New YorkOctober 18, 20267 min read

ByGerald J. Donnini II, Esq.·Sales Tax Defense Attorney·NYU LLM Taxation·15+ Years · 5,000+ Audits

New York Sales Tax PAID Program: What It Actually Does

You might be here because you received a letter from NYS DTF's PAID program. They have been going out in masses and many businesses are unsure what to do when they receive this letter. The letter typically means you have an outstanding sales tax liability and you may be eligible for the new Penalty and Interest Discount program (PAID) program which is an opportunity for penalty and interest relief. We wrote this article to help you understand if you or your business can take advantage of the program or better evaluate your options if you need assistance with the program.

I had a recent conference with a prospective client about a situation that comes up pretty regularly. For this particular business, which was a restaurant in Queens, the business did not file their sales tax returns, which resulted in an estimated liability. The estimated liability, in turn, was not properly handled and became final, plus penalty and interest. Although this situation was about unfiled returns, I deal with businesses on a regular basis that do not timely challenge or appeal an audit assessment, which ends up in the same place, a final unchallengeable liability. Many calls that I get are businesses that owe $75,000-$200,000 of tax penalty and interest to NYS.

For the past 15 years, I have worked with companies in this exact situation. I have seen businesses receive a letter from the New York State Department of Taxation and Finance with money apparently handed to them on a silver platter. For a lot of businesses it is money for nothing. While the PAID program reduces penalty and interest, it does not reduce the tax. The single biggest change regarding that letter in your hand is that PAID does not reduce the tax.

New York — Sales Tax

What New York's PAID Program Actually Offers

Who Qualifies, and the September 1, 2026 Cutoff

PAID is open to vendors who owe sales tax and have a current Certificate of Authority with the State of New York. The sales tax must not be associated with fraud. Your NYS sales tax liability must also be unpaid and outstanding as of September 1, 2026 to qualify for the PAID program. For example, an open balance on a return filed for the period ending November 30, 2026 would not qualify, even if a PAID letter is issued that same month for other outstanding sales tax.

When PAID Actually Becomes Available

Another important consideration is that PAID is not available until formal appeal rights have lapsed, typically 90 days after the issuance of a Notice of Determination. If you do not request a BCMS conciliation conference or Division of Tax Appeals review within that time, you essentially forfeit your right to appeal, and this is when PAID would be available. If you do request a BCMS conciliation conference or Division of Tax Appeals review, you have to wait until these processes play out before you become eligible for PAID. This can create a conundrum on an open appeal as it can be difficult to evaluate whether fighting the tax and risking the penalty and interest abatement is worth it from a cost benefit perspective. On stale collection cases, it is often worth pursuing the PAID route.

The Part the Letter Doesn't Tell You: Your Tax Bill Doesn't Change

Why the Order of Operations Matters

To be clear, PAID will remove 100% of the penalty and 50% of the interest for an eligible bill. PAID will not remove a single dollar of the tax that NY says you owe. PAID is working backward: solving the interest problem first, and then solving the penalty problem. Most people would assume PAID should first address the $120,000 tax and then address the $22,000 penalty and $20,000 interest.

Running the Numbers on a Hypothetical Bill

With that in mind, we have a hypothetical bill before us for $120,000 for tax, with penalties of $22,000, and interest of $20,000 for a total of $162,000. PAID removes the $22,000 penalty and shaves the interest to about $10,000. So, with PAID, the total is $130,000, rather than $162,000. In the end, that difference of $32,000 is real money. It is also completely separate from the $120,000 tax, which is still exactly the same before the letter was sent. These numbers are example numbers to help visualize the math, not actual client numbers. However, on very stale bills, where interest has had years to accrue, the dollar savings from PAID can end up being even bigger than in a newer case.

What PAID Means If You're a Responsible Person

Why You Can't Pay Your Own Responsible-Person Bill Directly

PAID relief flows through the business, not an individual. Owners, managers, or other responsible persons cannot receive PAID relief for themselves.

How the Business-ID Payoff Rule Works

What New York has implemented instead is this: when a business pays off all PAID-eligible bills connected to its business ID, then all responsible person bills related to that same business ID are also deemed paid and closed. Paying one's own personal bill will not achieve this relief. The payment must be done through the business ID.

