A Guide to New York City Taxes:
History, Issues and Concerns
Business
Real Estate
Personal Income
Sales and Use
Excise
Marilyn M. Rubin
December 2010
A GUIDE TO NEW YORK CITY TAXES:
HISTORY, ISSUES AND CONCERNS
Marilyn Marks Rubin
John Jay College
December 2010
Funded by the Peter J. Solomon Family Foundation
Marilyn Marks Rubin
Professor
John Jay College
City University of New York
445 W. 59th Street
New York City, NY 10019
(212) 237-8091
mrubin@jjay.cuny.edu
Peter J. Solomon
Chairman
Peter J. Solomon Company
520 Madison Avenue
New York City, NY 10022
(212) 508-1600
pjsolomon@pjsolomon.com
http://www.pjsolomon.com/
Preface
The origin of the Guide was a report on New York City taxes prepared in 1979 by Dr. Marilyn Rubin, a
consultant to me when I served as Deputy Mayor for Economic Policy and Development under Mayor Edward
I. Koch.
When I entered NYC government in the late 1970s, the City was deep in its financial crisis and tax policy and
its effect on the City’s budget and economy were critical. I was surprised to learn that there was no
comprehensive summary of all the taxes imposed by the City, and that the Mayor and other policy makers
lacked basic information to make decisions. In the ensuing 31 years, no government office, public policy
organization nor academic institution has, to our knowledge, provided a comprehensive and comprehensible
report on taxes in New York City. Before embarking on this project, we confirmed that observation.
I commissioned Dr. Rubin through the Peter J. Solomon Foundation and under the auspices
of John Jay College, where she is a Professor of Public Administration and Economics, to prepare this
Guide. She is a recognized expert on state and local taxes and is an elected fellow of the prestigious National
Academy of Public Administration (NAPA), chartered by the U.S. Congress to help government leaders build
accountable, efficient and transparent organizations that deliver results. I am indebted to Dr. Rubin for her
usual thorough and thoughtful analysis. Her colleagues Dr. Catherine Collins at George Washington Institute
of Public Policy and Dr. Yi Lu at John Jay College provided extensive input into the report as did current and
former students in the College’s MPA Program: Annemarie Eimicke, Dov Horwitz and Lauren McNerney.
Dr. Rubin and I are grateful to the many professionals who have read and commented on the report including
David Frankel, Commissioner of the New York City Department of Finance, and Michael Hyman, the
Department’s Assistant Commissioner for Tax Policy, and his staff. We thank John Grathwol, Assistant
Director of the NYC Office of Management and Budget, and his staff, for providing us with the data we
needed to produce the report, and Ronnie Lowenstein, Executive Director of the NYC Independent Budget
Office (IBO), and her staff for their helpful comments, particularly Michael Jacobs, David Belkin, Ana
Champeny and Alan Treffeisen. We also thank Steve Spinola, President of the NYC Real Estate Board, and
Michael Slattery, the Board’s Senior Vice President, for their valuable comments, Stephen Solomon and
Kenneth Moore of Hutton & Solomon, LLP for their input on some of the more technical aspects of the City’s
taxes and Diane Coffey, my partner at our firm, for her editing and publishing assistance.
New York City and State are once again faced with severe budget issues. We hope that this Guide, clearly
defining the history of NYC taxes, their rates and bases, who pays them and the issues associated with each
will allow more informed tax policy decisions and a better understanding of the effect of changes. As we
completed the Guide, the State had passed its 2010 budget, which includes several changes to its tax structure
and rates (see Exhibits 3 and 4 in Executive Summary). With the exception of the increased NYS tax on
cigarettes, which was already in place before the Guide was completed, these changes are not reflected in the
report, nor are any changes made to NYC taxes, including the elimination of Off-Track Betting.
In closing, the work is ours and, while we have received many helpful suggestions from the persons listed
above, we bear full responsibility for its accuracy and completeness. We welcome comments.
Peter J. Solomon
Chairman, Peter J. Solomon Company, L.P.
December 2010
CONTENTS
Executive Summary ………………………………………………………………………
i
Real Property Tax ……………………………………………………………………..….
1-1
Real Property Transfer Tax ……………………………………………………………..
2-1
Mortgage Recording Tax ………………………………………………………………...
3-1
Commercial Rent Tax ……………………………………………………………………
4-1
Personal Income Tax ……………………………………………………………………..
5-1
Sales and Use Tax ………………………………………………………………………...
6-1
Cigarette Tax ……………………………………………………………………………..
7-1
Hotel Tax ……………………………………………………………………………….…
8-1
General Corporation Tax ………………………………………………………………..
9-1
Unincorporated Business Tax …………………………………………………………...
10-1
Banking Corporation Tax ……………………………………………………………….
11-1
Utility Tax …………………………………………………………………………………
12-1
Other Taxes ……………………………………………………………………………….
13-1
Executive Summary
EXECUTIVE SUMMARY
Introduction
The purpose of the Guide to New York City Taxes
is to provide information to a wide range of
readers on New York City taxes in a format that is
broad in scope and non-technical in its
presentation.
The information presented in the Guide can be
found in several other sources.1 None, however,
provides a broad non-technical picture of NYC
taxes, showing their structural elements as well as
other relevant details – how they have evolved
over time, how much revenue they generate and
how they compare to similar taxes imposed in
other U.S. cities. Nor do these other sources, with
few exceptions, look at the extent to which NYC
taxes are imposed in addition to New York State
taxes on the same base.
The Guide provides this information for all of
NYC’s major taxes as of FY2009. It also presents
issues and concerns associated with each tax that
need to be addressed as part of the City’s ongoing
efforts to maintain its competitive position for
businesses and its standing as one of the best
places to live in the U.S.
Overview
New York City is home to more than 8.3 million
people. It is the largest city in the U.S., more than
twice the size of Los Angeles, the second-largest
city in the nation, and close to three times the size
of Chicago, the third most populous. If New York
City were a state, it would rank as the 12th largest
in the U.S. with respect to population size. This
would place it behind New Jersey with its 8.7
million residents and ahead of Virginia with its 7.9
million residents.
New York City’s tax structure also resembles that
of a state but with two critical differences. The
first is that states are sovereign with respect to
taxation; cities are creatures of the state. The
second is that the taxes paid by NYC residents and
businesses to both the City and State are much
higher than those in other localities in the nation.
Cities as Creatures of the State
Under the U.S. Constitution, states retain the
power to impose any tax that does not violate the
U.S. Constitution or their own state constitutions.
This means that states are generally free to decide
how, what and whom to tax. The U.S.
Constitution, however, does not mention local
governments. Instead, each state decides what
types of local governments to allow and what
powers they may exercise. Cities are thus
creatures of the state unless specific state action
alters this relationship by permitting home-rule for
local governments.
The creature of the state principle is based on
what is known as Dillon’s Rule, which dictates
that municipalities only have the powers explicitly
given to them by the state. Established in 1872 in
a treatise on municipal corporations authored by
Iowa Supreme Court Judge John F. Dillon, the
creature of the state principle remains the legal
doctrine governing current city-state relationships
throughout the U.S., as modified by individual
state laws permitting home rule.
Most states, including New York, have modified
Dillon’s Rule by providing home-rule powers to
certain or all local governments, either under their
constitutions or by statute. Home rule
municipalities are taken out from under Dillon’s
Rule and permitted to operate under their own
charter, which establishes local governance and
administrative practices. In general, however,
home rule authority does not extend to autonomy
over the power to tax, with few exceptions.
The only tax-related action that NYC, a home rule
jurisdiction, is permitted to take without NYS
legislative and gubernatorial approval is the
setting of its annual Real Property Tax rates and
even this action is taken within NYS constitutional
and statutory constraints. All other actions related
i to the NYC Real Property Tax and to any other tax
are subject to initiation or approval by the NYS
Governor and Legislature.
exceed the costs of service provision, they become
part of the City’s General Fund.3
Figure 2: NYC Revenue Sources, FY 2009
NYC and NYS Taxes: A Double Burden
The second factor that differentiates New York
City from the 50 states is that City residents and
businesses pay high taxes to both NYC and NYS,
sometimes on the same base. Figure 1 shows that
of the 19 taxes imposed by the City and included
in its General Fund revenues, 11 are also levied by
the State.2 NYS imposes more than 20 taxes that
impact City residents and/or businesses, including
the Estate and Gift Tax and the Insurance Tax (see
Exhibit 2 for a list of NYS taxes). This taxing of
the same base by NYC and NYS is one of the
concerns associated with City taxes discussed later
in the Executive Summary.
Figure 1: NYC and NYS:
Taxing the Same Base
Personal Income Tax
Sales/Use Tax
General Corporation Tax
Banking Corporation Tax
Utility Tax
Cigarette Tax
Mortgage Recording Tax
Real Property Transfer Tax
Alcoholic Beverage Tax
Off-Track Betting
Wireless Communications Surcharge
Taxes and Other NYC Revenue Sources
Taxes are the primary source of NYC revenues. Figure
2 shows that in FY 2009, of the $60.6 billion total
City revenues, $35.9 billion or 59.1% was
attributable to taxes, almost three times the 20%
attributable to State aid, the second-largest source
of City revenues and almost six times the 10%
from Federal aid.
Fees for services, licenses, fines and similar
charges, accounted for 7.4% of total City revenues
in FY 2009. Generally, fees are equal to the cost
of providing a service. To the extent that fees
Source: NYC Office of Management and Budget
Taxes. The Real Property Tax is the City’s largest
revenue producer, accounting for 40% of total tax
revenues and 24% of revenues from all sources in
FY 2009. Together with the City’s three other real
estate related taxes, more than 45% of tax
revenues and 27% of City revenues from all
sources were attributable to property owners and
renters (see Exhibit 1). The three other real estate
related taxes are: the Real Property Transfer Tax
(RPTT), the Mortgage Recording Tax (MRT) and
the Commercial Rent Tax (CRT).
The second-largest NYC tax source is the Personal
Income Tax (PIT). In FY 2009, the PIT yielded
$6.5 billion, accounting for 18% of all NYC tax
revenues and 10.6% of City revenues from all
sources.
The Sales/Use Tax, the third-largest NYC tax
source, generated 12.8% of all City tax revenues
and 7.6% of City revenues from all sources in FY
2009. The City also levies selective sales taxes,
known as excise taxes, on cigarettes, hotels,
beer/liquor and certain other items and
transactions.
NYC business taxes imposed on general
corporations, banking corporations and utilities
and its tax on unincorporated businesses together
generated 15.7% of all NYC taxes and 9.2% of
total City revenues in FY 2009.
ii Trends in NYC Tax Revenues4
Total NYC tax revenues in 2009 were $35.8
billion, a decrease of 7.1% over the $38.6 billion
in 2008. These revenues are, however, in current
or nominal dollars which do not take inflation into
account. Constant dollar values are adjusted for
inflation and show real tax changes over time.
For example, as shown in Figure 3, real tax
revenues adjusted for inflation began to decline in
2008 rather than in 2009 as indicated by current
dollar values. In real terms, FY2009 tax revenues
September 11th and the national recession. Real
tax revenues resumed their positive growth trend
in 2003 and continued to increase until 2007. In
2008, real revenues fell by 2% – a year before the
City’s economy went into decline – and again in
2009.
Figure 4: Constant 2000 Dollar Total NYC Tax
Revenues and Real Economic Growth, 1980-2009
were slightly below FY2005 revenues.
Figure 3: NYC Total Tax Revenues in Current and
Constant 2000 Dollars, 2000-2009
Sources: Index of Coincident Economic Indicators, NY Federal
Reserve Board; Moody’s.com NY State & Local Government
Product Deflator used to convert current dollar values into constant
2000 dollars.
Sources: Current Dollars, NYC OMB; Moody’s Economy.com NY
State & Local Government Product Deflator used to convert current
dollars into constant 2000 dollars.
Figure 4 shows how real dollar tax revenues over
the last 30 years have generally tracked NYC
economic conditions as measured by the NYC
Index of Coincident Economic Indicators.

