No. 06 Monday January 11, 1999

State Taxes

New York Energy Marketers Oppose Changes In Tax Policy on Transportation of Electricity

ALBANY, N.Y.--New York's new energy tax should be withdrawn, the head of the National Energy Marketers Association (NEMA) told BNA Jan. 8.

Under a new policy of the state Department of Taxation and Finance, companies that deliver electric service to customers are subject to the same New York state sales tax as those which generate and sell electricity.

The new policy, which was set forth in a Jan. 1 letter from Steven U. Teitelbaum, the department's counsel, is designed to respond to a restructured electric utility environment.

The letter reverses the department's tax policy on the sale of electric transportation services, which was set forth in a January 1997 opinion by Teitelbaum. The department is expected to issue a formal memorandum outlining the policy in the coming weeks, according to Leah Powell, a spokeswoman for the department.

The policy change was met with strong opposition from NEMA, which has requested that the department rescind the policy and is considering legal action and other remedies, according to Craig G. Goodman, president of the association.


Strong Opposition From NEMA
"To impose a new energy tax before New York's retail energy choice programs can be implemented on a widespread basis will effectively undermine the very efforts that the governor and many other state officials have been working hard to put in place," Goodman said. "We urge the state to rescind this untimely and ill-considered tax."

At issue is Section 1105(b) of the state Tax Law, which imposes a sales tax on "the receipts from every sale, other than sales for resale, of gas, electricity, refrigeration and steam, and gas, electricity, refrigeration and steam service of whatever nature."

In his letter, Teitelbaum wrote, "Until recently, electricity, including (among other things) the service of getting it to the consumer, was provided by one party, the utility, and the entire charge was subject to sales tax.

"In a restructured environment, one company will be generating and selling electricity and another company will be providing the service of (among other things) getting the electricity to the customer.

"It is my opinion that the phrase 'electricity ... and electric ... service of whatever nature' imposes tax on the services of both parties in the provision of electricity," Teitelbaum said.

Texts of the NEMA news release and Teitelbaum's letter are in BNA TaxCore.



By Gerald Silverman

Copyright © 1999 by The Bureau of National Affairs, Inc., Washington D.C.