Limo Companies Decry Paying Sales Tax

Posted on June 10, 2009 by LCT Staff - Also by this author - About the author

WESTCHESTER COUNTY, N.Y. — You wouldn't call a trip in a limousine a free ride, but it has been free from sales tax. Not anymore.

Starting this month, New York state began applying sales tax to rides in limousines and car services, though not taxicabs or buses. Limousine companies are crying foul, and some have filed a lawsuit to block the tax.

John Pedone, president of Prime Time Limousine, called "Going Places" to complain, and Pedone's company isn't even based in New York. He's based in Stamford, Conn., but anyone his cars pick up in New York state and drop off in New York state will have to pay the tax.

"This is the worst time for them to impose a tax to stimulate the economy," Pedone said. About 15% of Prime Time's rides start in Westchester County.

The tax comes as some limousine companies estimated their business was off 30% to 40%.

"Here's an industry that's really, really hurting in the economic climate," said Ira Thorner, president of All County Limousine, which does business in Westchester. By applying sales taxes to rides, he said, "you're looking to really crush these businesses."

This was one of the various new taxes that came with this year's state budget. Matt Anderson, spokesman for the state Division of the Budget, said it was needed, and was not unique.

"Imposing a sales tax on limousine rides is the practice of 16 other states," he said. "We would not be the only state in the nation to implement it. ... This is one of the many difficult choices that were necessary to close a $20 billion deficit."

The state estimates that the tax will put $25.6 million in state coffers this fiscal year and $34.2 million in 2010-11.

But the state isn't the only one that benefits. In most places in Westchester, the sales tax is 7.375%. The state gets 4% of each purchase. Westchester gets 1.5%, 1.5% is split among the municipalities other than Yonkers, New Rochelle, Mount Vernon and White Plains, and 0.375% goes to the Metropolitan Transportation Authority, according to the county.

It is higher in those four cities that don't share the county tax because they get their own. In Yonkers, New Rochelle and Mount Vernon, it is 8.375%, and in White Plains, it is 8.125%.

The tax charged depends on where the ride starts. If you take a limousine from New Rochelle to Larchmont, for example, you'll pay 8.375% tax. But a ride from Larchmont to New Rochelle would be taxed at 7.375%. With the sales tax, a trip from White Plains to John F. Kennedy International Airport, which might cost about $100, would now cost an additional $8.13 in tax.

It also comes as limousine companies, like all employers in the 12-county region served by the Metropolitan Transportation Authority, are now being charged a tax on employers of 34 cents for every $100 of payroll.

John Villanova, president of in Mount Vernon, predicted that the tax would backfire if it's meant to help the state.

"Our government is balancing its books on the backs of the business people and causing everybody to lay more people off, so there'll be more people on unemployment," Villanova said. "Basically, our government is shooting itself in the foot. They're taxing the hell out of all of us."

The tax applies to limousines, van and car services. But not to taxis, which are metered, or charge by the fraction of a mile, said Susan Burns, spokeswoman for the state Department of Taxation and Finance. It also doesn't apply to buses, scheduled public transportation like Metro-North Railroad, and limousines used in funerals. And it only applies to rides that begin and end in New York state. So a ride from Port Chester to Kennedy Airport would be taxed, but if you took that ride starting in Greenwich, Conn., no tax would be charged.

If you rode from Westchester to Newark Liberty International Airport, or a Giants game at the Meadowlands, you wouldn't have to pay it.

Guy Palumbo, secretary of the Luxury Base Operators Association, said the notion that only the rich ride in limousines is false.

"Not everybody who uses it is using it for luxury purposes," he said. "We get businesses' clients, we get local people, we get everyday people."

Trade organizations and a collection of companies have sued in Supreme Court in Albany to stop applying sales tax to limousine rides. But last week, a judge refused to set a temporary injunction while the case goes forward, so the tax began June 1.

A copy of their complaint, provided by Palumbo, argues that the tax is unconstitutional because it is vague, making it impossible to determine who is responsible for collecting the tax and turning it over to the state, and because it improperly allowed the Legislature to delegate taxing authority to a state agency, the Department of Taxation and Finance.

Michael Avilla, an attorney for the companies who is based in East Greenbush, N.Y., did not return calls.

Burns said she could not comment on pending litigation. Some company owners said it was particularly unfair to tax the money they charge customers to pay for tolls — often $10 for a trip to the airport — because the driver has to pay the toll on the way back, even if the car is empty. Tolls, they said, are already essentially taxes, used to raise public revenue.

Burns said that, in general, businesses cannot deduct expenses from the taxable sales prices. A contractor such as a plumber who includes bridge tolls and other expenses in the price for a job must also collect the sales tax for those expenses, she said.

Source: Journal-News, White Plains, N.Y.

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