The NYC Index of Coincident Economic
Indicators was developed by the Federal
Reserve Bank of New York.5 It combines
individual indicators of economic activity,
including employment, to measure overall
changes in economic conditions in the City.
The Index provides a broader measure of
economic conditions than does a single
indicator such as unemployment or income.
In the 1980s, real growth in tax revenues closely
tracked economic conditions in the City. During
the 1990s, tax revenues continued to grow – with a
dip only from 1994 to 1995 – when economic
conditions in the City declined.
Tax revenues increased along with the economy
until 2002 when they slumped in the wake of
One of the reasons that the relationship between
tax revenues and economic change differed in the
2008-09 period as opposed to the early 1990s is
the City’s growing reliance on economically
sensitive taxes, particularly personal and business
income taxes. In 1990, personal and business
income tax revenues comprised 26% of the NYC
tax base; by 2009 they represented 33%.
Common Issues and Concerns
The following sections of the Guide to New York
City Taxes describe the structural elements of each
NYC tax as well as other relevant details about the
tax – how it has evolved over time, how much
revenue it generates and how it compares to
similar taxes in other U.S. cities.
Although the taxes differ with respect to structure
and their contribution to City revenues, several
issues and concerns are common among them.
These issues and concerns shown in Table 1 are
discussed briefly below and explained more fully
in the descriptions of the individual taxes in the
following sections of the Guide.
iii Table 1: Common Issues and Concerns Related to Major NYC Taxes*
Tax
NYC/NYS
Tax Same
Base
Double
Taxation
Electronic
Commerce
Regulatory
Reforms
Unique
Tax
Real Property

Real Property Transfer

Mortgage Recording

Commercial Rent


Personal Income


Sales/Use



Hotel



Cigarette



General Corporation



Unincorporated Business


Banking Corporation



Utilities



*
Table does not show taxes that account for less than 0.1% of City tax revenues (see Exhibit 1).
NYC and NYS Taxing the Same Base. Of the 19
taxes levied by NYC and included in its General
Fund, 11 are imposed by the State on the same
base (see Figure 1, p.ii). Among U.S. cities,
comparative tax burden studies always show NYC
with the highest or close to the highest combined
city/state burden.6



