Info Finder

Department Info

Understanding the Repeal of the Sales Tax Exemption on Residential Energy Sources

Budget Office
Jessica White, Budget Director

 

Effective June 1st, sales tax will be repealed on all residential energy purchases.
(News Release 4/4/2014: Sales Tax on Residential Energy to End June 1st)

 

Thank you for taking the time to learn more about sales tax on energy purchases. We hope this page is helpful to understanding what necessitated the repeal of the sales tax exemption on residential energy sources in Dutchess County in the first place and how it is was possible to return the exemption effective June 1st. Answers to the most frequently asked questions are provided below.

 

Resolution 2014106, reinstating the local sales tax exemption on residential energy purchases effective June 1st, was adopted by the Dutchess County Legislature on April 7th and signed by County Executive Molinaro on April 8th. View the resolution and read the County Executive’s approval memo here.

 

What is the repeal of the sales tax exemption on energy sources?

How are you able to repeal the energy sales tax? What changed?

Why can’t the energy sales tax be repealed earlier than June 1st?

Will I get a refund on the energy sales tax I have already had to pay?

Why was the sales tax exemption on energy sources repealed in the first place?

Does the new state funding equal the projected revenue from the energy sales tax?

What was done to avoid repealing the sales tax exemption?   What did you cut?

When you say 70% of the Dutchess County budget is “mandates”…What is a mandate?

What do you mean when you say “discretionary services”?

How much would have the property tax levy increase been instead of the sales tax exemption repeal?

What other options were considered to avoid the sales tax exemption repeal?

What about options like income tax or luxury tax on certain items?

Why wasn’t fund balance used to make up the budget gap and avoid the sales tax exemption repeal?

Why is the sales tax on residential energy sources?   Do commercial users have to pay sales tax?

Do other counties collect sales tax on residential energy sources?

Why was I charged sales tax on my pre-paid delivery? 
 

 

What is the repeal of the sales tax exemption on energy sources?
In order to offset the increasing cost of state and federal mandates that consume 70% of the Dutchess County budget and balance the 2014 Dutchess County budget with stable, recurring revenue to pay for critical county services, the sales tax exemption on residential purchases of oil, natural gas, propane, electricity, coal and wood (including pellets) was repealed effective March 1st, 2014. This sales tax revenue was budgeted at $6.4 million for 2014. The exemption repeal was an alternative to a significant property tax increase or the elimination of core county services such as law enforcement, road repair, snow plowing, county parks, 911 emergency dispatch and more. (What is a mandate?)

Thanks to the advocacy of our county residents and county leaders, funding was secured in the New York State 2014-15 budget that will allow Dutchess County to restore the sales tax exemption on residential energy sources effective June 1st – the earliest possible date allowed by NYS Department of Taxation and Finance. (return to top)

 

How are you able to repeal the energy sales tax? What changed?
County Executive Molinaro, together with Legislature Chairman Rob Rolison and other members of the Dutchess County Legislature, launched an aggressive campaign to lobby state representatives for mandate relief in order to reinstate the exemption as quickly as possible. County residents called and wrote letters advocating for mandate relief needed to eliminate the energy sales tax.

New York Senator Greg Ball and Assemblywoman Didi Barrett were successful in identifying and securing $5.25 million in state funding to address critical, unique needs in Dutchess County. The funding includes $3.5 million to address growth in mental health populations as a result of a series of state facility closures and $1.4 million for corrections and reentry programs.

The funding secured by Senator Ball and Assemblywoman Barrett was part of the New York State 2014-15 budget. Senator Terry Gipson and Assembly members Frank Skartados and Kevin Cahill voted in support of the adoption of the state budget and the funding for Dutchess County. (return to top)

 

Why can’t the energy sales tax be repealed earlier than June 1st?
Under the guidelines of the New York State Department of Taxation and Finance, which is the agency responsible for sales tax collection and distribution, sales tax changes can only take effect on the first day of a sales tax quarter – those dates in New York State are March 1st, June 1st, September 1st and December 1st. The State Department of Taxation and Finance normally requires a 90 day notice for any sales tax changes, however a waiver can be granted. A waiver has been requested in order to make the sales tax exemption effective at the earliest possible date – June 1st. (return to top)

 

Will I get a refund on the energy sales tax I have already had to pay?
No. New York State Tax Law Section 1139 does not allow county government to issue tax refunds. Please see Memo from Dutchess County Attorney James Fedorchak for more details and information. (return to top)

 

Why was the sales tax exemption on energy sources repealed in the first place?
In order to offset the increasing cost of state and federal mandates that consume 70% of the Dutchess County budget and balance the 2014 Dutchess County budget with stable, recurring revenue to pay for critical county services, the sales tax exemption was repealed effective March 1st, 2014. This sales tax revenue was budgeted at $6.4 million for 2014. The exemption repeal was an alternative to a significant property tax increase or the elimination of core county services such as law enforcement, road repair, snow plowing, county parks, 911 emergency dispatch and more. Dutchess County was the 22nd county in New York State to repeal its exemption on residential energy in order to maintain county services while having to fund state mandated programs. There are a total of 57 municipalities across the state that charge local sales tax on residential energy purchases. (return to top)

Learn more about mandates here.  (What is a mandate?)

