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Sales Tax on Utilities
Frequently Asked Questions

 
Q Who can impose a sales tax on utilities?
A Counties, cities, and small city school districts in New York are authorized to impose a sales tax on utilities. Almost half of the 57 small city districts in the state currently impose such a tax, as do the City of Ithaca and Tompkins County (for a list of jurisdictions that impose these taxes, see Publication 718-R, Local Sales and Use Tax Rates on Residential Energy).
Q Which utilities can be taxed?
A Small city school districts in New York State may impose a sales tax, at a maximum of three percent, on the following utilities and utility services:
  • gas (including propane sold in containers of 100 pounds or more), electricity, refrigeration, and steam;

  • telephony and telegraphy, except interstate and international telephony and telegraphy;

  • telephone and telegraph services, except interstate and international telephone and telegraph services, including telephone answering and facsimile transmission (fax) services (not including prepaid telephone calling cards or services); and

  • mobile telecommunications services provided by a home service provider.


Q Why is the Ithaca City School District exploring the possibility of a utility tax?
A Despite New York’s equalizing state aid system, there remain significant disparities in fiscal resources available to support education among school districts. Property values of residences and businesses, as well as local assessment practices, vary dramatically across the state; and these factors directly impact each school district's ability to generate local property tax revenue. Consequently, students’ access to educational resources and opportunities largely depends on where they live.

The ICSD’s ability to assess property taxes is limited each year by the New York State tax cap, as well as by the large portion of property in the district that is owned by tax-exempt entities, such as Cornell University and Ithaca College. Additionally, shortfalls in foundation aid paid to the ICSD, combined with wage increases included in negotiated contracts, have necessitated that the district explore alternative options for generating the revenue necessary to sustain quality instructional programs.

Unlike property taxes, which disproportionately impact the district’s property owners, the utility tax would be a tax of general applicability, the burden of which would be shared by all users of utilities on an equitable basis.
Q Is the district accessing taxes already collected from utility companies?
A No, this would be a new tax for the ICSD’s tax base and would be in addition to any city or county tax levied on the sale of the same utilities and utility services.
Q What procedure must the ICSD follow in order to impose a utility tax?
A Section 1212 of the New York State Tax Law provides the procedure by which small city school districts may impose a sales tax on utilities:
  1. The district holds a public hearing to solicit public comment regarding the proposed imposition of a utility tax, after providing notice of the hearing four times during the seven weeks preceding the date of the hearing.

    The ICSD’s public hearing regarding the imposition of a utility tax will take place on August 13, 2019 at 5:00 p.m. in the Board Room, 400 Lake Street.

  2. A majority of the Board of Education votes to impose a sales tax on utilities and passes a resolution that sets the tax rate between one-half and three percent. The effective date of the tax shall be March 1, June 1, September 1, or December 1.

    Should the ICSD Board of Education vote to impose a utility tax after the August 13 public hearing, the earliest the tax could go into effect would be December 1, 2019. 

  3. At least 90 days before the effective date, a certified copy of the Board’s resolution must be sent to the Commissioner of Taxation (unless the Commissioner allows such notice 30 or more days before the effective date) for approval.

  4. Within five days of enactment, certified copies of the Board’s resolution must be filed with the State Education Department, the Secretary of State, and the State Comptroller.


Q How would the tax be collected and disbursed to the district?
A Should a majority of the ICSD Board of Education vote to impose a sales tax on utilities, utility companies would collect the tax from their customers and remit the collected monies to the State Department of Taxation and Finance on a quarterly basis. In turn, the Department of Taxation and Finance would disburse the monies to the ICSD.
Q What entities are exempt from a sales tax on utilities?
A The same entities that are exempt from property taxes, such as universities and churches, are also exempt from utility taxes.

Specifically, all sales by or to the state of New York or its agencies, the United States, the United Nations, and a post or organization of the United States armed forces are exempt. The exemption also applies to any corporation, association, trust, or community chest, fund, foundation, or limited liability company –

  • that is organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals;

  • no part of the net earnings of which benefits any private shareholder or individual;

  • no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation; and

  • that does not participate in, or intervene in (including the publishing or distributing of statements) any political campaign on behalf of any candidate for public office.