When external indices are utilized to determine sales and use tax due, requires such indices to reflect local economic conditions

1 Co-sponsor

• Michael H. Ranzenhofer

BILL NUMBER:S4943

Title of bill

An act to amend the tax law, in relation to the determination of sales and compensating use taxes due

Purpose

This bill would require that any external economic indices used by the Department of Taxation and Finance in estimating sales tax payments due must utilize regional economic indices to reflect the wide variation of the costs of goods and services sold throughout the state.

Summary of provisions

This bill would amend subdivision (a) of section 1138 of the tax law by adding a new paragraph (5) to require that whenever the Commissioner of Taxation and Finance is determining the amount of sales t.ax owed, in instances in where a required sales tax filing has not been made or there has been an incorrect or insufficient sales tax payment, the Commissioner must utilize a regional economic index to estimating the correct tax payment to be made.

Justification

New York State has hired hundreds of new auditors over the past few years and unleashed them on unsuspecting taxpayers. Thousands of retail merchants across the state have been subject to new audit tactics apparently designed to generate as much revenue as possible. The most insidious of these tactics is the practice of determining a merchant's sales tax assessment based on external indices rather than the merchant's records. Often times the external indices are not based on local standards thereby leading to drastically distorted assessments far exceeding any reasonable estimate. One of the most common indices used by the Department is based on an analysis of less than 100 businesses. The Department continues to use this index in spite of a specific note by the study's authors that it is not statically reliable for such purposes. This bill would prohibit the Department of Tax and Finance from using any external index that does not reflect local economic conditions. It ensures that anytime a sales tax assessment is imposed on a retail merchant not based on the merchant's records it will be more fair since the merchant's local area will be the basis of comparison. These business owners are the backbone of the state's economy and deserve to have their taxes determined in a fair manner. This bill will restore fairness to the tax assessment process and help retail merchants in New York live up to their legitimate tax assessments.

Legislative history

New Bill.

Fiscal implications

None.

Effective date

This act shall take effect immediately.