Authorizes certain counties, cities and school districts to impose up to a four percent rate of sales and compensating use taxes; repealer

Generally, the remainder of the bill would conform other sections of Article 29 of the Tax Law to reflect the new four percent general rate authority, including deleting obsolete language. Tax Law section 1211 would be amended to allow a city of less than 125,000 to impose general sales and use taxes at the request of its school district, at a rate up to four percent. Section 1212 would be amended to allow a school district to impose the section 1105(b) consumer utility taxes at a rate up to four percent. The maximum rates of tax authorized by section 1210, 1211 and 1212 have always been the same - 3% currently, and 4% under this bill.

Tax Law sections 1210-D and 1210-E, which authorize a 1/4% rate in excess of 3% for Erie County and a 1/4% rate in excess of 3% for Herkimer county, would be repealed, since bill section 1 would amend section 1210 (opening paragraph) to authorize those counties to impose a rate up to 4%, in 1/4% increments. Portions of section 1210-D relating to distribution of revenues from Erie county's additional

1/4% rate would be preserved in new Tax Law section 1262-t, to be added by bill section 35.

The preemption rules in Tax Law section 1224 that establish the rights of a county and a city in the county each to 50% of the current combined maximum three percent rate they are authorized to impose in the city would generally be continued with respect to the new maximum four percent rate. See bill section 13 amending Tax Law sections 1224(a), (b), and {c} and bill section 15 adding section 1224(d), reenacting current section 1224(11).) However, the bill would preserve the existing rights of counties and cities that currently have the sole right to impose an additional rate in excess of three percent to the exclusion of the other, to the extent of the county's or city's current rate in excess of 3%. Thus, if County A has a current right to impose an additional 1/4% rate above 3% and that rate is not subject to preemption by any city in the county, a city in the county could preempt that county only as to the 1/4% between 31% and 4%. This would mean that the city could preempt and have a 3 1/8% rate, even though a county or city cannot directly impose tax in 1/8% increments. Because the bill would eliminate the 1/8% rate in Ontario County, the cities in that county would not be able to preempt the remaining 7/8% rate, possibly resulting in city tax rates in 1/16% increments. Thus the bill would eliminate the possibility that merchants in the county would have to deal tax rates expressed in sixteenths of a percent, which would make tax calculations more difficult for them and for consumers.

More than 40 subdivisions of Tax Law section 1224 each provide that a county or city has the sole right to impose an additional rate that is not subject to preemption. The bill would repeal those subdivisions and replace them with new section 1224(e), which would set out the respective counties and cities and would preserve their rights to the current additional rates. New section 1224(1) would likewise preserve the sole right of five counties to impose their existing rates in excess of 4%. (A sixth county, Suffolk, also imposes a 1/4% rate in excess of 4%, but pursuant to the authority of section 1210-A which does not expire until the year 2030.)

The current rule in Tax Law section 1223 (a) that certain cities in the counties of Cayuga, Cortland, Fulton, Madison, and Otsego can preempt the county's additional rate would be preserved in new section 1224(g), as added by bill section 15.

Bill sections 18 through 34 make conforming amendments to preserve county distribution provisions applicable to existing rates of tax in excess of 3% or 4%.

Bill section 35 would add four new Tax Law sections. Sections 1262-t, 1262-u, and 1262-v would preserve current revenue dispositions applicable to Erie, Oneida and Herkimer counties. New Section 1262-x would preserve the disposition of Ontario's current 1/8% rate in excess of 3% and would also capture the disposition of the proposed new additional 3/8% rate in excess of 3% the county plans to impose, as set out in Bill No. S.1565/A.2805.

Section 36 provides the bill would take effect December 1, 2009, and apply in accordance with the applicable transitional provisions in Tax Law sections 1106 and 1217, provided that a county, city or school district would be authorized immediately after the bill is enacted to adopt or amend local laws, ordinances or resolutions to impose sales and use taxes at a rate in excess of three or four percent pursuant to the authority of the bill to take effect December 1, 2010, or thereafter. However, the local law, ordinance or resolution of Ontario County to impose sales and use taxes at the rate of one-half of one percent in excess of three percent could take effect September 1, 2010, and the local law, ordinance or resolution of the city of White Plains to impose sales and use taxes at the rate of up to one percent in excess of three percent could also take effect September 1, 2010, provided that Ontario County and the city of White Plains each complies with the provisions of subdivisions (d) and (e) of section 1210 of the Tax Law. Finally, bill section thirty-three and Tax Law section 1262-x to be added by bill section thirty-five, relating to disposition of revenues in Ontario County, would take effect September 1, 2010.

