Legislative Memo

Darren Suarez
Director of Government Affairs
T 518.694.4461


A.9509-B REV Article VII Budget Bill Part V



Extending Sales Tax to Delivering Energy



March 13, 2018


The Business Council of New York State opposes Part V which would extend sales tax on the transportation, transmission, or delivery of gas or electricity. This measure would impose an estimated $128 million in new state-level taxes on energy purchases in New York State, if local governments follow suit, by eliminating the local sales tax exemption, the cost of this proposal could be almost double that amount. This proposal is not about the creation of parity or equity in the tax law it is simply intended to raise revenue by increasing the cost of energy to New York State businesses.

Original Intent

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.

The NYS Department of Tax and Finance Commission Alex Roth included a memo of support in the Chapter 63 of the Laws of 2000 bill jacket. The Commissioner’s memo states that energy tax changes were intended to “reform and reduce State and local taxation of electricity and gas industry to promote competition in the energy marketplace and provide rate relief to energy customers.”

Sales Tax

In New York sales tax is imposed on sales of tangible personal property unless specifically exempted from tax, and on various enumerated services. New York provides sales tax exemptions to manufacturers, farms, and utility companies for the machinery, equipment, and numerous specialized exemptions (e.g. exemptions for film production, race horses, Internet data centers, etc.).

New York specifically excludes sales tax on heating oil, propane, natural gas, electricity and steam, and gas, electric, and steam used for residential purposes. It is estimated that this exclusion is worth approx. $800 million annually.

Delivery Services

In New York State sales tax is not imposed on transportation service, delivery services purchased by a customer directly from someone other than the vendor of the taxable property or services to be delivered.

Currently in New York when a business energy customer purchases electricity or natural gas (the commodity) from an Energy Service Company (ESCO), they purchase the delivery of that service from a utility, the cost of that delivery is exempt from sales tax. This transaction is very similar to a customer who purchases taxable goods from a vendor who does not have the ability to make or arrange for delivery.


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 83 percent of the electricity used by businesses in the state, and 24 percent of the electricity used by residences.

Energy is the basic driver of all major economies and in the interest of economic growth The Business Council of New York State opposes extending energy sales tax on the transportation, transmission, or delivery of gas or electricity.