My business partner and I run a traveling antiques business with no office, storing merchandise at our home in the MCTD and selling at shows across the country. Do we owe MCTMT, and does it cover our out-of-state show income too?

Plain-English summary

A two-partner New York antiques-dealing partnership with no employees or office space asked whether its partners owe MCTMT. The partners store merchandise in their home, located within the MCTD; direct and control the business and keep its books and records there; but sell exclusively at antique shows around the country — attending eight or more shows a year, with no guarantee they'll ever attend a New York show in any given year.

Because the partnership has no employees, the MCTMT question runs through the self-employment track (Tax Law § 801(a)) rather than the employer-payroll track: individual partners with net self-employment earnings allocated to the MCTD are subject to MCTMT, unless the total allocated to the MCTD is $10,000 or less for the year, in which case no tax is due. If a taxpayer has earnings from more than one business, all MCTD-allocated self-employment earnings are combined for the threshold and tax computation, and the threshold/tax apply on an individual basis even on a joint personal income tax return.

Business is "carried on" in a location if the individual maintains desk space, an office, a shop, a store, a warehouse, or similar place there where business matters are systematically and regularly conducted. The Department found the partners' home — used to store inventory, direct and control operations, and house the books and records — qualifies as such a place, so the partnership carries on business in the MCTD. But because the partners also sell at out-of-state shows, they're carrying on business both in and outside the MCTD, meaning only a portion of their self-employment earnings is allocated to (and taxed by) the MCTD.

That allocation follows the same rules used for allocating business income under the personal income tax (Tax Law § 801(b)(1)): if the partnership's books and records fairly show earnings attributable to MCTD activity, use those records directly; otherwise, use the formula method — averaging a property percentage, payroll percentage, and gross income percentage (the "business allocation percentage," detailed in the Form MTA-6 instructions) — or another Department-authorized method.

What this means for you

Traveling merchants, show vendors, and similar mobile self-employed businesses

Storing inventory or basing your business operations out of an MCTD home can be enough to trigger MCTMT exposure, even without a formal office or storefront — the test looks at where you systematically and regularly conduct business matters, not whether you have a commercial lease. But you're only taxed on the MCTD-allocated share of earnings, not your nationwide income.

Partnerships and self-employed individuals mixing MCTD and out-of-district activity

Keep books and records that clearly separate MCTD-sourced earnings from earnings generated elsewhere — that lets you use actual records for allocation rather than falling back to the formula (business allocation percentage) method, which may not reflect your actual MCTD activity as accurately.

Common questions

Q: Do we owe MCTMT on all our nationwide sales, or just sales made in New York?
A: Only earnings allocated to the MCTD count — sales/business activity carried on entirely outside the MCTD (like an out-of-state antiques show) aren't taxed, though the analysis of how much to allocate uses records or a formula, not just where the sale physically happened.

Q: Does storing inventory at home count as "carrying on business" even without a storefront?
A: Yes, if the home is used to systematically and regularly manage business matters — here, storage, direction/control, and recordkeeping at the MCTD home was enough, even though the partners never sold merchandise from the home itself.

Q: What if our MCTD-allocated earnings are under $10,000 for the year?
A: No MCTMT is due for that year if total net self-employment earnings allocated to the MCTD are $10,000 or less (this threshold is as stated in the 2010 ruling -- verify the current threshold, since MCTMT thresholds have changed over time, e.g. a $50,000 threshold appears in the later TSB-A-14(1)MCTMT for other self-employment facts).

Q: Can I rely on this ruling for my own partnership or self-employment situation?
A: No. This advisory opinion binds the Department only as to the petitioner and the specific facts described.

Citations and references

Statutes:

• Tax Law § 800(e) (net earnings from self-employment, referencing the Internal Revenue Code)
• Tax Law § 801(a) (MCTMT on self-employment earnings allocated to the MCTD; annual threshold)
• Tax Law § 801(b)(1) (allocation of business income earned in/out of the MCTD, per personal income tax rules)
• IRC § 1402(a) (net earnings from self-employment, including partnership distributive share)
• IRC § 1402(b) (annual social security wage limitation -- does not apply when computing MCTMT)

Related guidance:

• Publication 420, Guide to the Metropolitan Commuter Transportation Mobility Tax
• Form MTA-6 instructions (Business Allocation Percentage worksheet)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/mctmt_ao.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/mctmt/a10_2mctmt.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-10(2)MCTMT
Metropolitan Commuter
Transportation Mobility Tax
October 28, 2010

