When you have selected the "Use Tax Tables" option in the buynow module setting the cart calls the stored procedure "Smith_GetTaxRate".  
 
if (@CityName = '')
            BEGIN
                SELECT [TaxRate] FROM dnn_Smith_Tax WHERE lower([State]) like (@State)  
            END
        else
            BEGIN
                SELECT [TaxRate] FROM dnn_Smith_Tax  WHERE lower([City]) like  lower(@CityName) AND lower([State]) like (@State)  
            END
 
The city is not required but if you dont populate it the lookup will just use state and the stored proc will only lookup by state and give you the same tax rate for the entire state.  If you want different tax rates for each city you will need to populate the city.  You should be able to download this info from your dot gov site for New York.
 
-Scott