Opinion 92-17


This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.


SALES TAX -- Agreements (right of towns to receive share)

TAX LAW, §1262(c): A sales tax agreement between a county and cities within the county need not, as a matter of law, include a share of county sales tax revenues for towns.

You ask whether a sales tax agreement entered into between a county and all cities within the county pursuant to Tax Law, §1262(c) must provide that a portion of the county sales tax revenues not set aside for county or school district purposes shall be distributed to the towns in the county or whether such areas may be omitted entirely from the sales tax distribution scheme set forth in the agreement.

Under subdivision (a) of Tax Law, §1262, a county may set aside for county purposes or educational purposes all or any portion of the net collections from a county sales tax imposed pursuant to article 29 of the Tax Law. Subdivision (c) of section 1262 provides in pertinent part that amounts not set aside for county purposes or educational purposes:

shall ... be allocated quarterly to the cities and the area in the county outside the cities in proportion to their respective populations ... or in such other proportion as may be agreed upon by the elective governing body of the county and of each of the cities in the county with the approval of the state comptroller .... (emphasis added)

Thus, this statute provides that a county and all the cities in the county may agree to allocate certain county sales tax revenues among cities and the area outside the cities in a proportion which is based on factors other than the populations of the respective areas. Inasmuch as the territory of all counties in the State consists of cities and/or towns, the area "outside the cities" refers to the towns within the county.

It has been the long-standing position of this Office that the statutory reference to "or in such other proportion" implied that the towns must receive some proportionate amount of the county sales tax to be distributed under the sales tax agreement and that an agreement could not omit entirely a share for the towns. Thus, this Office, in reviewing sales tax agreements submitted for approval over the years, has taken the position that towns must receive a share of the revenues pursuant to section 1262(c).

In Town of Moreau v County of Saratoga, 142 AD2d 864, 531 NYS2d 61, however, the Appellate Division, Third Department, interpreted Tax Law, §1262(c) in a manner which is contrary to the long-standing interpretation of this Office. In that case, a town brought suit against the county and the State Comptroller challenging the amount of sales tax revenues allocated to it under a county sales tax agreement. In holding that the town lacked standing to challenge the allocation of county sales tax revenues, the court stated as follows:

Indeed, under Tax Law §1262 a county may expend its tax revenues exclusively for educational and county purposes, or it may enter into an agreement with included cities whereby no tax revenues are allocated to the towns ....(142 AD2d at 865, 531 NYS2d at 62; emphasis added)

Although this statement may be dictum, we believe that it must be given great weight. This is particularly so because we are aware of no judicial authority to the contrary and this statement was made by the court which generally would hear appeals in which the Comptroller's approval of a sales tax agreement is challenged (see CPLR, §506[b][2]). Accordingly, based on the decision in Town of Moreau v County of Saratoga, supra, we now conclude that a sales tax agreement between a county and all cities within the county under Tax Law, §1262(c) need not, as a matter of law, include an allocation of sales tax revenues for towns within the county.

June 24, 1992
Cornelius F. Healy
Deputy State Comptroller