Opinion 95 - 3


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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.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 -- Distribution (calculation of amount set aside for county or educational purposes when cities and county levy the same tax); (allocation of amount not set aside for county or educational purposes when cities and county levy the same tax) -- Pre-emption (where cities and county levy the same tax)

TAX LAW, §§ 1105(b), 1210(a),(b), (c), 1223, 1224(b), (k), 1262(a), (c), (d): In the absence of any applicable special law, when a county imposes a 3% general sales tax and a city within the county imposes a 3% sales tax on utility services, restaurant meals, hotel room occupancy, amusement admissions or any combination thereof, the county tax on the types of transactions taxed by the city may not be imposed within the city. The net collections from the county tax on the types of transactions taxed by the city imposed in the area of the county outside the city must be allocated to the area of the county outside the city in the manner provided by Tax Law, §1262(d). The amount of county sales tax set aside for county or educational purposes must be determined from the county's total net collections exclusive of the amount which must be allocated pursuant to section 1262(d). The remaining amount not set aside for county or educational purposes must be allocated to the cities and the area of the county outside the cities in the manner provided by section 1262(c).

This is in reply to your request for our opinion concerning the proper distribution of county sales tax revenue when the county and several cities within the county each impose a sales tax on certain transactions.

From your inquiry, it appears that the county imposes a 3% general sales tax and has not set aside for county or educational purposes all of the net collections therefrom. It also appears that one city within the county imposes a 3% sales tax on utility services and restaurant meals and the two other cities within the county each impose a 3% sales tax on utility services, restaurant meals, hotel room occupancy and amusement admissions. In view of the sales taxes imposed by the cities, you ask how the portion of the county general sales tax set aside for county or educational purposes should be calculated, and how the amount not set aside for those purposes should be allocated to the cities, towns and villages in the county.

Any city or county, except a county wholly within a city, is authorized to impose within its boundaries either a general sales tax (Tax Law, §1210[a][1]) or a limited sales tax on utility services, restaurant meals, hotel room occupancy, amusement admissions, or any combination thereof (Tax Law, §1210[b][1]; see also Tax Law, §1105[b], [d]-[f]). A general sales tax is applicable to, among other things, utility services, restaurant meals, hotel room occupancy and amusement admissions (id.; Tax Law, §1105[b],[d]-[f]). In the absence of special legislation, a sales tax must be imposed in 1/2% increments and may not exceed 3% (Tax Law, §1210).

Ordinarily, when a city and a county both impose a sales tax on the same transaction, the combined city and county tax may not exceed 3% (Tax Law, §1223). When the combined city and county tax on utility services, restaurant meals, hotel room occupancy or amusement admissions would otherwise exceed 3%, the city has a "prior right" to impose its tax (Tax Law, §1224[b][1]). The city's prior right to impose its tax preempts and precludes the imposition of the county tax within the city to the extent that the city has exercised its prior right (see Tax Law, §1224[k]), but does not preclude the imposition of the county tax in the area of the county outside the city (see Tax Law, §1210[c]; see also Tax Law, §1262[d]; 1983 Opns St Comp No. 83-187, p 235). Therefore, when a city imposes a 3% sales tax on utility services, restaurant meals, hotel room occupancy, amusement admissions or any combination thereof, and the county in which the city is located also imposes a general sales tax, the county tax on the types of transactions taxed by the city may not be imposed within the city, but may be imposed in the area of the county outside the city.

The set aside of county sales tax revenue for county or educational purposes is generally governed by Tax Law, §1262. Section 1262(a) provides that, "[e]xcept as otherwise provided in [Tax Law, Article 29]", the local law, ordinance or resolution imposing a county sales tax may set aside for county purposes or educational purposes all or any portion of the net collections therefrom. Section 1262(d), however, provides, in effect, that when a city imposes a 3% sales tax on utility services, restaurant meals, hotel room occupancy, amusement admissions or any combination thereof, and the county in which the city is located also imposes a general sales tax, all of the net collections from the county tax imposed in the area of the county outside the city on the types of transactions taxed by the city must be allocated to the other cities, towns and villages in the county in accordance with Tax Law, §1262(d) (see 1983 Opn No. 83-187, supra; see also Tax Law, §§1223, 1224[b][1], [k]). Since the amount which must be allocated to the other cities, towns and villages pursuant to section 1262(d) is not available to be set aside for county or educational purposes pursuant to section 1262(a), it is our view that the portion of a county's net collections set aside for county and educational purposes pursuant to section 1262(a) must be determined on the basis of the county's net collections exclusive of the amount which must be allocated pursuant to section 1262(d).

The allocation of amounts not set aside for county or educational purposes is generally governed by Tax Law, §1262(c). Section 1262(c) provides that, except as otherwise provided in section 1262, amounts not set aside for county or educational purposes must be allocated quarterly to the cities and the area of 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 boards of the county and the cities with the approval of the State Comptroller. Section 1262(c) also provides that, in the absence of such an agreement, the amount allocated to the area of the county outside the cities must then be allocated to the towns within the county in proportion to their respective populations or the full valuation of the real property in each town. In addition, under certain circumstances, the amount allocated to a town must be further allocated between the town and one or more of the villages therein on the basis of the full valuation of the real property in the town and each village (cf. Tax Law, §1262-f, pertaining to the allocation of sales tax revenue between the Town of Somerset and the Village of Barker, Niagara County, on the basis of population). There is no authority to reduce the amount allocated to a city, town or village pursuant to section 1262(c) by the amount required to be allocated to the municipality pursuant to section 1262(d).

Accordingly, subject to any applicable special laws, it is our opinion that, in this instance, the county must allocate all of the net collections from its tax on utility services and restaurant meals to the area of the county outside the three cities in the county in the manner provided by section 1262(d). All of the net collections from the county's tax on hotel room occupancy and amusement admissions must be allocated to the area of the county outside the two cities which tax these types of transactions in the manner provided by section 1262(d). The amount of county sales tax set aside for county or educational purposes must be determined based on the county's total net collections less the portion of the net collections derived from the county tax on utility services, restaurant meals, hotel room occupancy and amusement admissions. The remaining amount not set aside for county or educational purposes must be allocated to the three cities and the area of the county outside the cities in the manner provided by section 1262(c).

February 24, 1995
Glenn S. Hackett, Esq., County Attorney
County of Niagara