New York changes its business-to-business transaction rules

Previously, New York had an unwritten policy of not requiring the reporting of accounts payable or receivable credits that would otherwise be unclaimed property so long as the holder has an ongoing and documented business relationship with the customer (owner of the credits) for at least three years. The dormancy period for this property would not commence until the business relationship ceased.

Recently, however, New York issued a new Policy Statement outlining how business-to-business transactions would be treated for the sake of its unclaimed property laws. The Policy Statement does not have a formal or documented start date, but informal conversations indicate it will apply prospectively beginning March 25, 2014, and the state’s former policy would cease to apply at that time.

Under the new Policy Statement, credit balances, as well as checks representing the refund of credit balances, that would otherwise be reportable if unclaimed for three years are not reportable if the holder can demonstrate that the customer has either: (1) used the credit balance; (2) disclaimed entitlement to the credit balance; or (3) is aware of the credit balance. Thus, the holder must contact the customer prior to the end of the three-year dormancy period beginning on the date the credit was issued in order to satisfy one of the three requirements listed above. Satisfaction of one of these requirements tolls the beginning of the dormancy period to the time of the most recent communication or activity between the holder and the customer.

Similar to the former policy, regular vendor checks are not subject to these special rules and are treated as any other type of unclaimed property.

For more information on this topic, or to learn how Baker Tilly tax specialists can help, contact our team.

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