Increases certain sales and compensating use taxes in cities having a population of 1 million or more

Title of bill

An act to amend the tax law and the administrative code of the city of New York, in relation to increasing certain sales and compensating use taxes in cities having a population of one million or more persons

Summary of provisions

Sections one and four of this bill amend Sections 1210 and 1212-A of the Tax Law, respectively, to authorize cities with a population of one million or more to increase from four percent to four and one-half percent the rate of certain sales and compensating use taxes imposed by such cities. Sections five, seven and eight of the bill amend the New York City Administrative Code ("Code") to implement such increase in New York City.

Section two of this bill amends Section 1210 of the Tax Law to authorize cities having a population of one million or more to provide the exemption from City sales and compensating use tax on clothing and footwear that cost less than one hundred ten dollars. Section two also amends Section 1210 to impose the City sales tax on the transmission and distribution of electric and natural gas service, even when the electricity or natural gas service is purchased separately from the transmission and distribution service. Section three of this bill makes the same amendments to the version of Section 1210 of the Tax Law that will take effect on September 1, 2009. Section six amends the New York City Administrative Code to provide the exemption from City sales and compensating use tax on clothing and footwear that cost less than one hundred ten dollars.

Section nine of this bill provides that the bill will take effect on the first day of the month succeeding the month in which it was enacted.

Reasons for support

A one-half percent increase in the City sales and use tax rate will increase City tax revenues by over $500 million annually and will support necessary City services for those who live and work in New York City. Approximately 18% of the City's sales tax revenues are paid by tourists. Of the portion paid by City residents, approximately 40% is paid for by the 21% of City households with annual incomes greater than $80,000. The repeal of the City clothing exemption for purchases costing $110 and above will increase City tax revenues by approximately about $120 million annually, also supporting City services. The City will maintain the exemption for clothing and footwear purchases costing under $110, paralleling the NYS sales tax exemption on clothing, which will help families with costs for necessary clothing and footwear purchases. The repeal of the City sales tax exemption on the electric and natural gas transmission and distribution service for unbundled energy bills is estimated to increase City tax revenues by about $80 million annually. This change repeals a loophole that enabled some energy purchasers to avoid the transmission and distribution sales tax that the vast majority of energy consumers pay each month. Repealing this exemption ensures parity for all ratepayers and energy providers in the marketplace. These revenue actions will enable to City to balance its FY 2010 budget. If these revenues are not realized, the City will be forced to curtail essential services and layoff both professional and support staff throughout the City.

Accordingly, the Mayor urges the earliest possible favorable consideration of this proposal by the Legislature.