NYC has the highest corporate tax rate of any
local government in the U.S., and the highest
combined state/local corporate income tax
rate.
Among local governments imposing some
type of personal income-based tax, only
Philadelphia has a higher tax rate than NYC –
but a lower combined state/local rate.
The combined NYC/NYS Real Property
Transfer Taxes and Mortgage Recording
Taxes give NYC the highest real estate
closing costs in the country.
Double Taxation. Many City taxpayers, especially
City residents, pay more than one tax on the same
income stream. For example, NYC residents who
are S Corporation owners/ shareholders pay the
NYC General Corporation Tax (GCT) or the NYC
Bank Tax, and the NYC Personal Income Tax
(PIT) on income derived from the corporation.
Additionally, NYC business owners who are
residents with more than $42,000 in taxable
income for City PIT purposes pay the
x
Unincorporated Business Tax (UBT) and the PIT
on the same income stream.
Double taxation also occurs when commercial
tenants occupying space below 96th Street in
Manhattan pay the Commercial Rent Tax as well
as increases in Real Property Taxes on their
buildings.
Electronic Commerce. The growth in e-commerce
is a new challenge. NYC taxes were instituted
when doing business required a physical presence
and geographic borders generally defined the
boundaries for purposes of taxation. Today, as a
result of changing communications technologies,
geographic borders for purposes of many types of
taxation are rapidly disappearing.
The growth in sales made over the Internet and the
fact that most individuals pay no sales or use tax
on many of these purchases has negatively
impacted the City’s tax revenues. The combined
New York City/New York State loss of revenues
in FY 2009 resulting from untaxed e-commerce
sales is estimated at $257 million.7 Cigarette Tax
and Hotel Tax revenues are also adversely
affected by Internet transactions.
The increased use and reliability of telecommunications technology means that more
iv business can be conducted electronically and that
physical location is no longer as necessary as it
once was. This, too, has an adverse impact on tax
revenues as businesses act to reduce their tax
liability through increased use of the Internet and
other telecommunications technologies. Government Regulatory Reforms
Passage of the Federal Gramm-Leach-Bliley Act
(GLBA) in 1999 removed the demarcation
between banks, securities firms and other
financial institutions.
Changes resulting from GLBA blurred the line
between businesses that have to file under the
NYC Bank Tax and those that have to file under
the City’s General Corporation Tax. NYS has
begun a study of the possibility of creating a
single tax structure for financial institutions.
Government deregulation of utilities also has tax
implications. Before deregulation, utilities were
permitted to operate only within specific service
territories. Customers could purchase telecommunications services and electric power only
from their local regulated utilities.
Deregulation has changed the marketplace so that
cheaper telecommunications services and power in
other parts of the region and nation will be an
increasingly important issue for the City’s
competitive position. NYC/NYS utility taxes
contribute to making the City’s utility costs among
the highest in the country.
Changes in the regulatory environment make the
distinction between NYC’s General Corporation
Taxpayers and some Utility Taxpayers more
problematic. NYC Real Property Tax revenues are
also impacted since utility properties are taxed
differently than other types of business properties.8
taxes is also imposed on the same base as another
NYC tax.
Conclusions
NYC imposes a wide variety of taxes and has a tax
burden exceeding that of all other U.S. cities.
Most of the City’s taxes were enacted more than
50 years ago, long before dramatic technological
advances changed the environment in which taxes
are imposed. Over time, the City’s tax base has
also become increasingly sensitive to changes in
the City’s economy.
The tax burden in NYC, the complexity and
inequitable application of a number of taxes, the
impact of technology and the increasing volatility
of the City’s tax base are the impetus for the
Guide to New York City Taxes. The information
presented in the Guide can provide a baseline for
any efforts undertaken to modernize the City’s
revenue structure.
Conclusions regarding taxes in New York City,
their comparative burden and and their effect on
taxpayer behavior obviously cannot be reached
without considering the City’s expenditures and
the relationship between City and State taxes.
As we complete the Guide, the State has passed its
2010 budget which includes several changes to its
tax structure and rates (see Exhibits 3 and 4). With
the exception of the increased NYS tax on
cigarettes which was already in place before the
Guide was completed, these changes are not
reflected in the report.
Unique Tax
NYC is one of only two jurisdictions in the U.S.
to impose a specific tax on unincorporated
businesses (UBT) and to levy a Commercial Rent
Tax (CRT). As discussed above, each of these
v Endnotes
1
The 2007 New York City Independent Budget Office
(IBO) publication Comparing State and Local Taxes in
Large U.S. Cities provides information on taxes imposed in
the nation’s 9 largest cities. The report is found at
http://www.ibo.nyc.ny.us/iboreports/CSALTFINAL.pdf.
The March 2010 NYC Office of Management and Budget
Tax Revenue Forecasting Documentation, Financial Plan
Fiscal Years 2009–2013 includes information used to
forecast NYC taxes. It is available at
http://www.nyc.gov/html/omb/downloads/pdf/methodology
_2010_02.pdf. The NYC Department of Finance Webpage
provides information on each of the City’s taxes. The
information is available at
http://www.nyc.gov/html/dof/html/business/business_tax_b
usiness.shtml.
2
The General Fund is the primary City fund. Most taxes
and expenditures are in the General Fund. Two additional
taxes are imposed by the City and dedicated to the NYC
Police and Fire Departments. Neither is included in General
Fund revenues.
3
Letter from NYC Independent Budget Office to NYC
Council advising that “fees need not exactly reflect the cost
of providing a service, so long as it is reasonably related to
the provision of the service and is not a subterfuge for
raising general revenue.” October 2000.
http://www.ibo.nyc.ny.us/iboreports/spignerletter.pdf.
4
Current dollar revenue data used in the Guide are based on
tax collection data reported by the NYC Office of
Management and Budget (OMB). Constant 2000 dollar
values for all taxes were calculated using the Moody’s
Economy.com NY State & Local Government Product
Deflator provided to the author by IBO with permission
from Moody’s Economy.com. The legislative history of
each tax is primarily based on information reported in the
March 2010 OMB Tax Revenue Forecasting
Documentation, Financial Plan, Fiscal Years 2009-2013.
5
James Orr, Robert Rich, and Rae Rosen. Current Issues in
Economics and Finance. Federal Reserve Bank of NY.
October 1999 Vol. # 5, no. 14. Can be found at
http://www.newyorkfed.org/research/current_issues/ci514.pdf.
6
See, for example, Tax Rates and Tax Burdens in the
District of Columbia–A Nationwide Comparison 2008. Can
be found at
http://www.cfo.dc.gov/cfo/frames.asp?doc=/cfo/lib/cfo/cas
h_reports/08study-final.pdf. Also see IBO report referenced
in Endnote 1 above.
7
Bruce et al. State and Local Government Sales Tax
Revenue Losses from Electronic Commerce. Can be found
at http://cber.utk.edu/ecomm/ecom0409.pdf
8
Utility properties are classified as either special franchise
properties or Real Estate Utility Corporations. The
valuation of special franchise properties is done by the
NYS Office of Real Property Services.
vi Exhibit 1: New York City Taxes and Other Revenue Sources, FY 2009
Revenue in
Millions of $
Revenue Type
Total Revenues
$60,646
% of Total
NYC Taxes
Revenues
-
% of NYC
Revenues from All
Sources
100.0%
100.0%
59.2
16,179
45.1
26.6
14,339
40.0
23.6
742
2.1
1.2
Mortgage Recording Tax
515
1.4
0.8
Commercial Rent Tax
583
1.6
1.0
Taxes
35,873
Real Estate Related Taxes
Real Property Tax
Real Property Transfer Tax
Personal Income Tax
1
6,450
18.0
10.6
Sales and Excise Taxes
5,032
14.0
8.3
Sales/Use Tax
4,594
12.8
7.6
342
1.0
0.6
96
0 .3
0.2
Hotel Tax
Cigarette Tax
Business Taxes
5,602
15.6
9.2
General Corporation Tax
2,320
6.5
3.8
Unincorporated Business Tax
1,785
5.0
2.9
Banking Corporation Tax
1,099
3.1
1.8
398
1.1
0 .7
Utility Tax
Other Taxes
1,662
4.6
2.7
Commercial Motor Vehicle Tax
48
*
*
Auto Use Tax
28
*
*
Taxi Medallion Transfer Tax
11
*
*
Beer and Liquor Excise Tax
24
*
*
Retail Beer, Wine and Liquor
License Tax
Horserace Admission Tax
5
*
*
0.03
*
*
4
*
*
Off-Track Betting Surcharge
Other Tax-related Revenues
2
1,542
4.3
2.5
Audits
947
2.6
1.6
Transfers
1,124
-
1.9
Charges for Services, Fines, etc.
4,481
-
7.4
Non-government grants
1,103
-
1.8
State Categorical Aid
12,124
-
20.0
Federal Categorical Aid
5,941
-
9.8
*Less than 0.1%. 1Does not include $138 million in PIT revenues dedicated to the Transitional Finance Authority
(TFA). NYC did not begin including these revenues as part of its General Fund until FY 2010. In FY2009,
inclusive of these revenues, PIT revenues were $6,588 million. 2 Includes tax waivers, PILOTS, interest
payments. Total includes School Tax Relief (STAR) payments to the City from NYS, which were $1.2 million in
FY 2009. Total is net of refunds and does not include revenues from the premiums tax on foreign and alien fire
insurers that are dedicated to the Fire Department or the E-9/11 S and Wireless/Cellphone Surcharges, which are
part of the Police Department’s revenue budget.
Source: NYC Office of Management and Budget
vii Exhibit 2: New York State Taxes, FY 2009
Revenues in
Millions of $
Revenue Type
Total Revenues1
All Taxes2
% of Total
NYS Taxes
% of NYS Revenues
from All Sources
$117,256
58,921
100.0%
1,371
2.3
1.2
Real Estate Transfer Tax
701
1.2
0.6
Mortgage Recording Tax3
670
1.1
0.6
Estate and Gift Taxes
1,165
2.0
1.0
Personal Income Tax
36,840
62.5
31.4
Sales and Excise Taxes
12,613
21.4
10.8
10,374
17.6
8.9
504
0.9
0.4
1,338
2.3
1.1
Alcoholic Beverage
206
0.3
0.2
Highway Use
141
0.2
0.1
Auto Rental
50
0.1
*
Business Taxes
6,614
11.2
5.6
General Corporation Tax
2,729
4.6
2.3
Banks
1,062
1.8
0.9
Insurance
1,005
1.7
0.9
Petroleum Business Taxes
1,107
1.9
0.9
711
1.2
0.5
318
0.5
0.3
4
10
*
*
4
18
*
*
Hazardous Waste Assessment
1
*
*
Waste Tire Management
24
*
*
Wireless Communication
191
0.3
0.2
Other
74
0.1
0.1
Real Estate Related Taxes
Sales/Use Tax
Motor Fuel
Cigarette and Tobacco Products
Utility Taxes
Other Taxes
Pari-mutuel Total
Off-Track Betting
100.0%
50.2
1
Total revenue from NYS Financial Plan 2009-2010, p. T-25 plus estimated Mortgage Recording Tax.
Tax data are from NYS Department of Taxation & Finance Annual Tax Collections and may differ slightly from other
published data. Audit collections are not reported separately for each tax as reported for NYC taxes in Exhibit 1.
3
MRT is estimated by the author; it is not included in the Department of Taxation & Finance Table 2. The State MRT is
collected by the local recording offices at the time the mortgage is recorded.
4
Includes uncashed tickets and racing fee.
* Less than 0.1%
2
viii Exhibit 3: NYS FY 2010 Budget: Major Actions with Specific Application to NYC Taxes
Tax
Personal Income Tax: Itemized
Deductions for High-income
Filers
Action
For Tax Years 2010 through 2012, for taxpayers with NYAGI over $10 million,
the only itemized deduction allowable in calculating NYS Personal Income
Tax liability is 25% of their charitable contributions claimed for Federal
Income Tax purposes. NYC has the option to accept this change for purposes
of calculating City PIT liability.
Currently, for taxpayers with more than $1 million in NYAGI, the only
itemized deduction permitted for NYC PIT purposes is 50% of charitable
contributions claimed for Federal Income Tax purposes.
Personal Income Tax: New
York City Tax Rate
For TY 2010, the maximum City PIT rate increased for all taxpayers with
taxable income of $500,000 or over is increased to 3.4%. This 3.4% does not
include the 14% additional tax imposed on all City PIT filers. Including the
14% increases, the top marginal PIT rate increased to 3.876%, up from the
current 3.648% top marginal rate.
Sales Tax: Exemption on
Clothing and Footwear
The current NYS Sales Tax exemption for clothing and footwear up to $110
per item is suspended for one year. NYC and other localities have the option to
exempt clothing and footwear up to $110 per item (or $55 per item) from local
sales taxes. The current NYC Sales Tax exemption applies to clothing and
footwear up to $110 per item.
Hotel Tax: Responsibility for
Tax Collection
Currently, when a hotel room is booked over the Internet through a remarketer
(sometimes referred to as an intermediary) such as Travelocity or Expedia, the
hotel operator is responsible for collecting the tax on the price charged to the
remarketer and remitting it to the NYC Department of Finance. The remarketer
is responsible for collecting and remitting the tax on the mark-up (the
difference between the price paid to the hotel and the price paid by the guest).
Under the new law, the room remarketer will collect the Hotel Tax on the full
charge to the customer and pay the hotel the portion of the tax on the room
price charged by the hotel. The hotel will be responsible for remitting these tax
payments to the NYC Department of Finance. The remarketer will receive a
credit for the tax it has paid to the hotel and will remit that portion of the tax it
collects on the mark-up to the Department of Finance.
The 2010 NYS Budget treats remarketers as hotel operators, requiring them to
also collect the NYS and NYC Sales Taxes based on the price paid by the hotel
guest for the hotel room.
Exhibit 4: Major Tax Actions Adopted in New York
State 2010 Budget
ix Exhibit 4: Major Tax Actions Adopted in New York State FY 2010 Budget1
Budget
Section
A
Modifies qualified emerging technology company and bio-fuels production tax credit for limited liability
companies (LLCs) and partnerships.
B
Makes compensation for past services taxable for non-residents who had NYS nexus at time of payment.
C
Treats certain S Corporation income as NYS source income for non-resident shareholders.
N
Narrows the definition of vendor for purposes of the Sales/Use Taxes.
P
Provides a credit against State PIT for persons or entities investing in low income housing.
Q
Increases the cap on the film production tax credit by $420 million per year for 2010 through 2014; allows up to
$7 million per year in post-production tax credits.
R
1
2
Action
Provides that Empire Zone de-certifications imposed in 2009 were applicable to tax years beginning on or after
1/1/08. Clarifies that businesses certified as qualified Enterprise Zone entities (QEZEs) or qualified investment
projects prior to 6/30/2010 retain eligibility for Empire Zone investment and employment incentive tax credits.
S
Extends the exclusion for Sales Tax exemptions for business aircraft and vehicles included in transactions
between affiliated entities.
W
Repeals provisions allowing private-label credit card lenders to take Sales Tax credit/refund on uncollectable
accounts.
X
Repeals the Sales Tax vendor credit for monthly filers (receipts of $300,000 or more in taxable sales/quarter).
Y
Defers most business tax credits over $2 million for tax years 2010, 2011 and 2012 until tax year 2013 or later.
Z
Conforms NY Bank Tax deductions for bad debts to Federal Internal Revenue Code (IRC) calculations.
AA
Codifies requirement for hotel room remarketers to collect NYS/NYC Hotel Taxes and Sales Taxes on hotel
rooms.
EE
For TY 2010, increases the NYC Personal Income Tax base rate to 3.4% for taxable income over $500,000.2
GG
Suspends NYS Sales Tax exemption on clothing and footwear priced at $110 and less from October 2010 through
March 2011. Reinstated at $55 in April 2011 through March 2012; full reinstatement April 1, 2012. Gives local
governments option to keep exemption of $55 or $110.
HH
For Tax Years 2010 through 2012, the only itemized deduction allowed for NYS taxpayers with NYAGI of $10
million or more is 25% of charitable contributions claimed on their Federal Income Tax returns. Local
governments have the option of accepting this change for purposes of calculating local PIT liability.
M
Makes permanent 2008 amendments related to closely held REITS for General Corporation and Bank Taxes.
N
Clarifies that certain publicly traded REITS are not subject to provisions for closely held REITs.
W
Relates to exclusion of transportation services provided by affiliated livery vehicles in NYC from City and State
NYS Sales Taxes.
Y
Modifies the definition of little cigar for purposes of NYS Tobacco Tax.
Prepared August 5, 2011 based on NY State Senate S.6610-C and Assembly 9710-D.
Does not include 14% additional tax, which increases NYC top marginal PIT rate to 3.876%.
Sources: Pokalsky, Ken. Summary of Business-Related Provisions of S.6610-C/A.9710-D. The Business Council of New York
State, Inc; Albany, New York, August 4, 2010.
x Real Property Tax
1.0 REAL PROPERTY TAX
1.1 Overview
 Class 1: Residential properties with up to
New York City has imposed the Real Property
Tax (RPT) in its current format since 1983 under
the NYS Real Property Tax Law, as amended by
Chapter 1057 of the Laws of 1981 – generally
referred to as S.7000A.1 Some type of property tax
has been levied in the City since the mid-17th
century when a voluntary tax was imposed on
certain types of property including land and
houses.
In FY 2009, the City’s RPT yielded $14.3 billion,
accounting for 40% of NYC tax revenues and
23.6% of City revenues from all sources. The
NYC Department of Finance administers and
collects the tax.
The RPT is imposed on the value of land and
buildings located within the City with certain
exceptions described in Section 1.3. Unlike all
other NYC taxes whose rates are established by
the State, the RPT rates are set annually by the
NYC Council, within constraints established under
the NYS Real Property Tax Law.
The RPT statutory tax rates set for each of the
City’s four classes of property are not, however,
the real (effective) tax rates paid by taxpayers. The
EFT, the tax paid on every $100 of market value,
is discussed in Section 1.4.