 

Does the new state funding equal the projected revenue from the energy sales tax?
No. The $5.25 million state funding is one-time relief from increased mental health demands due to the closure of state psychiatric facilities in our county over the last few years. This assistance enables us to repeal the sales tax on residential energy sources. However, the energy sales tax revenue was budgeted at $6.4 million for 2014. This will create a significant gap going forward. Without annual reoccurring relief from state spending or the revenue from the repeal of this sales tax exemption, we will be forced to cut critical services going into the 2015 budget.

That is why we must continue our fight for mandate relief. With 70% of our net costs … your county tax dollars… going to pay for state and federal programs, we need your help! Contact your New York State Senate and Assembly member – tell them you support immediate mandate relief. (What is a mandate?)

Each of our local state representatives understands the importance of mandate relief and each has sponsored specific relief proposals. Let’s get those proposals passed! Call or write your representative and let them know that this must be their top priority. The more people advocating for mandate relief, the more likely it will become reality. (return to top)

Download a list of State Representatives Contact Information (.pdf)

 

What was done to avoid repealing the sales tax exemption? What did you cut?
Over the past two years, we have been aggressively transforming Dutchess County Government to be smaller, smarter and more efficient.    We have reduced recurring spending by nearly $20 million through some of the following efforts:

  • We have consolidated, reorganized and eliminated divisions, departments and administrative positions.   More than 110 positions have been eliminated in the past two years.
  • County administrative, confidential and elected officials are all contributing to health insurance while continuing a multi-year freeze on their salaries (with the exception of the state imposed arbitration award to the PBA which is another state mandated requirement).
  • The County’s workforce is the smallest it has been in more than 30 years, despite the fact that the population has grown by more than 50,000 residents and the demand for services has increased dramatically.

Dutchess County’s fiscal management ranks among the best in New York State according to the New York State Comptroller’s 2012 Report on Counties:

 

  • Dutchess County’s Spending per capita is $1,552   -  the 6th lowest in the state out of 57 counties.
  • Dutchess County’s Property Tax rate per thousand is $3.26 - the 9th lowest in the state out of 57 counties.
  • Dutchess County’s Property Tax Levy Per Capita is $350 - the 13th lowest in the state out of 57 counties.

 


However, 70% of Dutchess County Government’s budget is mandated by state or federal law.   County officials can only adjust spending on the discretionary portion of the county budget, which is only 30% of the overall budget. (return to top)

 

When you say 70% of the Dutchess County budget is “mandates”…What is a mandate?
A mandate is a combination of two things:  a government policy and the cost of implementing that policy.   The mandate requires government spending to make the policy happen.

The difficulty for county governments is the first part of the mandate equation is controlled by Albany or Washington – state and federal officials decide on a policy or program.    Local counties are only part of the second half of the equation – paying the bill.

Some of the mandates Dutchess County Government must pay include:

  • Medicaid   $43.6 million
  • Pre-School Special Education  $7.0 million
  • Early Intervention Program  $2.3 million
  • Child Protective Services $6.2 million
  • Child Placement, Adoption & Foster Care $12.2 million

Here is how the 2014 Dutchess County budget breaks down for mandated compared to discretionary costs:

As you can see, 70 cents of every local tax dollar collected (property tax, sales tax, hotel) goes to pay for a mandated program or service!

Dutchess County is not alone in the struggle against unfunded mandates.    Read about how Tompkins County is advocating for Albany to pay some of its own bills rather than passing them down to counties. return to top)

 

What do you mean when you say “discretionary services”?
Discretionary services are programs or services that Dutchess County Government provides to its residents, but is not required to by state or federal law.

Discretionary services include:

Sheriff law enforcement
E-911 dispatch
Road repair & maintenance
Snow removal
Senior Meal programs

County parks
Veterans services
Alternative to Incarceration programs (ATI)
Health & Mental Health program
Public Transportation

These are the programs and services that are “optional” and we have the ability to cut.   Expenses have been reduced and cut in all of these areas. Further cuts will result in job losses and residents would be impacted by cuts or elimination of these programs.    Even with further cuts or eliminations to these services, it would still be difficult to close the gap created by escalating mandate costs.

