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

Summary of provisions

Bill section 1 would repeal the opening paragraph of section 1210 of the Article 29 of the Tax Law, which currently authorizes counties, cities, and school districts to impose up to a 3% rate of tax, and also authorizes more than 50 counties and 5 cities to impose additional rates of tax in excess of 3%. These additional rate authorities are for two year periods, currently expiring November 30, 2011, except that one expires at the end of August, 2011, another expires at the end of December, 2011, and another is for one year and expires at the end of November 30, 2010, and except that New York City has permanent authority to impose tax at the rate of 4.5%. Section 1 would also add a new opening paragraph to authorize every county and city to impose tax at a rate of up to 4%. Under the new paragraph, a county or city could impose tax at a rate from three to four percent, in quarter percent increments. Rockland County's current additional 5/3% and 3/8% rates, totaling 1%, would not be continued as separate rates expressed in eighths, Rather, Rockland would have authority under the bill to impose the same 1% rate in excess of 3%, in 1/4% increments, that other counties would have under the bill. The special, separate distribution provisions for Rockland's current rates would be preserved, however, in Tax Law section 1262-1, as amended by bill section 25. Likewise, the current authority for Ontario County's separate 1/3% and 3/8% additional rates, for a total of 1/2%, would not be retained, since Ontario also would have authority under the bill to impose the same 1% rate in excess of 3%, in 1/4% increments, that other counties would have under the bill. However, the special revenue disposition provisions applicable to Ontario's existing 1/8% and 3/8% rates would likewise be preserved in Tax Law section 1262-r, amended by bill section 33, and in new Tax Law section 1262-w, added by bill section 35.

Bill section 4-a would add a new subdivision (k) to section 1210 of the Tax Law to preserve the current authority for the five counties that have rates in excess of 4% to continue to impose those rates through November 30, 2011, the end date of the current authorization period. Subdivision (k) would also preserve New York City's authority for its one-half percent rate in excess of 4% with no time limitation.

Generally, the remainder of the bill would conform other sections of Article 29 of the Tax Law to reflect the new 4% general rate authority, including deleting obsolete language. Tax Law section 121 I 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 4%. Tax Law section 1212 would be amended to allow a school district to impose the section 1105(b) consumer utility taxes at a rate up to 4%. The maximum rates of tax authorized by section 1210, 1211 and 1212 have always been the same - 3% currently, and 4% under this bill.

Bill section 3-a would preserve unconsolidated provisions in Chapter 468 of the Laws of 2007 and Chapter 174 of the Laws of 2009 that Chautauqua County cannot impose its additional rate of tax in excess of 3% unless it fully exempts residential energy sources and services from its sales and use taxes.

Tax Law sections 1210-D and 1210-E, which authorize a 3/4% rate in excess of 4% for Erie County and a 1/4% rate in excess of 4% for Herkimer county, would be repealed, since bill section 4-a would add new Tax Law section 1210(k) to authorize those counties to impose those rates in excess of 4%, in 1/4% increments. Portions of section 1210-D relating to distribution of revenues from Erie county's additional 3/4% rate in excess of 4% 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 3% rate they are authorized to impose in the city would generally be continued with respect to the new maximum 4% rate. See bill section 13, amending Tax Law section 1224(a), (b), and (c), and bill section 15, adding Tax Law section 1224(d), which re-codifies current section 1224(k). 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 3% 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 one-half of the 3/4% difference between 3 1/4% and 4%. This would mean that the city could preempt and have a 1 7/8% rate (50% of 3% plus 50% of 1/4%), even though a county or city cannot directly impose tax in 1/8% increments. Because the bill would eliminate any county or city rate imposed in eighth percent increments, it would eliminate the possibility of a county or city preempting and having an effective rate expressed in sixteenths; thus also eliminating the possibility that merchants in the county would have to deal with more difficult tax calculations 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 current rights to current additional rates. New section 1224(t) 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 provides that the 1/4% rate does not expire until the year 2030 and has its own non-preemption provision for that rate.)

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 I 224(g), 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 twelve new Tax Law sections. Sections 1262-t, 1262-u, and 1262-v would preserve current consolidated law revenue dispositions applicable to Erie, Oneida, and Herkimer counties. New Section 1262-w would preserve the disposition of a portion of Ontario's current 1/8% and 3/8% rates in excess of 3%. Sections 1262-x through 1262-ee would codify unconsolidated distribution provisions in chapters of the laws of 2009 for the following counties: 1262-x, Albany; 1262-y, Clinton; 1262-z, Columbia; 1262-aa, Genesee; 1262-bb, Monroe; 1262-cc, Onondaga; 1262-dd, Orange; and 1262-ee, Ulster.

These special provisions from the 2009 chapters generally apply only through November 30, 2011. Those sections with 201 I expirations would have to be extended in order to make them applicable after that date. Those sections with no express expiration should be reviewed if the rates they relate to are continued to see whether their special conditions should continue to apply in the future.

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 general sales and use taxes at the current "maximum authorized" rate of 3%. In addition, more than 50 of those counties impose additional rates, ranging from 1/8% to 1 1/2%. Some 25 cities impose general sales and use taxes pursuant to section 1210(21)(1); five of them are authorized to impose additional rates. The 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 1/2%, 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 three of the additional county and city rates that are subject to expiration expire on November 30, 2011. Erie County's additional 1% rate expires November 30,2010, but is expected to be renewed for another two years. White Plains' additional 3/4% rate expires August 31, 2011, New Rochelle's additional 1% rate expires December 31, 2011. All of these additional rates have typically been renewed for two years at a time. No school districts have authority to impose additional rates in excess of 3%.

Justification

As more and more localities have been authorized over the years to impose additional rates of sales and use taxes, the requirement to have their authority renewed every other year has placed an extraordinary administrative burden on them incurring additional time and expense by staff. This bill would provide local mandate relief by easing or eliminating this burden. The biennial renewal bills also burden the State Legislature every other year in the same way. 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, have 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 taxes. Those businesses then 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 the businesses can come into compliance.

By authorizing counties and cities each to impose at a raw up to 4%, the 52 counties and 5 cities that need the biannual renewals will be reduced to just the 5 counties that currently have rates in excess of 4%. This will alleviate the workload for those laboring in the counties, cities, New York State Legislature and New York State Tax Department. This authorization will also enhance flexibility for counties and cities to elect rates up to 4% to secure needed revenues as local requirements dictate, without the need for special state legislation. It will furthermore allow counties and cities to reduce rates when conditions allow, while still providing the opportunity for an increase if necessary.

This legislation benefits all stakeholders. it streamlines and optimizes state and local government operations. It also helps to minimize compliance problems for businesses required to collect sales and use taxes because there will be no need for state enabling legislation allowing cities and counties boards to adopt local enactments increasing their tax rates up to and including 4%. Moreover, businesses required to collect taxes will have notification of rate change in a timely fashion, improving operations.

Legislative history

Similar to A.10418 and S.6648A of 2009/2010

Fiscal implications

Minimal Savings.

Effective date

This bill would take effect December 1, 2012, 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 3% pursuant to the authority of the bill to take effect December 1, 2012, or thereafter subject to the provisions of subdivisions (d) and (e) of section

1210, 1211, or 1212-A or subdivisions (e) and (f) of section 1212 of the tax law.