New York State Sales and Use Tax - Penalty and Interest Discount Program

Overview

New York State passed legislation as part of the FY 2026-2027 budget authorizing the Penalty and Interest Discount ("PAID") Program (L. 2026, ch. 59, Part N, §§ 2-3). The program provides eligible sales tax vendors with the opportunity to receive a 50% reduction in interest and a 100% waiver of penalties associated with certain unpaid sales and use tax liabilities.

The New York State Department of Taxation and Finance (“Department”) will notify taxpayers by letter, in early September, of any “PAID-eligible bills.” Eligibility requires the liabilities to be fixed and final (i.e., an assessment that a sales tax vendor no longer has the right to appeal) as of September 1, 2026.

To receive 100% penalty waiver and 50% interest reduction, all amounts listed on the letter from the Department must be paid electronically through an Online Services account or Quick Pay by December 31, 2026. If payment cannot be made electronically, taxpayers can contact the Department at 518-457-2563 to make payment over the phone.

If payment is not made by December 31, 2026, the full outstanding balance will remain due and subject to collection beginning January 1, 2027. Penalties and interest will continue to accrue at full statutory rates.

Observations

This program is part of New York's upcoming sales tax reregistration initiative which begins in mid-2027. Eligible taxpayers should consider taking advantage of this opportunity to resolve outstanding New York sales and use tax liabilities at a significant discount while avoiding the imposition of liens and other potential collection actions.

For more information, please contact Thomas Walsh from the State and Local Tax Advisory Practice. For technical interpretation or firm policy matters, please contact Stacy Ip-Mo from the Washington National Tax Practice.