All properties in the 4 classes are subject to the
RPT with certain exceptions. State law mandates
that property owned by government entities and
not-for-profit organizations be fully exempt from
the RPT (see Exhibit 1.1).
Properties owned by City residents in specific
demographic categories, such as veterans, senior
citizens and disabled persons are eligible for
partial exemptions and/or abatements from the
RPT. Certain residential, commercial and
industrial properties are also eligible for partial
property tax exemptions and/or abatements under
several NYC tax relief programs.3

1.2 Factoring in the State
The State of New York does not impose its own
tax on real property.
1.3 The New York City RPT Taxpayer
As a result of changes made in S.7000A to the
NYC property tax structure, the City has had a
classified property tax system with four property
classes in place since 1983.
3 units and certain vacant land for
residential use2
Class 2: Residential properties not
included in Class 1, including cooperative
properties (co-ops) and condominiums
(condos)
Class 3: Regulated utility corporation
properties and special franchise
properties, excluding land and certain
buildings
Class 4: All other properties including
office buildings, industrial facilities,
retail establishments, and hotels/motels.

Exemptions reduce a property’s taxable value
and thus its RPT liability. In FY 2009, the tax
dollar value of RPT exemptions was $11.4
billion (see Table 1.1).
Abatements are subtracted directly from RPT
liability, generally at a specified dollar
amount. The total value of abatements in FY
2009 was $472.7 million.
Some taxpayers receiving exemptions and/or
abatements provide the City with payments-inlieu-of-taxes (PILOTS). In FY 2009, the City
collected $221 million in PILOTS.4
1-­‐1 Table 1.1: Tax Dollar Value of NYC Real Property Tax Exemptions, FY 2009
Property Type
# Exemptions
% of Total
% of Total
100.0%
Tax Value*
($ in millions)
$11,385.9
Total
734,700
Government
11,182
1.5
4,945.9
43.4
Public Authorities
9,463
1.3
2,525.6
22.2
Institutional
15,363
2.1
1,736.9
15.3
Residential
82,533
11.2
1,396.2
12.3
Commercial/ Industrial
6,333
0.9
543.0
4.8
Individual Assistance
609,826
83.0
238.3
2.1
100.0%
*Tax dollar value of exemption is calculated as the exempt property value multiplied by the tax rate. The exempt property value is
actual assessed value (or, for partially exempt properties, a portion of actual assessed value). Actual assessed value is the product of
the assessment ratio multiplied by market value.
Source: NYC Department of Finance, Annual Report, NYC Property Tax FY2009, page 13.
1.4 The New York City RPT Base
The Real Property Tax base is determined by the
total taxable value of property in the City and the
average Citywide tax rate set by the NYC Council
when it establishes the total RPT levy needed for
budget-balancing purposes. The average Citywide rate is not, however, used to calculate
individual taxpayer liabilities which are
determined by applying class-specific tax rates to
each property’s market value. Class-specific tax
rates are set by the Council based on the share of
the total tax levy for which each class is
Figure 1.1: Calculating NYC Property
Tax Liability
Market value as determined by the NYC
Department of Finance (DOF)
Multiplied by
Class-specific Assessment Ratio
established by the DOF
Minus
RPT Tax Exemptions, if applicable
Equals
Assessed or Taxable Value
Multiplied by
Class-specific Tax Rates set by the
NYC Council
Equals
NYC RPT Liability before Abatements
Minus
RPT Tax Abatements, if applicable
Equals
NYC RPT Liability
responsible and the total assessed value in each
class (class shares are discussed below).
Taxable Value of NYC Property. For purposes of
the RPT, taxable value is equivalent to assessed
value, the base for determining taxpayer liability.
Each of the elements in the calculation of taxable
value and tax liability for individual properties is
shown in Figure 1.1 and explained below.
Market Value. The starting point for calculating
the taxable value of a property is its market value.
Market value can be defined conceptually as “the
cash price a property would bring in a competitive
and open market.”5 The NYC Department of
Finance determines market value for NYC
properties using three approaches: (1) the
comparable sales or market data approach, (2) the
income approach, and (3) the cost or summation
approach.
All properties in the City are reassessed each year
between June and January. Once the new market
value of a property is determined, it is multiplied
by the class-specific assessment ratio to determine
the new assessed value.

An assessment ratio is the ratio of assessed
value to market value. For example, a 10%
assessment ratio means that a property with a
$100,000 market value is assessed at 10% of
this value or $10,000. The RPT statutory tax
rate is applied to the $10,000 to calculate tax
liability.
1-­‐2 (1) In the Comparable Sales Approach, the market
value of a property is determined based on sales
prices of comparable properties that have recently
been sold. Comparable properties are those with
characteristics similar to the property being
valued, such as location, lot size, square footage,
architectural style, age of the home and property
use, especially density of use.
Dollar adjustments are made for differences
between the property being valued and the
comparable properties, based on periodic physical
inspections by the City and a Computer Assisted
Mass Appraisal (CAMA) model.6

The Department of Finance uses the
comparable sales approach to estimate the
market value of Class 1 properties.
(2) In the Income Approach, two techniques are
generally applied to determine market value for
purposes of the RPT. In the first, the estimated
future net operating income (NOI) of the property
being valued is divided by an appropriate
capitalization (CAP) rate.7 In the second
technique, a multiplier is applied to the gross
income of the property being valued to estimate
market value.8

The Department of Finance uses the income
approach to estimate the market value of Class
2 and Class 4 properties.
(3) In the Cost Approach, property valuation is
generally determined on the basis of the value of
the land on which the property is sited plus
reproduction/replacement
costs
minus
depreciation.

The Department of Finance uses the cost
approach to estimate the market value of Class
3 properties.
Assessed Value. Assessment is the process by
which a taxing jurisdiction establishes the assessed
or taxable value of a property relative to its market
value. The NYC Department of Finance (DOF)
determines assessed values for City properties
based on assessment ratios.
Under S.7000A, NYC is permitted to set
assessment ratios for each of the 4 classes. The
current target assessment ratio for Class 1
properties is 6% while the ratio for each of Class
2, 3 and 4 properties is 45%.
For Classes 1, 2 and 4, when market values
increase in any given year, class-specific
restrictions, i.e., caps, imposed by S.7000A and
subsequent legislation determine how assessment
increases are to be phased in.



Class 1: Assessment increases are capped at
6% annually and at 20% over any 5-year
period.
Classes 2 and 4: Assessment increases are
phased in over a 5-year (transition) period
with no annual caps except on 4-10 unit rental
buildings and co-op and condo buildings with
10 units or less. For these properties,
assessment increases are capped at 8%
annually and at 30% over any 5-year period.
Annual taxpayer liability is the lower of the
transitional or actual values.
Class 3: There are no caps on assessment
increases or phase-in requirements.
Real Property Tax Rates. As shown in Figure 1.1,
tax liability is calculated by multiplying the
assessed value of a property by its class-specific
statutory tax rate established by the City Council
annually. In 2009, these rates were:




Class 1:
Class 2:
Class 3:
Class 4:
16.787%
13.053%
12.577%
10.612%
The statutory rates are not, however, the real, i.e.,
effective tax rates (ETR), imposed on property
owners.


The ETR is calculated by dividing the Real
Property Tax liability of a property by its
market value and multiplying by 100.
For a property with a $100,000 market value
and a 10% assessment ratio, taxable value
would be $10,000. If the statutory RPT rate is
5%, tax liability would be $500. The ETR
would be 0.5% ($500/$100,000 x 100), far
less than the statutory 5%.
1-­‐3 The RPT as the Budget Balancer. As mentioned
earlier, the NYC Council sets the average Citywide RPT rate once expenditures and revenues
from all other sources e.g., aid from NYS have
been estimated. When revenues from all other
sources are not sufficient to bring the budget into
balance, RPT rates are usually increased. In 2008,
the City-wide rate was reduced to $11.66; in 2009
it was increased slightly to $11.70.
Class Shares of the Property Tax. The total City
RPT levy is shared among its 4 property tax
classes. Provisions in S.7000A ensured that each
property class would continue to provide the same
share of the City’s RPT levy that it contributed in
1981. S.7000A also restricted the ability of the
City to shift taxes from one class to another by
requiring that taxes be levied in accordance with
base proportions, i.e., shares of the RPT pie in
1981.
In 1989, State legislation reset the base year for
calculating base proportions to 1991. This meant
that for each of the City’s 4 property classes its
base proportion share of the total tax levy must
remain the same as it was in 1991, after
adjustments for new construction, demolitions,
alterations and changes in taxable status.
NYS law also prohibits base proportions for each
class in any one year from increasing more than
5% over its base proportion in the previous year.
Any increase that would be in excess over the 5%
in one class must be distributed to the other
classes.

