Gov. Cuomo's Budget Would Terminate Sales Tax Exemption For ESCO Customers

A proposed budget from New York Governor Andrew Cuomo would terminate an existing exemption from state sales tax granted to customers of ESCOs for transmission and distribution of electricity and gas sold to such customers.

Non-residential transmission and distribution charges are subject to what is colloquially known as state sales tax (technically a compensating use tax), and non-residential default service customers pay such tax for T&D service. However, ESCO customers are exempt from paying this T&D sales tax.

Non-residential commodity supply is subject to state sales tax regardless of the supplier

There is no residential state sales tax on utility delivery service, regardless of the customer's supplier.

A briefing book from the governor's office states of the proposal:

"Discontinue the Energy Services Sales Tax Exemption. The Executive Budget eliminates the sales tax exemption on the non‐residential transmission and distribution of gas or electricity when purchased from an Energy Service Company (ESCO). Enacted in the early 2000s to incentivize consumer choice, this exemption is no longer necessary now that ESCOs are established entities (New York City eliminated this tax exemption in 2009)"

To implement this change, Section 1105-C of the tax law would be repealed, and various other changes would be made to the tax law, such as by inserting language defining services subject to the tax as, "including the transportation, transmission or distribution of gas or electricity, even if sold separately."

See the specific legislative changes proposed to implement the governor's proposal on page 73 (page 76 of the PDF) here