Justification

There are 57 counties outside New York City that impose general sales and use taxes pursuant to the authority of Tax Law section 1210(a) (1). Everyone of them imposes the current "maximum authorized" rate of 3% of sales and use taxes. in addition, more than 50 of those counties impose additional rates, ranging from 1/8% to 1/4%. Some 25 cities impose general sales and use taxes pursuant to section 1210(a) (1); six of them are authorized to impose additional rates. The additional 1% additional rates for the cities of Mount Vernon and Yonkers are not subject to expiration. New York City imposes general sales and use taxes at the rate of 4%, also without expiration and not subject to preemption by the five counties in New York City, which are not authorized to impose sales and use taxes. All but two of the additional county and city rates that are subject to expiration have typically been renewed for two years at a time. No school districts have authority for additional rates.

As more and more localities have been authorized over the years to impose additional rates of sales and use taxes, the burden on them to have their authority renewed every other year has increased. These renewal bills also burden the State Legislature every other summer. Drafting and renewing the State enabling legislation for this ever expanding population of counties and cities and then preparing model enactments for them to impose or extend the additional rates has also tied up the Tax Department's resources. Often, a county or city seeks to rush a bill through the Legislature to meet a local fiscal emergency. These bills often get passed without sufficient time for the Tax Department to notify vendors and other persons required to collect tax. Those businesses do not have sufficient time to adjust their cash registers and take other steps necessary to collect the correct amount of tax on the effective date of the new rate, putting them at risk and threatening the locality's revenues until they can come into compliance. By authorizing counties and cities each to impose at a rate up to 4%, the 57 counties and cities that need the biannual renewals will be reduced to five counties that currently have rates in excess of 4%. This will lighten the load for these counties and cities, the Tax Department and for the State Legislature. It will also enhance flexibility for counties and cities to elect rates up to 4% to provide needed revenues as local requirements dictate, without the need State legislation, as well as to reduce rates when conditions allow. Thus, this bill will improve State and local government operations. It will also help to minimize the compliance problems for persons required to collect sales and use taxes, since counties and cities will not have to wait for State enabling legislation to adopt local enactments increasing their tax rates up to and including 4%. The Tax Department will have the usual minimum 90 days advance notice of rate changes required by Tax Law section 1210(d). In exigent circumstances, the Tax Commissioner can reduce that minimum 90 day period down to not less than 30 days, though it really takes at least 60 days for the Tax Department to process a rate change effectively and efficiently. Also, persons required to collect tax will have greater notice of the rate change, which will make their lives easier. For these reasons, the bill is a benefit to all stakeholders.

Prior legislative history

New Legislation.

Fiscal implications

This legislation does not affect state revenues.

Effective date

Section 36 provides the bill would take effect December 1, 2010, and apply in accordance with the applicable transitional provisions in Tax Law sections 1106 and 1217, provided that a county, city or school district would be authorized immediately after the bill is enacted to adopt or amend local laws, ordinances or resolutions to impose sales and use taxes at a rate in excess of three or four percent pursuant to the authority of the bill to take effect December 1, 2010, or thereafter. However, the local law, ordinance or resolution of Ontario County to impose sales and use taxes at the rate of one-half of one percent in excess of three percent could take effect September 1, 2010, and the local law, ordinance or resolution of the city of White Plains to impose sales and use taxes at the rate of up to one percent in excess of three percent could also take effect September 1, 2010, provided that Ontario County and the city of White Plains each complies with the provisions of subdivisions (d) and (e) of section 1210 of the Tax Law. Finally, bill section thirty-three and Tax Law section 1262-x to be added by bill section thirty-five, relating to disposition of revenues in Ontario County, would take effect September 1, 2010.