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M091211A

On December 11, 2009, the Department of Taxation and Finance received a Petition from
James M. Labaugh Antiques (“Petitioner”). Petitioner asks whether its partners’ business activities
in the Metropolitan Commuter Transportation Department (MCTD) are subject to the New York
State Metropolitan Commuter Transportation Mobility Tax (MCTMT). We conclude that
Petitioner’s partners have an obligation to pay MCTMT as a result of their partnership business
activity in the MCTD, but the partners may exclude business activity outside of the MCTD.
Facts
The Petitioner conducts its business as a New York partnership. The Petitioner sells antique
merchandise at various antique shows throughout the country. The partnership has two partners,
but has no employees or office space.
The partners store the merchandise in their home located in the Metropolitan Commuter
Transportation District. The partners do not sell merchandise out of their home. The direction and
control of Petitioner’s business activities take place in the MCTD, and the books and records of the
business are located in the MCTD. They travel to eight or more antique shows located throughout
the country. At each show, they rent space and showcases, pay for electricity, etc. The partners
may or may not sell merchandise at a particular show. In any particular year, the partners may or
may not attend a show located in New York State. The partnership’s business records show income
earned at each location.
Analysis
Chapter 25 of the Laws of 2009 added Article 23 to the Tax Law, which establishes the
Metropolitan Commuter Transportation Mobility Tax (MCTMT). The MCTMT is imposed on
certain employers and self-employed individuals engaging in business within the MCTD. The
MCTD is defined under section 1262 of the Public Authorities Law and includes New York City
(the counties of New York (Manhattan), Bronx, Kings (Brooklyn), Queens, and Richmond (Staten
Island)), and the counties of Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and
Westchester.
The Petitioner’s partners would be subject to the MCTMT as self-employed individuals. If
the partnership had employees, the partnership may also owe MCTMT on the payroll expense of its
employees.

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TSB-A-10(2)MCTMT
Metropolitan Commuter
Transportation MobilityTax
October 28, 2010

Individuals (including partners in partnerships, and partners and members of LLPs and
LLCs that are treated as partnerships for federal income tax purposes) who have net earnings from
self-employment allocated to the MCTD are subject to the MCTMT. However, if the total net
earnings from self-employment allocated to the MCTD are $10,000 or less for the tax year,
no MCTMT is due. Tax Law §801(a).
If the net earnings from self-employment allocated to the MCTD are from more than one
business or partnership, a taxpayer must use the total of all net earnings from self-employment
allocated to the MCTD for purposes of the $10,000 threshold and to compute the tax. Additionally,
the threshold and the tax must be computed on an individual basis, even though a joint personal
income tax return may be filed.
Net earnings from self-employment means an individual’s net earnings from selfemployment as defined under section 1402(a) of the Internal Revenue Code (IRC). Tax Law
§800(e). An individual’s distributive share of income or loss from a trade or business carried on by
a partnership is included in net earnings from self-employment under IRC §1402(a). IRC §
1402(b)(1) defines self-employment income subject to social security taxes. However, in computing
the amount of net earnings from self-employment subject to the MCTMT, IRC § 1402(b), including
the annual limitation on the amount of net earnings from self-employment subject to social security
tax under IRC § 1402(b)(1), does not apply.
Net earnings from self-employment allocated to the MCTD means an individual’s net
earnings from self-employment that are attributable to a business carried on within the MCTD.
Business activity is carried on in the MCTD if an individual has, maintains, operates, or occupies
desk space, an office, a shop, a store, a warehouse, a factory, an agency, or other place located in
the MCTD where his or her business matters are systematically and regularly carried on. Similarly,
business activity is carried on outside of the MCTD if the individual has, maintains, operates, or
occupies desk space, an office, a shop, a store, a warehouse, a factory, an agency, or other place
located outside the MCTD where his or her business matters are systematically and regularly
carried on.
The Petitioner maintains inventory in its partners’ home, located in the MCTD. Further, the
direction and control of Petitioner’s business activities take place in the MCTD, and the books and
records of the business are located in the MCTD. Therefore, Petitioner is carrying on business
activity in the MCTD.
If all the business activity is carried on within the MCTD, all net earnings from selfemployment are allocated to the MCTD. If business activities are carried on both in and outside of
the MCTD, only a portion of the net earnings from self-employment are allocated to the MCTD. In
this case, when the Petitioner participates in an antiques show at a location outside the MCTD, the
Petitioner will be carrying on business activity both in and outside the MCTD.
If an individual has net earnings from self-employment from activity both in and outside of
the MCTD, those net earnings must be allocated for purposes of (1) determining whether or not the
$10,000 annual threshold has been met, and (2) computing the amount of MCTMT due. Allocation

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TSB-A-10(2)MCTMT
Metropolitan Commuter
Transportation MobilityTax
October 28, 2010

is done using the same rules that apply for purposes of the allocation of business income earned in
and out of New York State under the personal income tax rules. Tax Law §801(b)(1).
Accordingly, if the business keeps books and records that fairly and equitably show net
earnings from self-employment from business activity in the MCTD, the part to be allocated to the
MCTD may be computed from those books and records. If the books and records do not fairly and
equitably show the net earnings from self-employment in the MCTD, the business must allocate to
the MCTD using the formula method (business allocation percentage) or another method that has
been authorized by the New York State Commissioner of Taxation and Finance.
The amount to be allocated to the MCTD using the formula method is that part of total net
earnings from self-employment that results from multiplying total net earnings by the average of a
property percentage, a payroll percentage, and a gross income percentage. For more information,
see the Business allocation percentage worksheet in the instructions for Form MTA-6, Metropolitan
Commuter Transportation Mobility Tax Return For Self-Employed Individuals (including partners).
For additional information regarding the MCTMT, see Publication 420, Guide to the
Metropolitan Commuter Transportation Mobility Tax.

DATED: October 28, 2010

NOTE:

/S/
DANIEL SMIRLOCK
Deputy Commissioner and Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the person
or entity to whom it is issued and only if the person or entity fully and accurately
describes all relevant facts. An Advisory Opinion is based on the law, regulations, and
Department policies in effect as of the date the Opinion is issued or for the specific time
period at issue in the Opinion.