FOR RELEASE:

New York State’s Sales Tax Rates Among Nation’s Highest

85 Percent of State’s Population Pays 8 Percent or Higher in Sales Tax

Combined State and local sales tax rates in New York range from 7 to 9.5 percent — among the highest sales taxes rates in the nation, according to a research report on local government sales tax issued today by New York State Comptroller Alan. G. Hevesi.

The report found that:

• 85 percent of the State’s population resides in areas where the combined State and local tax rates is 8 percent or higher.
• New York State’s counties have grown more reliant on sales tax revenues to fund their operations. Between 1994 and 2004, sales tax as a percent of total county revenues increased from 20.4 percent to 25.6 percent.
• Sales tax growth is tied to economic growth. Sales tax revenues grew by nearly 45 percent from 1993 to 2001, more than double the rate of property taxes. Following the economic downturn of 2000, sales tax growth slowed to 15 percent from 2001 to 2003, while property taxes grew by 17 percent during this period.
• The growth of sales tax revenues varies widely by location. From 1999 to 2005, sales tax collections grew almost three times faster in the Hudson Valley than in the Finger Lakes or the Capital District.
• Competition from other states and from internet sales, as well as the high and regressive tax burden of the sales tax, continue to be important tax policy issues in New York State. The recently enacted exemption of sales tax on clothing helps to address these concerns.

“Sales tax rates in New York State are much higher than the national average,” Hevesi said. “Because sales tax revenues are tied to the economic health in a specific area, the fact that many governments are becoming more dependent on sales taxes to pay for their daily operations makes them more vulnerable if they face an economic downturn.”

In New York State, counties and cities are allowed to levy a local sales tax, which is imposed in addition to the State sales tax of 4 percent. Generally, the sales tax is levied at the county level and sales tax proceeds are distributed to other units of government in accordance with local sharing agreements. Cities have the right to pre-empt counties and levy sales taxes directly within their borders. Currently, 22 of 62 cities levy their own sales taxes.

The report includes a county-by-county and city-by-city breakdown of current rates, revenues sources and methods of distribution to municipalities and school districts around the State. The report also contains technical information on the sales tax, including summary descriptions of local sales tax sharing agreements.

Other findings of the research report include:

• New York’s average combined state-local sales tax rate of 8.25 percent compares to a national average rate of 5.93 percent. This places New York fourth highest among all states for combined sales tax burden.
• Statewide, sales tax revenues increased from $6 billion to nearly $9.8 billion between 1994 and 2004, an increase of 63 percent or 5 percent annually. Excluding New York City, county sales tax revenue grew from $2.6 billion in 1994 to $4.3 billion in 2004, an increase of 70 percent or 5.4 percent annually. City sales tax revenues increased $385.8 million to $591.1 million over the same period, a 4.4 percent annual increase.
• By geographic region, annual sales tax growth from 1999-2005 ranged from a high of 9.2 percent annually in the Mid-Hudson Valley to 3.1 percent annually in the Finger Lakes and in the Capital District.
• Buffalo, Rochester, Syracuse and Yonkers had average annual sales tax revenue growth of 3.1 percent from 1990 to 2004, which significantly lagged behind the sales tax growth of towns at 5.8 percent during this period.
• 49 of 57 counties have local sales taxes rates that exceed the 3 percent statutory limit, including six counties with local rates above 4 percent (Oneida, Erie, Allegany, Chautauqua, Nassau and Suffolk). Oneida County has the highest sales tax rate in the state at 5.5 percent ― 9.5 percent when combined with the State’s 4 percent. Several downstate counties and New York City are also subject to the 0.375 MTA sales tax. Although the rates in excess of 3 percent are often referred to as “temporary” taxes, in many cases these rates have been in effect for decades.
• 18 of the 57 counties rely more heavily on sales tax revenues than property taxes as part of their total budgets. Suffolk is the highest at 43.5 percent followed by Dutchess at 35.1 percent, Putnam at 33.2 percent and Seneca at 31 percent.
• Among cities, Watervliet relies the heaviest on sales taxes compared to property taxes at 29.2 percent of its total budget. Other notable cities include White Plains at 28.4 percent, Oswego at 27.7 percent and Fulton at 27 percent.
• 43 of the 57 counties have some form of sales tax sharing agreement with other local governments located within their boundaries. However, the proportion of sales taxes retained by each county varies greatly, ranging from a low of 31 percent in Monroe County to a high of 98 percent in Rockland County.
• 22 cities levy their own sales tax ranging from 1.5 percent to 4 percent. Cities at 4 percent include New York City, Oswego and Yonkers.
• A 2002 report from the Governmental Accounting Office estimates state and local sales tax losses from internet sales nationwide for 2000 were as much as $3.8 billion and for 2003 were as high as $12.4 billion.

Click here for a copy of the report.

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