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MONTICELLO, NY — After towns and villages requested that Sullivan County share either sales-tax revenue or casino impact fees with the other municipalities, Sullivan County Chair Luis Alvarez responded by sending a letter to town and village attorneys on March 4 essentially saying the county won’t share the revenue.
In the letter, Alvarez laid out a long list of expenses that prevent the county from sharing. “The County most often bears the brunt of unfunded State mandates. Our employees earn significantly less than, not just neighboring counties, but towns and villages within our borders. We are responsible for initiating, implementing and paying for large-scale projects like the new jail/sheriff’s administration facility and a reconfiguration of our courthouse and court-related offices, once the old jail is demolished. We are also responsible for maintaining a sizable array of existing buildings, bridges, roads and other infrastructure, more than any single town or village in the county. And it deserves mention that we retain all costs associated with charge-backs from SUNY community colleges for enrolling students from our area, plus the entire expense of every election— in every town—administered by our board of elections.”
According to a document produced by the state comptroller’s office, “In New York State, 46 of the 57 counties outside of New York City share a portion of their sales tax collections with other local governments within their borders.”
Town and village officials have been asking the county to share sales tax revenues for about three years. Representing the Sullivan County Association of Towns, Tom Bose, who is also the supervisor of the Town of Callicoon, visited the county legislature on February 21 to once again ask county lawmakers to share. He acknowledged if the county decided to share sales tax, legislation in Albany would be required to allow the change. Bose suggested that an easier route might be for county lawmakers to instead consider sharing casino impact fees, but the suggestion was not accepted.
Part of the concern among town and village officials is that Gov. Andrew Cuomo, as part of his executive budget, proposed decreasing funding to towns from the Aid and Incentives to Municipalities (AIM) Program. That move prompted a sharp response from across the state, in part because the proposal would have kept AIM funding flowing to cities at the same rate as previous years. Cuomo responded to the criticism by proposing that counties use new revenue from sales tax on purchases over the internet, most of which have previously not been taxed, to make up the AIM funding difference to towns and villages.
That proposal was met with skepticism from some. “Sharing sales tax should be on top of proper state funding. This proposal does nothing to reduce property taxes, and takes money out of one hand to pay the other. Rather than supporting this attempt to pit local governments against each other to the detriment of New Yorkers, the Association of Towns continues to call for a full restoration and increase in AIM funding by the state,” wrote Association of Towns executive director Gerry Geist.
Regardless of what happens with the AIM funding to towns and villages, it is likely that expanded sales tax for internet purchases in the state will kick in this year. Gov. Cuomo has proposed that they begin in June.
As the situation now stands, retailers with a physical presence in the state are required to collect and remit sales taxes on internet purchases to the state. But internet retail outlets with no physical presence in the state are not required to do so. In the past, it was not clear if states had the authority to impose sales tax on retailers with no in-state physical presence. But that changed with a case called South Dakota v. Wayfair, Inc. In the Wayfair case, the U.S. Supreme Court ruled in a five to four decision in June 2018 that states do have the right to charge sales tax in internet retail sales even if the retailer has no presence in the state. About a dozen states now have some sort of internet sales tax system in place. In New York State, the tax will be collected and paid if the seller has at least $300,000 worth of sales in the state and 100 separate transactions in a year.
The reduction in AIM funding to towns and villages amounts to about $60 million, while the change in the status of internet sales tax is expected to generate $390 million in additional revenue for local governments via sales taxes. Therefore, if counties are mandated to make up the decrease in AIM funding to towns and villages, with the increase of internet sales tax, they may be in a good position to do so.
Whether the counties are compelled to do so depends on whether the state legislature agrees with Cuomo about both the imposition of the expanded internet sales tax and that counties should share part of that new revenue with towns and villages.
The decision may be made by the end of March, if the governor, the Senate and the Assembly finish the budget process on time. Cuomo said in a radio interview this week that getting an on-time budget is not as important as getting the “right budget.”