Legislative Memo

Darren Suarez
Director of Government Affairs
T 518.465.7511


A.9593 (Dinowitz)  



Increasing Taxes on Gas and Electric Service



March 24, 2016


The Business Council strongly opposes this proposal to impose an estimated $116 million in new state-level taxes on energy purchases in New York State, by eliminating the current sales tax exemption for services provided by energy service corporations (ESCOs) (Note: this cost estimate is based on the state's 2016 tax expenditure report.) If local governments follow suit, by eliminating the local sales tax exemption, the cost of this proposal could be almost double that amount.

Chapter 63 of the Laws of 2000, an omnibus tax bill that restructured State energy taxes, eliminated the 4% sales tax on electricity and gas but then replaced it with a 4% "compensating use" tax under Tax Law Section 1110. The legislation contained a new provision, Tax Law Section 1105C, which eliminated the compensating use tax on utility delivery service when the customer buys electricity or gas commodity separately from an ESCO.

ESCOs are businesses that provide a wide range of energy-related services to business and residential customers, including arranging both electric power and natural gas purchases. As such, ESCOs play an important role in New York State's deregulated electric power market. Statewide ESCOs sell 72 percent of the electricity used by businesses in the state, and 30 percent of the electricity used by residences.

If the legislature is interested in addressing the cost of energy they should eliminate sales tax on electricity and gas, not increase taxes.

In a State known for its energy tax burden, it is hard to believe that the legislature would adopt additional energy taxes, and add further to the state's already un-competitively high energy costs. It is well known that in large part due to this heavy tax burden, energy prices in New York remain high despite recent reductions in fuel prices, and the resultant reduction in the wholesale cost of energy.

For these reasons, The Business Council strongly opposes A.9593