The NYC Council has sole discretion to
decide how the excess is apportioned among
the remaining classes.
In several years, the NYS Legislature, at the
request of the City, has lowered the 5% cap; in
2009, it was reduced to 0% for the third
consecutive year. The impact of the base
proportions requirement and the reducible cap on
the inter-class share of the property tax burden has
been to favor Class 1 properties over the other
three classes.
1.5 The RPT in Other Jurisdictions
New York and most other states do not levy a tax
on real property. It is, however, imposed at some
level of government in all 50 states and in the
District of Columbia. Because of different
assessment practices, statutory property tax rates
cannot be compared across jurisdictions. What can
be compared, however, are property tax structures.
State laws may require or permit local
governments to structure their property taxes so
that different assessment ratios and/or different
tax rates are applied to different types of
properties. Among the largest cities in each of the
50 states, 16 use market value as their taxable base
in assessing residential properties (see Exhibit
1.2). The median assessment ratio for the 50 cities
is 60%; 2 of the 50 cities have assessment ratios
less than the 6% applied to Class 1 properties in
NYC.
Due to extreme fiscal stress and the need for
additional revenues, many local governments have
been re-evaluating their RPT incentive programs.
Some have begun to charge non-profit institutions
for essential services. For example, local
governments in Indiana are imposing fees on them
for police and fire services. Some jurisdictions are
turning taxes into fees which can be levied against
otherwise tax exempt organizations.
1.6 New York City RPT Revenue Trends
In FY 2009, NYC Real Property Tax revenues
stood at $14.3 billion, a 9.8% increase over the
$13.1 billion in 2008. Figure 1.2 shows that in
current dollars, property tax revenues have
increased every year since 2000. In constant
dollars, there has been more fluctuation, with
revenues falling slightly in 2005, 2007, and 2008.
1-­‐4 Figure 1.2: NYC Property Tax Revenues, Current and
Constant 2000 Dollars, 2000-2009
Sources: Current Dollars, NYC OMB; Moody’s Economy.com NY
State & Local Government Product Deflator used to convert current
dollars into constant 2000 dollars.
Figure 1.3 shows that constant dollar RPT revenues
rise and fall within a narrow margin over
relatively long periods of time, indicating that the
RPT is a stable tax. Figure 1.3 also shows that
RPT revenues are relatively insensitive to
changing economic conditions, as measured by the
NY Federal Reserve Board Index of Coincident
Economic Indicators. This means that the tax does
not fluctuate as dramatically as other taxes when
the economy goes into recession. It also means
that when the economy is growing, revenues are
not as responsive as they are for other taxes.
Figure 1.3: Constant 2000 Dollar RPT Revenues and Real
NYC Economic Growth, 1980-2009
Sources: Index of Coincident Economic Indicators, NY Federal
Reserve Board; Moody’s.Com NY State & Local Government
Product Deflator used to convert current $ values from NYC OMB to
constant 2000 dollars.
1.7 New York City RPT History
Since the implementation of S.7000A in 1983,
NYC has been operating under a Real Property
Tax system in which different assessment ratios
and tax rates are applied to 4 statutorily defined
property classes. Several changes since 1981 have
been made by the NYS Legislature to modify the
RPT tax law. A description of these changes and
actions taken under NYC local rule are described
in Exhibit 1.3.
1.8 Issues and Concerns
Preferential Treatment of Class 1 Properties. As
shown in Table 1.2, in FY 2009, Class 1 properties
accounted for 52% of the $811.1 billion market
value of all properties in the City (excluding fully
exempt properties), but for 10.5% of the City’s
total billable assessed value. In contrast, Class 4
properties accounted for 22.2% of market value in
the city, but for 47.3% of billable assessed value.
Within Class 2, rental buildings accounted for
7.7% of market value compared with 15.4% of
billable assessed value.
Table 1.2: NYC Billable Assessed Value,* by Tax Class, FY
2009 ($ in millions)
Class
Market
Value
(MV)
% of
Total
Market
Value
Billable
Assessed
Value
% of
Billable
Assessed
Value
Total
$811.1
100.0
$133.0
100.0
Class 1
422.8
52.1
14.0
10.5
Class 2
186.0
22.9
46.5
35.0
Rentals
62.3
7.7
20.5
15.4
Co-ops
35.8
10.1
12.9
9.7
Condos
20.2
2.5
6.4
4.8
Class 3
22.4
2.8
9.6
7.2
Class 4
179.9
22.2
62.9
47.3
*Billable assessed value is the assessed value on which tax liability is
based. For properties in Classes 2 and 4, it is the lower of the actual
or transitional assessed value minus any exemptions.
Source: NYC Department of Finance, Annual Report, NYC Property
Tax FY2009, page 1.
The lower assessment ratios for Class 1 properties,
along with the 6%/20% caps on their assessment
1-­‐5 increases, have resulted in their favorable property
tax treatment relative to properties in the other
three classes. For example, the caps made it
difficult for the City to take full advantage of the
run-up in residential property market values earlier
in this decade.
data from comparable buildings, many of which
contain rent-controlled or rent-stabilized units. As
a result of applying the income approach using
data from comparable rental buildings, co-ops and
condos are assigned market valuations that may
bear little relationship to their actual value.
Annual State legislative amendments to the
adjusted base proportion statutes to reduce the 5%
cap on market value adjustments – made at the
City’s request – have also contributed to the
preferential treatment of Class 1 properties.
Tax Exemptions and Abatements. As discussed in
Section 1.3, the total assessed value of exemptions
and abatements in FY 2009 was almost $11.4
billion. Relief for some taxpayers will result in
higher taxes for others if the City is to meet the
revenue targets needed to balance the budget.
Valuation of Co-ops and Condominiums. Under
NYS Real Property Tax Law, the NYC
Department of Finance is required to value
residential condominiums and cooperatives in
Class 2 as if they were rental apartments. This
means that the actual sales prices of co-ops and
condos cannot be used to determine market value
as is the case with Class 1 residential properties.
Instead, DOF must base its valuation on income
Non-transparency of the RPT. The RPT is
a difficult tax to understand with each of its
four classes having its own assessment ratio,
tax rate and specific caps on assessment
increases. The City Council’s discretion to adjust
base proportions makes the RPT even less
transparent.
Endnotes
1
For a summary of events leading up to the adoption of S.7000A see 2006 report issued by the NYC Independent Budget
Office (IBO) http://www.ibo.nyc.ny.us/iboreports/propertytax120506.pdf
2
Outside Manhattan residentially zoned vacant land or land not residentially zoned but adjacent to a parcel improved
with a 1-3 family residence is included in Class 1. If the vacant land is in Manhattan and meets certain other conditions,
alternative requirements apply.
3
For industrial and commercial properties see
http://www.nyc.gov/html/dof/html/property/property_tax_reduc_taxreductions.shtml#individual
For residential property owners see
http://www.nyc.gov/html/dof/html/property/property_tax_reduc_taxreductions.shtml#commercial
4
Information supplied by NYC OMB, May 2009
5
Joe Eckert, Property Appraisal and Assessment of Administration (Chicago, International Association of Assessing
Officers, 1990, 35)
6
Computer Assisted Mass Appraisal (CAMA) is a term to describe software packages used to help taxing jurisdictions
establish market values for property tax calculations.
7
The CAP rate is determined in several ways, including market extraction, band-of-investments or a built-up method.
The NYC Department of Finance uses the band-of-investments approach, which is explained on
http://www.nyc.gov/html/dof/html/pdf/10pdf/income_guidelines_fy11.pdf
8
Gross income multipliers are determined using income and expense statements for a sample of rental properties in each
decile range and the CAP rate to estimate market value. The sample data are used to set the gross income multiplier for
each income band. This approach is explained on
http://www.nyc.gov/html/dof/html/pdf/10pdf/income_guidelines_fy11.pdf
1-­‐6 Exhibit 1.1: New York City RPT: Exempt Properties
by Type of Organization and Use of Property*
420(a)
Charitable
Moral/mental health of
Educational
men/women/children
Hospital
Religious
420(b)
446
462
Bar Association
Benevolent
Bible
Enforcement of Law
relating to children or
animals
Historical
Infirmary
Cemetery
Parsonage
Library
Medical Society
Missionary
Patriotic
Public Playground
Scientific
Supervised Youth
Sportsmanship
Manse
*To be fully exempt from the NYRPT, properties must be in one of the exempt
categories described in Sections 420(a), 420(b), 446 or 462 of the NYS RPT Law.
Source: NYC Department of Finance Exhibit 1.2: Residential Property Tax Rates, Largest City in each U.S. State, 2008
.
State/City
Statutory
Rate/$100
Assessment
Ratio
State/City
Statutory
Rate/$100
Assessment
Ratio
AK: Anchorage
1.72
100%
MT: Billings
1.86
34%
AL: Birmingham
7.53
10
NC: Charlotte
1.3
82.9
AR: Little Rock
7.05
20
ND: Fargo
45.54
4.4
AZ: Phoenix
8.75
10
NE: Omaha
2.05
96
CA: Los Angeles
1.1
100
NH: Manchester
1.69
98.6
CO: Denver
7.06
8
NJ: Newark
2.6
60
CT: Bridgeport
3.87
70
NM: Albuquerque
4.52
30
DC: District of Col.
0.85
100
NV: Las Vegas
3.27
35
DE: Wilmington
3.38
47.2
NY: New York City*
15.43
6
FL: Jacksonville
1.6
100
OH: Columbus
5.94
33.4
GA: Atlanta
4.1
40
OK: Oklahoma City
10.98
11
HI: Honolulu
0.33
100
OR: Portland
1.95
52.1
IA: Des Moines
4.5
45
PA: Philadelphia
8.26
32
ID: Boise
1.32
100.5
RI: Providence
2.37
100
IL: Chicago
6.72
10
SC: Columbia
26.26
4
KS: Wichita
12.32
11.5
SD: Sioux Falls
1.49
85
KY: Louisville
1.24
100
TN: Memphis
7.47
23.3
LA: New Orleans
12.93
10
TX: Houston
2.52
100
MA: Boston
1.02
100
UT: Salt Lake City
1.19
100
MD: Baltimore
2.27
100
VA: Virginia Beach
0.89
100
ME: Portland
1.77
91
VT: Burlington
1.78
100
MI: Detroit
6.58
32.1
WA: Seattle
0.94
83.4
MN: Minneapolis
1.2
92.5
WI: Milwaukee
2.42
100
MO: Kansas City
6.32
19
WV: Charleston
1.44
60
MS: Jackson
17.16
10
WY: Cheyenne
7.1
9.5
*NYC assessment ratio applies only to Class 1 properties.
Source: Tax Rates and Tax Burdens in the District of Columbia - A Nationwide Comparison, 2008.
1-­‐7 Exhibit 1.3: Major NYS Legislative Actions Affecting the NYC Real Property Tax*
Year
Action
1788
New York State enacts law establishing full-value assessment as Property Tax standard.
1981
1986
Chapter 1057 of the Laws of 1981, known more generally as S.7000A, adopted by State Legislature. Law
significantly changes NYC Property Tax from a single class to a classified system with four classes of property:
Class 1, Class 2, Class 3 and Class 4. Properties in each class to be taxed at different assessment ratios and at
different rates. Assessment increases for Class 1 homeowners capped
Condominiums of three stories or less reclassified from Class 2 to Class 1; Assessment increases for rental
properties of 4-6 units capped at 8% annually and 30% over five years.
1990
Assessment increases for residential rental properties with 7-10 units capped at 8% annually and 30% over 5 years.
1994
Assessment increases for co-ops and condos with 2-10 units capped at 8% annually and 30% over 5 years; One
family homes on cooperatively owned land reclassified from Class 2 to Class 1.
1996
Abatement program for co-op/condo owners enacted. For properties with assessment values less than $15,000 per
unit, abatement set at 4%; for properties with assessment values at more than $15,000, abatement set at 2.75%.
1997
Co-op/Condo Abatement increased from 4% to 16% for properties with assessment less than $15,000 per unit and
to 10.75% for properties with assessments greater than $15,000.
2003*
2005*
NYC increases RPT rates for period covering January 1 - June 30, 2003
NYC enacts 3-year property tax rebate of $400 (or annual Property Tax liability whichever is less) for owners of
Class 1 properties and co-ops/condos.
Assessment increases attributable to additions to Class 2 properties with less than 11 residential units capped at
15% with one-third of the increase to be added immediately; the other two-thirds are subject to the 8%/30% caps.
2006
2007*
NYC reduces RPT rates by 7% starting July 1, 2007 and extends RPT rebate program until July 1, 2008.
2009*
RPT rate increases for all classes. $400 homeowner rebate repealed.
*NYC changes; NYS legislative approval not required
Source: New York City Office of Management and Budget. Tax Revenue Forecasting Documentation.
Financial Plan, Fiscal Years 2009-2013.
1-­‐8 Real Property Transfer Tax
2.0 REAL PROPERTY TRANSFER TAX
2.1 Overview
New York City has levied a Real Property
Transfer Tax (RPTT) since 1959. In FY 2009,
the tax generated $742 million, accounting for
2% of NYC tax revenues and 1.2% of City
revenues from all sources. The RPTT is
administered by the NYC Department of
Finance.
The City’s RPTT is imposed on the transfer of
all real property in the City, when the
consideration for the transfer exceeds $25,000,
with few exceptions (see Section 2.3). The tax is
also imposed on the sale or transfer of at least a
50% ownership interest in a corporation,
partnership, trust or other entity that owns or
leases real property.
The City’s RPTT rates differ by value and type
of property being transferred. For purposes of
the RPTT, there are two types of transfers:
residential transfers and all other transfers.



The tax rate on the transfer of residential
properties is 1% when the consideration is
$500,000 or less, and 1.425% when the
consideration is greater than $500,000.
The tax rate on the transfer of all other
properties, including commercial and
industrial properties, is 1.425% when the
sales price is $500,000 or less, and 2.625%
when the sales price is greater than
$500,000.
The 2.625% rate includes the 1% urban tax,
which is dedicated to the MTA and is not
included in tax collection numbers for the
City’s RPTT.
2.2 Factoring in the State
The New York City RPTT is levied in addition
to the NYS Real Estate Transfer Tax (RETT).
In FY 2009, the State’s RETT generated $701
million, accounting for 1.2% of NYS tax
revenues and 0.6% of State revenues from all
sources.
The NYS Real Estate Transfer Tax rate of 0.4%
is imposed on the consideration for real property
transfers in the State. An additional 1% tax is
levied on property transfers when the purchase
price is $1 million or more for 1-3 family
houses, individual residential co-operative
apartments and residential condominium units.
The 1% is referred to as the mansion tax.


For all real property transfers with the
exception of residential properties purchased
for $1 million or more, the combined
NYC/NYS tax rate on real property transfers
is higher than the rate imposed in any place
in the U.S. with the exception of certain
jurisdictions in Pennsylvania.
For residential property transfers with a
purchase price of $1 million or more, the
combined NYC/NYS rate is the highest in
the U.S.
2.3 The NYC
Taxpayer
Real
Property
Transfer
A joint tax return must be filed by the buyer and
the seller but the entire NYC Real Property
Transfer Tax is payable by the seller. In general,
if the seller is exempt from the tax, or fails to
pay the tax, the tax is payable by the buyer.
Exemptions from the RPTT include:

Property transfers to Federal, State and City
agencies as well as transfers by or to the UN
or any other international organization of
which the U.S. is a member.
 Property transfers by or to non-profit
institutions such as charitable, religious or
educational organizations.
 Certain other property transfers such as
those given solely as security for a debt.
The 0.4% State tax on the transfer of property is
also payable by the seller. The 1% mansion tax
is payable by the buyer.
2.4 The New York City RPTT Base
The Real Property Transfer Tax base is
generated by transfers of residential and all other
2-­‐1 properties. Residential properties include 1-3
family
houses,
individual
cooperative
apartments, individual residential condominium
units or an individual unit in a dwelling
occupied as a residence or home of four or more
families living independently of each other.
All other properties encompasses rental
apartment buildings, real estate of traditionally
regulated utility corporations and other nonresidential properties including office buildings,
factories, retail establishments and hotels/
motels.
Figure 2.2 shows that constant dollar changes in
RPTT revenues tend to follow the same long
term trend as do economic conditions in NYC.
The dramatic fall-off in RPTT revenues in 2008
and 2009, for example, reflects the real estate
driven nature of the most recent economic
decline in the City, State and nation
Figure 2.2: Constant 2000 Dollar RPTT Revenues and
Real NYC Economic Growth, 1980-2009
2.5 Real Property Transfer Taxes in Other
Jurisdictions
Thirty-eight states and/or one or more of their
local jurisdictions impose some type of tax/fee
on real property transfers. Combined state/local
property transfer tax/fees range from a low of
$2.00 per deed/contract in Arizona to a high of a
4% realty transfer tax in some Pennsylvania
jurisdictions.
2.6 New York City RPTT Revenue Trends
In FY 2009, the RPTT generated $742 million in
current dollars, a decrease of 47% over the $1.4
billion in 2008. Figure 2.1 shows that in current
and constant 2000 dollars, RPTT revenues have
increased in all years since 2000 with the
exception of 2002, 2008 and 2009.
Sources: Index of Coincident Economic Indicators, NY Federal
Reserve Board; Moody’s.com NY State & Local Government
Product Deflator used to convert current dollar values from NYC
OMB to constant 2000 dollars.
2.7 History of the NYC Real Property
Transfer Tax
When NYC first imposed a tax on the transfer of
real property in 1959, the tax rate was set at 1%
on the net consideration paid on all transfers
(exclusive of mortgages, liens/encumbrances
remaining on the property). The relatively few
changes that have been made to the rate and base
since 1959 are shown in Exhibit 2.1.
2.8 Issues and Concerns
Figure 2.1: NYC Real Property Transfer Tax Revenues,
Current and Constant 2000 Dollars, 2000-2009
Out-of-line Taxes. The combined NYC/NYS
property transfer tax rate on properties sold at $1
million or more is the highest imposed in the
U.S. On all other properties, the combined rate is
higher than the rate imposed in any place in the
U.S. with the exception of certain jurisdictions
in Pennsylvania.
Sources: Current Dollars, NYC OMB; Moody’s Economy.com NY
State & Local Government Product Deflator used to convert
current dollars into constant 2000 dollars.
2-­‐2 Exhibit 2.1: Major NYS Legislative Actions Affecting the NYC Real
Property Transfer Tax, 1959-2009
Year
1959
1982
1987
1989
1994
1997
Action
Real Property Transfer Tax (RPTT) payable by the seller implemented on the sale or
transfer of a property in NYC. Rate is set at 1% of the net consideration paid for the
property.
Rate increased to 2% for transfers valued at more than $500,000. Tax base expanded
to include leasehold transfers. Deduction for continuing liens repealed.
RPTT base expanded to include property that is part of a transfer of a majority
interest in an entity which owns real property in NYC.
Rate increased to 1.425% for commercial sales of $500,000 or less and residential
sales over $500,000 and to 2.625% for commercial sales over $500,000.
Temporary 50% percent reduction in RPTT rate for certain transfers to newly
organized Real Estate Investment Trusts (REITs). This provision is now permanent.
Deduction allowed for the amount of any mortgage assumed by the buyer on the
transfer of a 1-3 family home, or an individual residential co-operative or
condominium unit.
Source: New York City Office of Management and Budget. Tax Revenue Forecasting Documentation.
Financial Plan Fiscal Years 2009-2013.
2-­‐3 Mortgage Recording Tax
3.0 MORTGAGE RECORDING TAX
3.1 Overview
New York City has imposed the Mortgage
Recording Tax (MRT) since 1971. In FY 2009,
the tax yielded $515 million, accounting for
1.4% of NYC tax revenues and 0.8% of City
revenues from all sources. The City’s MRT is
collected by local recording offices in the City at
the time the mortgage is recorded.
MRT Revenues are initially deposited into a
trust account. The NYC Department of Finance
transfers appropriate funds to the City’s General
Fund, the MTA and the State of New York
Mortgage Agency (SONYMA).
The City MRT is imposed on new mortgages
recorded on real property located in NYC with
certain exceptions (see Section 3.3 below). The
tax rate varies with the type and size of the
mortgage. 



