Taxes aren”™t always created in New York state; sometimes they are “broadened.”
Take the case of the new sales tax for limousine operators. Its aim is to raise $26 million from the transportation services industry.
What it has raised, so far, is anger among the owners of limousine and black car services ”“ the vehicles that ferry corporate executives to airports as well as brides and grooms to weddings. A request for a temporary restraining order on the tax was rejected last month by a state judge just days before it took effect on June 1.
According to the enacted 2009-10 state budget, the fee “broadens the sales tax base to cover certain transportation-related services, such as limousine and black car services, but excludes taxis.” Metered taxis were already hit with a 50-cent per ride tax, part of the Metropolitan Transportation Authority bailout.
“Devastating” is the way Edward Stoppelmann, president of Red Oak Transportation in White Plains, portrayed the sales tax.
“New York state is casting a big net to cover its budget deficit,” he said. “It”™s not going to our industry, but the general fund.”
Jeff Nyikos, chief operating officer of Leros Point to Point, said this was just the beginning.
“You”™ll see a variety of these taxes coming. The service sector will take hit. Any service not charging sales as an industry will get taxed,” said Nyikos, whose limousine service, which has 175 vehicles, is based in Hawthorne, with offices in Connecticut and New Jersey.
Nyikos foresees Connecticut tapping into his industry to raise revenue. New Jersey imposed a sales tax on limousine operators in October 2006.
“It”™s an added expense to an industry that has already been hit by the downturn in the economy,” he said.
The transportation services sales tax is one of 52 new fees or taxes in the state budget.
Stoppelmann points out that the sales tax is much more onerous in scale and wider in scope than the taxi surcharge, requiring additional software and monitoring.
Any limousine that begins and ends its route within New York state is subject to sales tax on all charges except a chauffeur”™s gratuity. In addition to the fare, sales tax must be collected on tolls, parking, waiting time, stop charges, early morning and holiday surcharges.
The major exception to the rule is if the ride were to begin or end outside of the state. A ride from Bedford to Stamford, Conn., for example, would not be taxable.
John Pedone, president and CEO of Prime Time Limousine in Stamford, is upset by the new law. While his business is based in Stamford, he still picks up and drops off clients in New York state.
Since buses and metered taxis are exempt, Pedone feels the law is “discriminatory” and “puts the limo industry at a disadvantage.”
In addition he said the “double taxation” is “ridiculous.”
“Sales tax on tolls and parking is unheard of.”
In addition, Pedone must pay $300 per vehicle to operate in Westchester as per the county”™s Taxi and Limousine Commission”™s rules.
“We need less taxes and less government,” he said.
As far as the actual sales tax, the only consistency is that 4 percent goes to the state. The tax varies from city to city and county to county. In Westchester the tax is 7.375 percent, except in: Mount Vernon, Yonkers and New Rochelle, where it”™s 8.375 percent; and White Plains, 8.125 percent. The sales tax would be determined where the ride begins.
With the start of the sales tax on June 1, Stoppelmann said that Red Oak Transportation would be dropping its 5 percent surface transportation charge.
“We”™re committed to not raising our prices,” he said, instead looking at tightening operations. The company has not raised its prices since April 1, 2008. “Unless gas prices go crazy,” Stoppelmann said he did foresee any price increases until the end of the year.
He said the new fee was poorly conceived. He said it did not make sense as to why buses and exotic stretch limousines, such as stretch Hummers, were exempt from the law and community cars were not. “A stretch is a luxury. A community car is a necessity.”
The limousine industry has already been affected by the recession, Stoppelmann said, as businesses cut back on limousines for their executives, choosing instead less expensive alternatives such as taxis or maybe a spouse is dropping off their mate at the airport.
Most of Red Oak”™s 60 drivers are seeing fewer trips per day.
He said now the trick is to make sure clients understand that “we”™re just collectors (of the tax), not imposing it.”
A downside to the sales tax is that it must be paid to the state regardless of whether it had yet been collected from the customer. Stoppelmann said that many limousine services, especially in New York City, operate on a voucher system. That voucher might not be paid until 90 days after the ride, leaving the limousine operator with having to pay the sales tax.
