June 3, 1999
State again delays sales tax on power transmission
The state Department of Taxation and Finance Wednesday announced a 30-day postponement in implementing the state sales tax on energy transmission.
Business Council President Daniel B. Walsh had urged a delay in a May 27 letter to Arthur Roth, acting commissioner of taxation and finance.
Walsh wrote that the tax would nullify benefits of New York's ongoing transition to competitive power markets.
Moreover, Walsh added, the Governor's energy tax reduction and reform proposal includes a one-year credit to energy-service companies designed to offset the new sales tax on transmission.
The sales tax should not be implemented until the fate of that proposal is determined in state budget negotiations, Walsh said.
"Delaying the sales tax on transportation until the budget is approved will ensure that customers in retail access programs do not face rate increases," Walsh said. "This is essential at a time when we must carefully cultivate competition in the electric market."
Walsh noted that The Business Council supports Governor Pataki's tax reduction and reform package, saying it would "ensure lower energy costs for all consumers and enhance the transition to full retail access."
Last December, the department ruled that the transmission of electricity and natural gas is subject to sales tax. The Council warned that this would increase energy costs for some customers by 5 to 8 percent and interfere with the transition to competition.
Partly because of these concerns, the department twice delayed the implementation of the ruling.
The ruling last December reversed a 1997 department ruling that the tax would not apply to "unbundled" transmission of electricity.
Savings created by the 1997 ruling have played a key role in the emergence of a competitive market for electricity in the territory served by Consolidated Edison. Competition in other parts of New York was also expected to move forward largely because of those savings.
State law imposes a sales tax on "the receipts from every sale, other than sales for resale, of gas, electricity, refrigeration and steam, and gas, electric, refrigeration and steam service of whatever nature."