New York Levies 4% Sales Tax on Limo Service

Posted on June 3, 2009 by LCT Staff - Also by this author - About the author

(EDITOR’S NOTE: An article in last week’s Driving Force about the New York sales tax used the phrase “Drop Dead” in a headline. It was not LCT’s intention to imply that the Black Car Assistance Corp. or any industry group LITERALLY wants the tax or anyone to drop dead. The headline was an attempt to sum up operators’ general distaste for the higher tax. Victor Dizengoff, the head of the BCAC, explained that the sales tax likely will not be repealed entirely, but that industry groups will pursue legal and legislative ways to minimize its harmful effects on operators and get clarification on the new compliance rules. LCT did not mean to evoke any Gerald Ford-related traumas for New Yorkers).

NEW YORK — Limousine operators had to start collecting a whopping 8.375% sales tax on livery service Monday, which now includes an additional 4% sales tax effective the same day.

Several key industry organizations — such as the Black Car Assistance Corporation, the New York Limousine Association, the Luxury Based Operators’ Association, the Western New York Limousine Association, and The Nassau Suffolk Limousine Association — attempted to get a temporary restraining order to halt the new tax until clarifications could be made as to what is included and how it will be collected. The judge ruled against the injunction, and the associations will now seek remedy through a lawsuit.

The new tax laws are not clear as to what is actually being taxed. For example, are gratuities to be included? If they are included, how will operators account for cash gratuities given directly to a chauffeur?

Other questions which need to be addressed include: If tolls and parking are taxed, will they be included on no shows? When will the tax be paid? What if clients don’t pay for the service for 30 to 60 days? Billing portions of dispatch software will need to be modified to take into account the new tax laws once clarification is given to the industry, but until then operators are still expected to collect a tax on service despite not knowing what to include.

“Ignorance will be no excuse” was the message that the court sent when turning down the request for a temporary restraining order.

Operators in New York believe that the new tax will offer an additional hardship to an industry already hurt by the current economy and the downturn in corporate travel. Corporate travelers may now turn to taxi service rather than pay the taxed chauffeured service. The taxi and bus industries were spared from paying the additional tax on service, but the taxi industry will now pay an additional 50-cents surcharge for each ride. This surcharge will not go into effect until Jan. 1, 2010.

Dan Santos, owner of Starlight Limousine Service based in Rockland County, is concerned that customers will see the new tax only as a raise in pricing. “The consumer only cares about the bottom line price. You have to pass it on to them. With the way things are right now, it is terrible to add this burden to operators,” Santos says.

Operators in New Jersey also pay sales tax but it is on the net price of the job and not on the gratuity. Additionally, New Jersey operators have a “rolling stock” exemption which allows them to purchase vehicles, gasoline, and parts for their vehicles without adding sales tax.

Peter Verdi, President of Bermuda Motorcar Renting Co. Inc, believes that the tax is not fair. “We have to pay the tax based on when service is render but our clients often don’t pay for 30 days. We have to front the tax before we even get paid. Our counter parts in New Jersey pay tax on service, but, with their rolling stock exemption, the burden is not as great,” laments Verdi.

In addition to the new tax, operators are also concerned with a proposal that the New York City Taxi and Limousine Commissions has proposed allowing shared rides among strangers in taxi cabs. Although the new service will only pilot intercity locations, the concern is that if successful, it will move to the airports. Operators believe that the new sales tax, combined with programs of this sort, drive consumers to the less expensive taxis. For more information, see this article.

The Black Car Assistance Corporation will be hosting an industry meeting in conjunction New York Limousine Association, the Nassau Suffolk Limousine Association, and the Luxury Based Operators’ Association to inform the industry representatives where the lawsuit stands on Thursday at 2 p.m. in the Courtyard by Marriott at 94th Street at Ditmars outside LaGuardia Airport.

Source: Linda Moore, LCT Magazine

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