 

Here are some scenarios of what would have to cut to close the annual shortfall of  $7.7 million:


 

How much would have the property tax increase been instead of the sales tax exemption repeal?
The property tax rate increase would have been approximately 12-13%.

Residents made it clear at outreach events, budget surveys and various other communications that they were opposed to exceeding the 2% property tax cap. (return to top)

 

What other options were considered to avoid the sales tax exemption repeal?
Dutchess County Government tried to re-establish a mortgage recording fee in 2013.    This is a one-time fee paid at the time of closing on a mortgage.   It is a ½ percent fee on the overall cost of the mortgage that can be rolled into the mortgage financing.   This fee impacts only those who are closing on a mortgage and would generate approximately $6 -$7 million dollars annually.

However, the mortgage recording fee requires “home rule authorization” from the New York Legislature.     One of Dutchess County’s six elected state representatives must sponsor the legislation for it to be voted on.    None of our elected representatives would sponsor the bill in 2013.    Had the mortgage tax fee been authorized, there would have been no need to repeal the sales tax exemption on residential energy sources.

The three options within our purview to choose from were:

  • Property tax increase of 12 to 13%
  • Decimate county services
  • Repeal the sales tax exemption on residential energy sources.

(return to top)

 

 

What about options like income tax or luxury tax on certain items?
New York State does not permit county governments to collect income tax or determine what items are subjected to sales tax collection.

 

In the case of sales tax on the residential energy sources, the New York State Department of Taxation and Finance allows counties offer an exemption from sales tax.    While the distinction may seem minor, it is important.    County governments cannot decide what is subject to sales tax. (return to top)

 

Why wasn’t fund balance used to make up the budget gap and avoid the sales tax exemption repeal?
Dutchess County Government’s fund balance has been used many times over the years to close budget gaps.  The prior administration crafted the 2012 Dutchess County Government with an appropriation of $24.4 million from the general fund balance and an additional $2.5 million from the D, E and ET funds to maintain core services for residents.   This significant fund application positioned the unappropriated fund balance of the county at only 1.3% of budget, well below the generally recommended 5 to 10% of budget for fund balance.

Fund balance reserves are an important component of fiscal health and can impact bond rating.  Following the reduction of the fund balance, Dutchess County Government’s bond rating was recently downgraded from Aa1 to Aa2.     Additionally, a recent audit by the New York State Comptroller noted that although the County’s 2014 budget was reasonable and structurally balanced, it is necessary to ensure adequate fund balance reserves. (return to top)

 

Why is the sales tax on residential energy sources?   Do commercial users have to pay sales tax?
Yes, business and other commercial users must pay sales tax on residential energy purchases.   Commercial energy use has never been exempt from sales tax.    New York State Department of Taxation and Finance only allows for residential energy purchases to be exempted at the discretion of local governments. (return to top)

 

Do other counties collect sales tax on residential energy sources?
Yes, there are 22 counties in New York State that collect sales tax on energy source.   Additionally, there at 24 school districts and 11 cities that also collect sales tax on energy sources.

Allegany
Bronx
Cattaraugus
Cayuga
Chemung
Cortland
Erie
Franklin
King
New York
Niagara

Orleans
Queen
Richmond
Rockland
Schenectady
St. Lawrence
Suffolk
Tioga
Tompkins
Westchester

 

For more information please refer to Publication 718‑R: Local Sales and Use Tax Rates on Residential Energy Sources and Services
(return to top)

 


Why was I charged sales tax on my pre-paid delivery?
The collection process for all sales tax, including sales tax on energy sources, is set by the New York State Department of Taxation and Finance.    There have been some questions about sales tax being charged on products and services that have been prepaid, prior to March 1, 2014.

The following information has been provided by NYS Department of Taxation & Finance.

“Sales of residential energy sources and services are subject to sales tax at the rate in effect at the time of delivery to the customer, even if the sales were contracted for before this change, unless the sales are based on meter readings.”

Additional information is available at:  New York State Tax & Finance “Dutchess County: Local Sales Tax and Use Tax Rate on Residential Energy Sources and Services (pdf)”:

The New York State Department and Taxation has provided the following links to its “AU-11 form” which you can fill out to apply for credit or refund if you feel you have been charged sales tax in error.   The form does not guarantee a refund -   the state will decide if a credit or refund is due.

AU-11 Form:  http://www.tax.ny.gov/pdf/current_forms/st/au11_fill_in.pdf

AU-11 Instructions: http://www.tax.ny.gov/pdf/current_forms/st/au11i.pdf

 

If you should have any further questions regarding the collection of these taxes or status of your application, please contact New York State Tax and Finance at 518-485-2889.


Go to top of page


 

Jessica White
Budget Director
Dutchess County Seal

Accessibility

 

Listen button image Listen to webpage

 

Increase and decrease text size Change text size