New York—Sales and Use Tax: Changes Enacted in 2019 Budget Discussed

03 June 2019

New York has issued a summary on some of the sales and use tax changes enacted in the 2019-20 budget.

Energy Delivery Service Exemption

Beginning June 1, 2019, the state and local sales and use tax exemption for the transportation, transmission, or distribution of gas or electricity when purchased from someone other than the vendor of the gas or electricity is repealed. This change applies to sales made and services rendered on or after that date regardless of when a service contract began. As a result of this change, the services of transporting, transmitting, or distributing gas or electricity (T&D) are subject to both state and local sales tax when the sale of the commodity is also subject to state and local sales tax.

Sales of gas and electricity for commercial purposes are subject to both state and local sales tax and, therefore, the charges for T&D are also subject to state and local sales tax. Sales of residential energy continue to be exempt from state sales tax and, therefore, charges for T&D of residential energy are also exempt from state tax. Where sales of residential energy are subject to local sales tax, the charges for T&D related to those sales are also subject to local sales tax.

If a vendor’s billing method is based on meter readings that do not coincide with the June 1, 2019 effective date, or a vendor is unable to update its billing system by that date, for the first sales tax quarterly return period after the effective date, the Department of Taxation and Finance will accept a reasonable method of determining the tax due for the portion of a billing period occurring on and after June 1, 2019.

Passenger Car Rental Special Tax

On June 1, 2019, the tax rate for the special tax on passenger car rentals increases as follows:

  • from 11% to 12% within the Metropolitan Commuter Transportation District (MCTD); and
  • from 6% to 12% outside the MCTD.

The special tax on passenger car rentals is in addition to the state and local sales tax imposed on passenger car rentals.

The changes apply to passenger car rentals commencing on or after June 1, 2019, whether or not made under a prior contract. Where rentals are billed on a monthly, quarterly or other period basis the rate increase will apply to such period if more than half of the days included in such period are days after June 1, 2019.

Vending Machine Exemption

Currently, candy, fruit drinks and soft drinks sold for $1.50 or less through a vending machine are exempt from sales tax. However, effective June 1, 2019, the budget bill expanded the exemption to:

  • add bottled water to the products that qualify for exemption; and
  • increase the exemption amount to $2.00 or less for candy, fruit drinks, soft drinks, and bottled water sold from a vending machine that accepts forms of payment other than coin or currency (whether or not it also accepts coin and currency).

For vending machines that only accept coin and currency, the exemption applies to candy, fruit drinks, soft drinks, and bottled water sold for $1.50 or less.

Advertising and Tax Collections

Vendors are permitted to advertise, hold out, or state to a retail purchaser or to the public that the vendor will pay the sales tax on behalf of a purchaser, subject to the following conditions:

  • they expressly state on every bill, memorandum, receipt or other statement of the price, amusement charge or rent paid or payable given to the purchaser, that they will pay the sales tax on behalf of the purchaser, and do not indicate or imply that the transaction is exempt or excluded from tax; and
  • every bill, memorandum, receipt or other statement of the price, amusement charge or rent paid or payable given to the purchaser must separately state the amount of sales tax due and that the tax was not collected from such purchaser.

The changes do not affect any additional compensating use tax liability that a customer may incur on uses of tangible personal property or services where the vendor has paid the sales tax on the customer’s behalf.

These changes took effect on April 12, 2019.

Law Extensions

The following provisions were extended:

  • electronic filing and electronic payments mandate;
  • requirements for vendors participating in the segregated accounts program; and
  • exemption for transactions between certain financial institutions and their subsidiaries (Dodd-Frank Wall Street Reform and Consumer Protection Act).

Separate Guidance Issued By Department

The department will issue separate guidance on the following changes:

  • beginning June 1, 2019, marketplace providers must collect and remit the sale tax on taxable sales of tangible personal property they facilitate for marketplace sellers; and
  • beginning December 1, 2019, a new 20% supplemental retail tax on vapor products.

TSB-M-19(1)S, New York Department of Taxation and Finance, May 29, 2019