Many employers who operate in the NYC metropolitan area are subject to the NYS metropolitan commuter transportation mobility tax (MCTMT). This employer tax is based on the payroll expenses for covered employees working in the Metropolitan Commuter Transportation District (MCTD), which consists of all five boroughs of New York City and the counties of Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess and Westchester.
Employers are subject to this tax when total payroll expenses for “covered employees” equal or exceed $312,500 for the quarter.
Many employers unknowingly underpay this employer tax because they are not identifying all covered employees for the payroll provider. Without this information, the payroll system has no other way to recognize and compile the employees’ salaries to determine if the company is subject to the tax in any given quarter and if, so, to report the tax obligation accurately on the employer’s quarterly NYS MTA-305 returns.
It is critical to classify and report all MCTD employees to your payroll provider to avoid underpayment and penalties. An employee’s services are allocated to the MCTD if one of the following criteria apply:
- Services are performed entirely within the MCTD or performed both inside and outside of the MCTD, but the services performed outside are incidental to the services performed within.
- Employee’s base of operations is in the MCTD. Base of operations is the place where the employee is not continuously located but from which the employee customarily starts out to perform his or her functions.
- Employee’s direction and control emanates only from within the MCTD, and the employee performs some services within the MCTD.
- None of the preceding criteria apply, but the employee resides in the MCTD and performs some services in the MCTD.
Review your employee payroll records to determine if all appropriate employees are identified and report any deficiencies to your payroll provider right away. If you discover that your business has already underreported MCTD wages on MTA-305 returns, a NYS voluntary disclosure can be filed to correct the noncompliance and pay the tax with interest but no penalties.
For more information on determining your covered employees and MCTMT obligation, please contact Jeffrey Cohen, Tax Partner, at jcohen@grassiadvisors.com.
