Energy Sales Tax Exemption Discontinued in New York State FY2020 Budget

Congestion pricing, mansion tax, and a ban on plastic bags – but what isn’t making headline news is the discontinuation of the sales tax exemption on non-residential transmission and distribution of gas and electricity when customers buy from an ESCO.  In other words, for C&I customers in NYC purchasing electricity and gas from an ESCO / retail energy company, you’ll now be paying the full 8.875% sales tax on Con Ed’s T&D, rather than the 4.5% you have been paying since 2009.  Read on to learn when this exemption officially disappears and when you will start paying the full sales and use tax on your T&D charges.

In order to raise an additional $90-120 million dollars per year towards the State of New York’s $175 billion budget, the FY2020 budget repeals the sales tax exemption for electric and gas transportation, transmission, and distribution for non-residential customers who purchase energy from an ESCO. 

In its Memorandum of Support, the state cites well-developed competition among ESCOs and the “exemption perpetuates unequal treatment among utility customers.”  New York commercial customers already pay 30% more than the average commercial customer in the US (9^th highest $/kWh – based on calendar 2018 EIA data).  And if this were limited to New York City customers, we estimate it would be closer to 53% higher and in the top 3 most expensive. 

According to the Memorandum of Support, this bill will take effect June 1, 2019 and would apply to sales made and services rendered on or after that date.  Update your budgets accordingly!