June 19, 1998

Governor George E. Pataki today announced that the Legislature has passed a bill that fully exempts Internet access fees from State and local sales tax.

In January 1997, New York became the first State to declare that it would not impose sales taxes on Internet access fees. That action was taken administratively at Governor Pataki's direction. The bill passed today preserves that exemption in state law.

"Last year, we took the intelligent step of becoming the first state in the nation to choose to fully exempt Internet access fees from State and local sales tax," Governor Pataki said. "At the time, our move sent a clear signal to Internet providers and new entrepreneurs across the nation that New York welcomes this growing industry and the jobs it provides."

"Since that time, several other states have followed our lead and enacted laws creating the Internet tax exemption," the Governor said. "It makes sense to have this pro-jobs, pro-growth policy in law."

In January 1997, Governor Pataki directed State Department of Taxation and Finance Commissioner Michael H. Urbach to implement recommendations from a new report that called for exempting Internet access service from State and local sales tax.

The report also recommended that Internet access receipts be exempt from the gross receipts excise tax because they are outside the scope of that tax. Additionally, the report recommended that "taxable nexus" is not created in New York State merely by having a non-New York company's advertising appear on a New York server or through a New York-based Internet service provider.

For example, New York does not collect sales taxes from companies that advertise on the Internet through a New York-based access provider. This decision is designed to encourage businesses from across the nation and the world to use New York-based companies that provide access to the Internet.

"We're confident that the Governor's move and this subsequent legislation will continue to send the message to the ever-growing New Media industry that New York is the place to be." Commissioner Urbach said. "New York is quickly gaining a reputation as being a strong competitor with places like Seattle and Silicon Valley in California for Internet-related jobs."

A recent study by the New York New Media Association showed that new media type jobs are up 105% in the New York City area. That study also showed that New York's new media industry generated $5.7 billion in total revenues last year.

"We must continue to encourage the New Media industry to expand and grow in our state. This legislation is just one more step in New York State's efforts to restore our competitiveness, revitalize our economy and make our state a better place to create jobs and opportunity," Governor Pataki said.

Governor Pataki has also appointed a "New Media Task Force", co-chaired by Commissioner Urbach and Economic Development Commissioner Charles A. Gargano, to continue to work toward establishing State policies that will facilitate the growth of New Media industry and the use of the Internet in New York.

The legislation, proposed by the Governor, contains the following provisions: