Regulations

NY Sales Tax Hits Prom Goers

Posted on June 24, 2009 by LCT Staff - Also by this author - About the author

NASSAU COUNTY, NY. — As prom-goers prepare to head out the door, they should slip a few extra dollars in their pockets — to cover the state sales tax they'll have to pay for their limousine ride.

“It's really inconvenient, that's what it is,” said Ava Yergo, 17, a senior at Calhoun in Merrick who will be heading to her prom in a limo packed with 10 students. “It's split between 10 people, so it probably won't be that big of a deal, but for some other people, that will probably be shocking and worse than in our case.”

The state sales tax on limousine services, part of the Governor's Executive Budget, went into effect on June 1 and taxes limousine, livery, and black car services. A typical prom reservation costing about $1,000 would see $86.25 tacked on for the new tax, a portion of which goes to Nassau County.

Yergo, who already has paid her share of the limo fee to a parent collecting the money for the group, said she isn't sure that anyone else in her limo has even heard about the tax. She had no idea until the Herald asked her about it.

“I’m sure no one’s mother would be happy about finding out they have to pay an extra $86 for the limo,” Yergo said. Not everyone has that much extra cash on hand — or even thinks about it while rushing around to get pre-prom photos taken in front of the waiting limousine.

Just because prom-goers reserved limousine services before the tax took effect doesn’t mean they are exempt from paying up. “This new sales tax applies to transportation services provided on or after June 1, 2009, even if the transportation services were contracted for earlier than June 1, 2009,” said Susan Burns, the state Department of Taxation and Finance’s assistant director of public information.

The tax will not apply, however, to people who have pre-paid the entire fee for a limo before June 1, regardless of the date of the prom. “If the service was fully paid before June 1 but the service was provided after June 1, the service is not subject to the new tax,” Burns said.

But some local limousine companies don’t plan to ask teens to pay the tax, since their reservations preceded the law. Instead they will take the state’s share from their profits. All County Limousines, which has offices in Oceanside and Bellmore, is one company that has been honoring prices set before the tax went into effect.

“It’s not affecting our clients because we made a booking with them in advance and we think it’s in bad taste to tell them now that it’s plus tax,” said the company’s president, Ira Thorner. “I’m going to have to pay the tax to the state.”

For the Oceanside prom, that means $107.81 for the rental of a Hummer limousine.

Thorner said that the limousine industry has seen a 30% to 40% decline since this time last year, evidenced in part by fewer prom bookings. He is concerned that the tax will further deter steady clients from booking limousine or car services to airports.

Part of the problem, he said, is that the state tax is on everything — except the driver’s tip. This means that clients will be taxed on the fee, gas, tolls and parking, instead of just on the service.

“If you wanted us to park and come inside and pick you up at the airport, we have to tax tolls and fuel charge and parking,” Thorner said. “That is wrong, for the consumer to have to pay tax on everything but the driver’s tip.”

The tax applies to livery services such as limousines, car services, and privately rented buses and vans. Limousines used in funerals, however, are exempt, as are metered taxicabs that charge by the fraction of a mile, along with public transportation, such as buses and trains. The tax also does not apply to rides that begin outside New York state, although rides that end there are subject to the tax.

State tax officials were unclear as of press time on Monday about whether the tax includes Long Island taxicabs, which are not metered. However, Burns said, “Our interpretation is that yes, they — meaning taxicabs that do not contain a taxi meter — have to collect the tax.”

Source: Herald Community Newspapers, Garden City, N.Y.

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