New York Levies Hefty Sales Tax On Limo Operators

Posted on April 29, 2009 by LCT Staff - Also by this author - About the author

NEW YORK — On June 1, the state of New York will begin levying a 4% sales tax on black car and luxury car services statewide while exempting the charter bus and taxi industries.

The lopsided tax policy has created a furor among chauffeured transportation operators who were caught off guard by the measure and are now mobilizing to get an exemption. New York Governor David Patterson signed the legislation on April 7.

Although the New York tax goes into effect June 1, there are a number of issues which still require clarification. The tax is not yet spelled out well enough for operators to begin documenting and collecting it.

For example, is the chauffeurs’ gratuity taxable? Can tolls and parking also be taxed? If the ride is canceled late and the company still charges, is that taxable? How do you handle rides that originate in other areas such as Newark International Airport or in Canada? These are all among many issues that New Jersey transportation operators dealt with three years ago and New York operators now must grapple with.

The taxi industry, however, did not escape unscathed despite being exempted from the tax. They will see a $1 service surcharge added to each ride. Taxi drivers believe that the passengers will reduce their tips as a result of the new surcharge. They are uniting with rallies to voice their opposition to the new surcharge which comes amid a recession resulting in fewer riders overall. Part of the opposition to the surcharge also stems from the fact that funds generated by it will pay for projects outside New York City.

New York Mayor Michael Bloomberg and the NYC City Council oppose the taxi surcharge so strongly that there is a fair chance it could be killed through an amendment. Transportation Committee Chairman Martin Dilan, the official sponsor of the plan, declared that he wants the “taxi tax” cut in half or eliminated, according to a report in Newsday.

New York’s state budget increases spending by 9% overall while the transportation industry takes a 4% hit with the tax on service.

Operators and industry associations are outraged about the exemptions to the measure, which essentially discriminates against luxury-based chauffeured transportation.

Kevin Barlow, owner of Giorgio’s Limousine Service and President of the Limousine Operators of Western New York, is scurrying to line up operator support. In 1988, LOWNY fought and won a tax battle when the state attempted to place a tax on transportation services. They are ready again. Barlow has contacted other industry associations in the state and has shared information from the 1988 tax battle.

Western New York operators are including the taxi and bus industries in their fight against the measure, Barlow said. “We feel that we need to all rally together and fight this. The hard part with us is that most of the politicians are more concerned with the activities of New York City and they forget about the rest of the state. We are working with the National Limousine Association, which is helping us. If we need to get legal representation, we will. This just shows you how important it is to be involved in both your local and national associations. We need to always present a unified front.”

Barlow believes that opposition to the measure will continue to escalate until something is done. His organization is extending its reach across the state to solidify the industry.

Jeff Rose, owner of Attitude New York and president-elect of the Limousine Association of New York, Inc.(LANY), is also in motion. “We are trying to work with other associations in the state in order to marshal our political capital,” he said. “We believe that this tax will actually diminish the tax revenues for several reasons. In our industry, payment is not rendered at time of service. We can get paid three to six months after the service. If the debt goes bad, how do we get the sales tax back? All of our software needs to be altered. Our association feels that this will drive a lot of the activities of the industry underground to avoid paying these taxes. This legislation is the poster child of unexpected consequences. The state is battering an industry that has already suffered. We are directly tied to the financial industry. This isn’t only hurting the companies; it’s hurting tens of thousands of middle class workers: chauffeurs, car washers, garage men. All these people who are affected are not the executives that are sitting in the back of our vehicles.”

In addition to working with the other state associations, members of LANY are also doing some things behind the scenes to keep this issue out front.

Victor Dizengoff, executive director of the Black Car Assistance Corp. (BCAC), spoke to LCT this week while en route to Albany, N.Y. He plans to hold meetings to assess the situation and formulate a plan of attack as well as a formal position on the issue.

The industry overall is on the move to alleviate this new tax burden, focusing on cumulative efforts to bring the tax injustice to the attention of lawmakers. Unfortunately, the measure and its exemptions for buses and limos came to light after it had been passed.

Nearby New Jersey added a 7% sales tax on transportation services three years ago. Since then, the Limousine Associations of New Jersey has been battling to get the tax rescinded and believes that they will achieve a breakthrough by June 2010.

To the benefit of New Jersey limousine operators, they have a rolling stock exemption which relieves them from paying taxes on vehicles purchased for their businesses, and parts and materials used for operations. New York does not have such a rolling stock exemption.

Meanwhile, operators are getting ready to suffer if there is no immediate cancellation of the tax or exemption amendment. Dawson Rutter, CEO of Boston-based Commonwealth Worldwide Chauffeured Transportation, said his company does about $12 million in business annually in New York with a fleet of 108 vehicles. The added tax bite to his operations would be about $480,000 per year.

“Taxis and buses have effective local and national organizations with lobbyists to counteract these kinds of legislations,” said Rutter, also a member of the board of directors of the National Limousine Association. “The limousine industry has been very disorganized, and in this case did not know about the tax until after the taxis and buses had gotten exemptions.”

NLA President Ron Sorci said the national organization is available for any support New York area associations need in handling a predominantly local and regional issue.

Industry leaders will no doubt be fighting to get the budget amended and the tax — axed. At a time of a deep recession, financial sector shake-up, and business travel cutbacks, this tax would compound the pain for operators and clients alike.

Source: Linda Moore and Martin Romjue, LCT Magazine

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