For all mortgages securing less than
$500,000, the NYC tax rate is 1% of the
mortgage amount.
For mortgages securing $500,000 or more
on 1-3 family dwellings or individual
residential condominium units, the tax rate
is 1.125%.
For all other mortgages securing $500,000
or more – including mortgages on
commercial/industrial properties – the NYC
tax rate is 1.75%.
There is no MRT liability on the purchase of
a co-operative apartment since this financing
is not considered to be a mortgage.
3.2 Factoring in the State
The New York City MRT is imposed in addition
to the New York State MRT (see Exhibit 3.1). In
FY 2009, the State’s revenues from the MRT
were $670 million, accounting for 1.1% of NYS
tax revenues and 0.6% of State revenues from all
sources. The State’s MRT is collected by local
recording offices at the time mortgages are
recorded.
The State MRT rate applicable in NYC is
$1.05/$100 on all mortgages regardless of their
value.

The combined NYS/NYC MRT rate is the
highest imposed in the U.S.
The State MRT rate has three components: (1)
the $0.50/$100 basic rate, which goes directly to
NYC (and outside of NYC to the counties); (2) a
special additional tax of $0.25/$100 earmarked
for the MTA in NYC and the other seven
counties comprising the MCTD;1 and (3) a
$0.30/$100 additional tax with most proceeds
earmarked for SONYMA.2
NYS tax law provides for an exemption from the
special
additional
tax
for
non-profit
organizations that are exempt from Federal
income taxation. If the lender qualifies for this
exemption, it is payable by the borrower.
However, if the borrower is also exempt, neither
party pays this portion of the tax.

The combined NYS/NYC Mortgage
Recording Tax is the highest imposed in any
jurisdiction in the U.S.
3.3 The NYC Mortgage Recording Taxpayer
The NYC Mortgage Recording Tax is usually
payable by the borrower at the time a mortgage
is recorded. Taxpayers generally pay the MRT
each time they secure a new mortgage on real
property in the City. For a credit-line mortgage,
however, the MRT Tax is imposed on the
maximum principal amount.3 No further tax is
due on advances or re-advances by the lender
unless the maximum principal amount is
increased. Prior to 1996, this provision applied
only to owner-occupied 1-6 family homes.
Legislation was enacted in 1996 extending it to
all residential and commercial credit-line
mortgages with a credit limit below $3 million.
When a mortgage is being refinanced, if the old
mortgage can be assigned, which is easiest to do
if the borrower refinances with the same bank,
3-­‐1 the loan can usually be arranged so that only
new money is subject to the MRT.
Unlike the State MRT, the NYC tax applies to
certain wraparound mortgages and spreader
agreements.


A wraparound mortgage, generally referred
to as a wrap, is a form of secondary
financing for the purchase of real property.
The seller extends to the buyer a secondary
mortgage that wraps around and exists in
addition to any superior mortgages already
secured by the property. A spreader agreement is an agreement
spreading the reach of a mortgage to other
properties and sometimes even to other
borrowers or lenders. At one time, it was
common, especially in New York, to use
spreading agreements rather than executing
new mortgages to avoid paying large
Mortgage Recording Taxes.
Exemptions from the City MRT are available to
the NYC, NYS and Federal governments and
their agencies, instrumentalities and political
subdivisions, public authorities, housing
development fund companies and certain nonprofit organizations.
3.4 The NYC Mortgage Recording Tax Base
NYC Mortgage Recording Tax revenue is based
on the number of mortgages recorded in the City
and the amount of the indebtedness secured by
the mortgages.
3.5 The MRT in Other Jurisdictions
New York is one of 11 states plus the District of
Columbia to levy a specific Mortgage Recording
Tax. Some states, such as New Jersey, do not
impose a specific mortgage recording tax but
charge a recording tax for all documents related
to real estate transactions.
3.6 New York City MRT Revenue Trends
In FY 2009, NYC Mortgage Recording Tax
revenues stood at $515 million, a 55% decrease
over the $1.1 billion in 2008. Figure 3.1 shows
that in current dollars and constant 2000
dollars, mortgage recording tax revenues
increased annually from 2000 until 2007 and
then dropped in 2008 and again in 2009.
Figure 3.1: NYC Mortgage Recording Tax Revenues,
Current and Constant 2000 Dollars, 2000-2009
Sources: Current Dollars, NYC OMB; Moody’s Economy.com NY
State & Local Government Product Deflator used to convert
current dollars into constant 2000 dollars.
Figure 3.2 shows that constant dollar MRT
revenues generally move in the same direction as
economic conditions in NYC. This is especially
true when the economy is growing. Since 2007,
MRT revenues have declined more sharply than
the economy, reflecting the real estate driven
nature of the most recent economic decline in
the City, State and nation.
3.7 History of the NYC Mortgage Recording
Tax
The NYC Mortgage Recording Tax was
established in 1971 at a rate of 0.5% on the
value of all mortgages. Changes since then are
shown in Exhibit 3.2.
In New York State, in addition to NYC, the City
of Yonkers and several counties are authorized
to impose an MRT. County rates generally range
from $1.00/$100 to $1.30/$100.
3-­‐2 Figure 3.2: Constant 2000 Dollar MRT Revenues and
Real NYC Economic Growth, 1980-2009 3.8 Issues and Concerns
Out-of-line Taxes. As a result of the high
NYC/NYS Real Property Transfer Tax and the
NYC/NYS Mortgage Recording Tax, taxpayers
purchasing property in NYC pay some of the
highest closing costs in the nation.
Endnotes
Sources: Index of Coincident Economic Indicators, NY Federal
Reserve Board; Moody’s.com NY State & Local Government
Product Deflator used to convert current dollar values from NYC
OMB to constant 2000 dollars.
1
The MCTD includes the 5 counties of NYC plus
Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess and
Westchester.
2
MRT proceeds from mortgages on 1-6 family homes
within the MCTD are earmarked for the District.
3
A credit-line mortgage secures indebtedness under a
financing agreement that allows the borrower to receive a
series of advances or re-advances up to a stated amount.
Exhibit 3.1: Combined New York State and New York City Mortgage Recording Tax, 2009
Tax per $100
NYC Tax
Type of Mortgage
All mortgages securing less
than $500,000
Residential mortgages
securing $500,000 or
more*
All other mortgages
securing $500,000 or more
NYS Tax
Basic
Tax
Combined
City/State Tax
$1.00
$.50
Special
Additional
Tax
$.25
Additional
Tax
$.30
$2.05
$1.125
$.50
$.25
$.30
$2.175
$1.75
$.50
$.25
$.30
$2.80
*For 1-3 family houses and individual residential condominium units
Source: NYS Department of Taxation and Finance, Office of Tax Policy
Exhibit 3.2: Major NYS Legislative Actions Affecting the NYC Mortgage Recording Tax
1971-2009
Year
1971
1982
2004
Action
City MRT established at a rate of 0.5% on the amount of the mortgage.
Tax rate increases for mortgages of $500,000 or more. For 1-3 family homes, rate increases to 0.625%;
on other large mortgages, to 1.25%. Half of the collections from large non-residential mortgages
earmarked for the NYC Transit Authority, the City Para-transit system and certain private bus operators
franchised by the City.
Tax extended to certain supplemental (wraparound) mortgages and spreader agreements regardless of
whether the indebtedness secured by the mortgage is increased.
Source: New York City Office of Management and Budget. Tax Revenue Forecasting Documentation.
Financial Plan Fiscal Years 2009-2013. 3-­‐3 Commercial Rent Tax
4.0 COMMERCIAL RENT TAX
4.1 Overview
 Governmental
NYC has levied the Commercial Rent Tax
(CRT) since 1963. In Fiscal Year 2009, the tax
yielded $583 million, accounting for 1.6% of
NYC tax revenues and 1% of City revenues
from all sources. The CRT is administered by
the NYC Department of Finance.

The CRT is imposed on tenants paying
annualized base rents of $250,000 or more for
premises south of 96th Street in Manhattan that
are used for business/professional services and
for commercial activities.
The statutory tax rate is 6% of the base rent paid
by tenants liable for the tax. NYC allows tenants
an across-the-board 35% reduction in their
computation of taxable base rent, reducing the
effective tax rate (ETR) to 3.9%.
4.2 Factoring in the State
NYS does not levy a tax on commercial renters
of real property.
 The only other jurisdiction in the U.S.
besides NYC to impose a specific tax on
commercial renters is the State of Florida.
4.3 The NYC Commercial Rent Taxpayer
Tenants paying annual rents of $250,000 or
more for premises in Manhattan south of 96th
Street that are used to operate businesses,
professions or commercial activities are liable
for the CRT. A tenant is defined as a person or
entity paying rent as a lessee, sub-lessee,
licensee or concessionaire. Tenant-owners of
offices used for commercial purposes in cooperative buildings are also liable for the tax.
Tenants whose annualized base rents are below
$250,000 – calculated without regard to the 35%
reduction allowed by NYC in computing taxable
base rent – are exempt from the CRT. Other
tenants exempt from the CRT include:





