I thought New York had a store of every kind. But I'm not aware of one that makes and sells only flags. Philadelphia has Humphreys Flag Company. However, New York can enjoy a proprietary feeling toward the shop. It was founded in New York City in 1805 as a sail manufacturer. It moved to Phily in 1864, still making sails, but also flags. It now purports to be the leading business of its kind in the U.S.
The shop's location is ludicrously ideal—right across the street from the Betsy Ross home. However, this has only been Humphreys' address for a few decades. The shop is owned by Tim O'Connor, who says he can make any flag that's requested. They're made to order.
The shop is vast and airy inside, with high ceilings. Flags of every size and variety on are display everywhere. There's no flag you can't get here. Every country, every state is represented. And, of course, historical flags of a sort no longer practically used or needed. The green one above, for instance, was the flag of the Philadelphia Militia's Navy, when such a thing existed. They also have the "Don't Tread on Me" variety, which has become so perversely popular again with the rise of the Tea Party.
For tiny flags, there are rows of metal drawers, the contents indicated by the flag decals on the outside. A small flag will run you about $4. The bigger ones, of course, can be pretty pricey.