chapter, which apply to the

administration of and procedures with respect to the provisions of this

section, shall be deemed also to refer to the penalty provided by this

section.

(i) Regulations. The commissioner shall promulgate regulations

necessary to implement this section, which regulations shall include,

but shall not be limited to, the following:

(1) the different methods of effecting electronic funds transfer

messages available to taxpayers. Such methods shall include at least two

methods in which the transfer can be effected without any charge to the

taxpayer for the electronic funds transfer itself, and one of such

methods shall not require the taxpayer to disclose financial institution

account information to the department;

(2) the contents of an electronic funds transfer message necessary to

ensure the proper receipt and crediting of a tax payment;

(3) the means by which taxpayers will be provided acknowledgements of

payments by electronic funds transfer; and

(4) delineation of what shall constitute reasonable cause and absence

of willful neglect for purposes of compliance with the provisions of

this section, including the inability of a taxpayer, for reasons beyond

the taxpayer's control, to utilize any system of electronic funds

transfer required pursuant to this section.