Cuomo New York Budget Bills Again Seek To Eliminate Delivery Sales Tax Exemption For Customers Taking ESCO Service

Budget bills filed by the administration of New York Gov. Andrew Cuomo again proposed to modify the state's tax law to eliminate a current exemption from "sales" tax for deliveries of electricity and natural gas supply to customers of ESCOs.

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 FY 2020 budget book from the Cuomo administration states, "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). Local governments outside of New York City would receive $48 million as fairness is established."

Companion bills A. 2009 and S. 1509, reflecting the Cuomo budget, would enact the elimination of the T&D sales tax exemption for ESCO customers by amending section 1105 of the tax law to provide that the applicable tax on receipts from the sale of gas, electricity, refrigeration and steam, and gas, electric, refrigeration and steam service of whatever nature includes, "the transportation, transmission or distribution of gas or electricity, even if sold separately."

Additionally, Section 1105-C of the tax law, which currently addresses certain exemptions, would be repealed under the bills