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Calculating NY PrompTax payments

This article applies to:Avalara Returns

Some businesses are required to participate in the New York PrompTax electronic filing and payment program. This generally applies to businesses with annual sales and use tax liabilities greater than $500,000. The NY Department of Taxation and Finance notifies you by mail if you're required to participate. Learn how Avalara calculates the PrompTax payment amount.

Understanding NY PrompTax payment calculations

Avalara uses the Estimated method to calculate NY PrompTax, instead of the Actual method. Avalara is unable to use the Actual method because of the following reasons:

  • Because of the nature of Avalara’s monthly worksheets, data locks on the 10th of current month.
  • Because of the limitations placed on Avalara treasury, funding needs to be fully received by the 14th of the current month.

The Actual method requires data from the 1st to the 22nd of the current month, while all funding and transactions need to be fully reconciled by the 14th and 10th of the current month, respectively. Therefore, Avalara uses the Estimated method.

In the Estimated method, Avalara makes monthly Promptax payments based on the same quarter last year’s liability. Per NY, these monthly payments must be at least 1/3rd of 75% of the total liability (which is the same thing as 25%). The resulting value is rounded up to the nearest $100.

The first two months of every quarter, Avalara pays the exact sales tax liability reported by the customer. On the quarterly return, there is an additional amount prepaid for the next quarter.

  • This additional payment occurs only on quarterly cycles.
  • For more information, review form TR-682-N.

Example

In this example, for the Promptax payment for the March - May quarter of 2022, the monthly Promptax payment attempted is as follows:

  • March 2021 – May 2021 quarter liability = $589,375.10
  • 25% =  $147,343.78
  • Rounded up Avalara payment = $147,400.00

The preceding amount is remitted to NY as an additional prepayment with the February 2022 ST-810 return, as this is when the first prepayment is due for the new quarter.

On the two monthly payments for the quarter, Avalara attempts to pay $147,400.00 in the 1st-22nd portion of the promptax payment, and then any additional monthly liability in the 23rd – EOM portion of the promptax payment. However, the reverse is also true. If you only had $20,000 in monthly liability for one of the months, Avalara would only pay $20,000. Following are the examples:

  • March 2022 Monthly Liability: $160,000
    23rd – EOM payment: $12,600.00
    1st – 22nd payment: $147,400.00
     
  • April 2022 Monthly Liability: $20,000
    23rd – EOM payment: $0
    1st – 22nd payment: $20,000

On the two monthly payments for the quarter, Avalara only pays your NY monthly liability (shown in AvaTax). However, the breakout of the payment will look different depending on if that liability passes the calculated prepayment amount for the quarter ($147,400.00 in the example). Once the quarter ends, Avalara calculates the new prepayment amount for the March 2022 – May 2022 quarter and uses that number.

On quarterly returns, Avalara uses the ST-810. This return is a reconciliation return for the quarter.  All Promptax payments will be listed as prior payments and there will be an additional prepayment made at this time, which means additional funds will be pulled that will be credited toward the following quarter. Prepayments are only made on quarters so additional funds are only pulled for quarterly filings.

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