Deciding Whether to Take the Deal

When PAID Is a Clear Win

If you have verified the underlying tax number is correct and your appeal rights are gone, PAID is almost free money. PAID can clear 100% of the penalty and 50% of the interest, and the department will temporarily stop collection action on the bill during the program. Tax warrants tied to PAID eligible bills will automatically be resolved when the eligible bills are fully paid. An installment agreement with a mix of PAID eligible and ineligible bills will finish early when the eligible bills are fully paid, and the agreement will remain with the same monthly payment.

When to Get a Second Look Before You Pay

If all or a piece of the underlying tax is incorrect, based on a defective sample, or connected to an assessment that was issued incorrectly, PAID might not be the right tool for your business. Generally, in conciliation or through the appeal process, the penalty is resolvable anyway, so leaving tax on the table is not worth the trade off. However, on cases in which the tax is clearly due, the guaranteed interest and penalty savings through PAID is probably worth it.

Pursuing PAID is New York's means to obtain bills cleared prior to its sales tax re-registration in the middle of 2027, thus giving the above deadline an added importance. Your letter in hand is a true opportunity, and like all others, it expires December 31, 2026. Have your tax number reviewed prior to this date. After payment is made, it cannot be recovered.

Received a Notice of Determination? Our team of attorneys, CPAs, and former state auditors can help you evaluate whether PAID is the right move before December 31, 2026.

Frequently Asked Questions

Is NY's PAID program the same as a sales tax amnesty program?

They're similar, but NY's program is called the Penalty and Interest Discount program, and it only applies to final bills that can no longer be appealed and that are in the collection process. Like an amnesty program, it offers a type of discount, but NY's materials do not call it that.

Who is eligible for the PAID program?

Only vendors with an active Certificate of Authority, an unpaid sales tax bill that is final, has no longer any appeal rights, and was not tied to fraud, and was outstanding as of September 1, 2026, are eligible.

How much can a business save with the PAID program?

100% of the penalty, and 50% of the interest on the eligible bill, as long as the total amount is paid electronically by December 31, 2026.

Does the PAID program reduce the sales tax owed?

No, the sales tax remains the same. PAID only decreases the penalty and interest.

What is the deadline to take advantage of the PAID program?

December 31, 2026.

Will paying my PAID balance protect me personally as a responsible person?

Although paying your PAID balance will close out responsible person bills tied to the same business ID, it will not remove information the state has regarding your role as responsible person. Additionally, paying your separate responsible person bill instead of paying the business balance will not provide relief.

Am I able to make smaller payments toward my PAID balance?

Yes. You are not required to have a formal payment plan to make payments, but the entire PAID-eligible amount must be paid by December 31, 2026 in order to avoid losing the discount.

What happens if I don't pay the full amount by December 31, 2026?

If you do not pay the full amount by December 31, 2026, you will lose the discount, and the full penalty and interest will be reinstated. Starting January 1, 2027, New York will take normal collection actions on the unpaid balance.

Am I still able to challenge my assessment if I am eligible for PAID?

No. You cannot do both. If you want to challenge the underlying assessment through the appeals process, you need to do that first, before applying for PAID. Once you accept PAID and pay under the program, your appeal rights on that liability are gone, and you cannot go back and challenge it separately.

What happens if I have an existing payment agreement for some of these bills?

Paying off the PAID-eligible balance in full will have no effect on your existing agreement, and your payment amount will remain the same. The length of the agreement will just be reduced.

This article is for general informational purposes only and does not constitute legal or tax advice. Eligibility for New York's PAID program and the treatment of any specific sales tax bill depends on the facts of your situation. Consult a qualified sales tax attorney before making payment decisions based on this information.

About the Author

Gerald J. "Jerry" Donnini II is a sales tax attorney and the founder of Sales Tax Helper, a national platform that helps businesses find, fix, and prevent sales tax exposure before it becomes a problem. Over a 15-year career, he has represented businesses in more than 5,000 sales tax audits, appeals, and disputes across 40+ states. He holds an LLM in Taxation from New York University, is co-author of a CCH treatise on state sales and use tax, and serves as an adjunct law professor. Jerry has saved businesses more than $500 million in sales tax assessments. His framework, Find It. Fix It. Defend It., guides businesses from initial nexus diagnosis through voluntary disclosure and, when necessary, full audit defense.

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