Passed New York Budget Includes Elimination Of Delivery Sales Tax Exemption For Customers Taking ESCO Service

A final New York budget agreed to by both New York Gov. Andrew Cuomo and legislative leaders, which has been passed by both Houses and delivered to the governor, eliminates the 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 had been 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.

The passed budget (S. 1509--C) eliminates 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."

Furthermore, Section 1105-C of the tax law, which currently addresses certain exemptions, is repealed under S. 1509--C

Additionally, the final budget (under passed S. 1505--C) amends State Finance Law § 97-g to authorize public authorities and public benefit corporations to acquire energy products as a centralized service from Office Of General Services (OGS). The State Finance Law had already permitted State agencies and local governments to purchase energy products (primarily electricity) as a centralized service provided by OGS to reduce their costs for energy products.