entities and non-profit
religious, charitable and educational
organizations; Non-profit organizations that do not use the
premises for commercial purposes and
receive a written exemption from the NYC
Department of Finance;
Renters using space for 14 days or less and
tenants (other than operators of hotels) who
use at least 75% of their floor space to rent
to others for residential purposes;
Tenants using space for theatrical
productions for the first 52 weeks after their
production begins;
Tenants in commercial buildings in the
World Trade Center Area in lower
Manhattan;
Tenants of premises used for retail sales
purposes located in the Commercial
Revitalization Program (CRP) Abatement
zone in lower Manhattan;1
Certain other properties, including property
used as a pier in interstate commerce and
with premises used for air, railroad or
omnibus transportation purposes.
4.4 The NYC Commercial Rent Tax Base
The CRT base rent is the amount of rent paid by
non-exempt tenants located in Manhattan south
of 96th Street, minus the amount received or due
them from any subtenants.
Tenants with annual base rents between
$250,000 and $300,000 are eligible for a slidingscale credit that reduces tax liability. When the
rent is based on a percentage of gross receipts
due the landlord, the taxable percentage may not
exceed 15% of gross receipts.
4.5 The CRT in Other Jurisdictions
In Florida, a 6% Sales Tax is imposed on the
total rent paid for the right to use or occupy
commercial real property, unless the rent is
specifically exempt. Rental premises subject to
the State of Florida Sales Tax are also subject to
any locally imposed sales surtax on rentals.
4-­‐1 4.6 New York City CRT Revenue Trends
4.7 History of the NYC Commercial Rent Tax
In FY 2009, NYC Commercial Rent Tax
revenues stood at $583 million, a 7% increase
over the $545 million in 2008. Figure 4.1 shows
that in current dollars, CRT revenues have
increased every year since 2000. In constant
dollars, CRT revenues showed small declines in
2002 and 2005.
The NYC Commercial Rent Tax was first
imposed in 1963 on businesses renting space in
all parts of NYC. In the early 1960s, before the
City imposed the Personal Income Tax (PIT)
and shifted from a gross receipts approach to a
net income tax on businesses, NYC was facing
limits on its Real Property Tax (RPT) levy due
to the NYS constitutional cap on the amount of
tax dollars that could be raised for operating
purposes.2 The CRT offered a means for the City
to tap some of the growth in property values that
it was unable to fully capture under the constitutionally constrained RPT.
Figure 4.1: NYC Commercial Rent Tax Revenues,
Current and Constant 2000 Dollars, 2000-2009
Since 1963, many changes have been made to
the tax rate and base, including total exemption
from the tax of commercial tenants located
outside of Manhattan and north of 96th Street in
Manhattan. A fuller description of rate and base
changes can be found in Exhibit 4.1.
Sources: Current Dollars, NYC OMB; Moody’s Economy.com NY
State & Local Government Product Deflator used to convert
current dollars into constant 2000 dollars.
4.8 Issues and Concerns
Figure 4.2 shows that changes in CRT revenues
are not closely tied to fluctuations in NYC
economic conditions as measured by the NY
Federal Reserve Board Index of Coincident
Economic Indicators. The dramatic decline in
revenues in 1997 was a result of the change in
the CRT law that exempted space used for
commercial purposes located in the Bronx,
Brooklyn, Queens and Staten Island and north of
96th Street in Manhattan.
Double Taxation. The CRT is imposed on
businesses that do not own property and do not
directly pay the NYC Real Property Tax. Most
commercial leases, however, contain provisions
requiring tenants to pay additional rent
attributable to increases in the RPT on their
buildings. Commercial tenants thus pay the CRT
on the escalation amounts of the RPT, which
essentially amounts to paying one tax on top of
another tax.
Figure 4.2: Constant 2000 Dollar Commercial Rent Tax
Revenues and Real NYC Economic Growth, 1980-2009
Sources: Index of Coincident Economic Indicators, NY Federal
Reserve Board; Moody’s.com NY State & Local Government
Product Deflator used to convert current dollar values from NYC
OMB to constant 2000 dollars.
Unique Tax. With the exception of Florida, no
other jurisdiction in the U.S. imposes a tax on
commercial rents. The CRT presents a
competitive disadvantage for NYC in its efforts
to attract and retain businesses that rent space,
especially with regard to nearby communities
that do not impose a tax on commercial renters.
4-­‐2 Endnotes
1
The CRP provides tax incentives through a property tax
abatement and CRT special reduction for non-residential or
mixed-use premises built before 1975 and located in
designated abatement zones. Applicants are required to
make certain minimum expenditures to improve the eligible
premises. 2
The NYS Constitution (Article VIII, Section 10) limits the
amount of Real Property Taxes that cities, villages and
counties may raise each year for operating purposes. The
limit for NYC is set at 2.5% of its 5-year average full
valuation of taxable property.
Exhibit 4.1: Major NYS Legislative Actions Affecting the NYC Commercial Rent Tax
1963-2009
Year
Action
1963
Tax imposed on tenants for rental space used for commercial/professional purposes.
Rate set at 2.5% on annual base rents below $2,500 and 5% on rents of $2,500 and
above.
1970
Graduated rate schedule adopted, with rates ranging from 2.5% on base rents below
$2,500 to 7.5% on base rents of $11,000 or more.
1977
Maximum rate reduced to 6.375% as of 1980 and 6% as of 1981.
1981
Base rent less than $5,000 exempt from tax.
1984
Base rent exemption increased to $8,000 on June 1, 1984, and to $11,000 on
December 1, 1984.
1985
Base rent in certain locations reduced by 10% starting 1986.
1994
25% tax credit granted to taxpayers in certain locations and expanded in 1995 to a
full exemption for renters with base rent less than $21,000 in central and lower
Manhattan and up to $30,000 elsewhere in the city.
1995
Renters of space for commercial purposes located in the Bronx, Brooklyn, Queens
and Staten Island, and north of the centerline of 96th Street in Manhattan, exempt
from the tax.
1997
Taxpayers with base rent less than $100,000 exempt from the tax; those with base
rent between $100,000 and $140,000 allowed a sliding scale credit against tax
liability.
2000
Base rent exemption increased to $150,000 and sliding scale credit increased on
rents up to $190,000.
2001
Base rent exemption increased to $250,000 with a sliding scale credit for those with
rents up to $300,000.
2005
The Commercial Revitalization Program expanded to provide greater CRT
reductions. New or renewal leases in the World Trade Center area exempted from
the tax.
2009
The enhanced special Commercial Revitalization Program extended over four more
years.
Source: New York City Office of Management and Budget. Tax Revenue Forecasting Documentation.
Financial Plan, Fiscal Years 2009-2013.
4-­‐3 Personal Income Tax
5.0 PERSONAL INCOME TAX
5.1 Overview
New York City has imposed the Personal Income
Tax (PIT) since 1966. In FY 2009, the tax
generated $6.5 billion, accounting for 18% of
NYC tax revenues and 10.6% of City revenues
from all sources.1 The City PIT is administered by
the NYS Department of Taxation and Finance and
reported by NYC taxpayers in a separate section
of their State Personal Income Tax returns.
The New York City PIT is imposed on the taxable
income of resident individuals, estates and trusts.
Under City law, certain non-residents who are
employed by the NYC government are required to
sign a contract that requires them to pay an
amount equivalent to the PIT they would pay if
they were City residents.2 The PIT is levied based on the filing status and
income of the taxpayer.

NYC has three filing statuses: single (which
includes married, filing separately), joint or
head of household. There are currently four
tax brackets for each status, with marginal tax
rates ranging from 2.907% to 3.648%
depending on the taxpayer’s income bracket
(see Exhibit 5.1 for NYC rates and brackets).
5.2 Factoring in the State
The New York City PIT is levied in addition to the
NYS Personal Income Tax. In FY 2009, the State
PIT generated $36.8 billion, accounting for 62.4 %
of NYS tax revenues and 31.4% of State revenues
from all sources. It is the largest source of State
tax dollars.
The New York State PIT is imposed on State
residents and on non-residents who have income
attributable to NYS sources. The tax is applied to
all sources of income including wages and
salaries, interest, dividends, business-related
income and capital gains.
As of 2008, the State had five filing statuses with
seven tax brackets for each. For tax years 20092011, two new temporary brackets were added,
with the highest rate set at 8.97% on taxable
income in excess of $500,000 for all filers (see
Exhibit 5.2 for NYS rates and brackets).

The combined NYC/NYS top PIT tax rate is
the highest imposed in any jurisdiction in the
U.S.
Metropolitan
Commuter
Transportation
Mobility Tax. Effective for tax years beginning on
or after January 1, 2009, the State has imposed the
Metropolitan Commuter Transportation Mobility
Tax (MCTMT) on businesses and individuals
including members of partnerships and limited
liability corporations (LLCs) that are treated as
partnerships. The tax was enacted to help finance
mass transportation expenditures in the MCTD.
The MCTMT is a payroll tax on employers and on
individuals who earn more than $10,000 in selfemployment income in NYC and the other 7
counties in the MCTD.

Income taxes, such as the NYC and NYS
Personal Income Taxes, are paid by
individuals. Payroll taxes can either be
withheld from employees’ wages or, as is the
case with the MCTMT, paid from the
employer’s own funds.
The MCTMT rate is 0.34% of an employer’s total
payroll expense for employees within the MCTD.
For sole proprietors and partners, the rate is 0.34%
of net earnings from self-employment allocated to
the MCTD during the tax year.
5.3 The NYC Personal Income Taxpayer
The PIT is imposed on all income sources of NYC
residents including wages and salaries, interest,
dividends, business-related income and capital
gains. Income passed through to NYC residents
who are owners/shareholders of an elected
Subchapter S Corporation is treated as taxable
5-­‐1 income for purposes of the PIT as is the income
from City-based partnerships.
Non-residents. Currently, non-residents are not
subject to the PIT. From 1966 to 1999, however,
every non-resident individual, estate or trust was
taxed on earnings from NYC sources, i.e., wages
and net earnings from self-employment within the
City.3
Tax rates for the non-resident earnings tax,
commonly referred to as the Commuter Tax, were
last set at 0.45% of wages and 0.65% of selfemployment income from NYC sources. The
liability for Tax Year 1998 – the last full year in
which the tax was imposed – was $325 million.
Periodically, City officials and others have called
for reinstatement of the Commuter Tax, arguing
that it helps to pay for public services provided to
people who work in NYC but live elsewhere.
Reinstatement of the tax requires approval from
the NYS Legislature with its many members
representing districts outside of NYC that house
large numbers of voting constituents employed in
the City.
5.4 The New York City PIT Tax Base
The NYC Personal Income Tax is imposed on the
taxable income of all NYC residents.
Calculating Personal Income Tax Liability. As
shown in Figure 5.1, the NYC Personal Income
Tax base is derived from the NYS taxable base,
with the same additions to, and subtractions from,
Federal Adjusted Gross Income (FAGI). The
starting point for calculating City and State PIT
liability is NYS Adjusted Gross Income (NYAGI).
NYAGI is equal to Federal Adjusted Gross
Income (FAGI) – as reported on taxpayer Federal
individual income tax returns – modified to
account for differential treatment by the State of
certain income sources.
Some income items not taxed by the Federal
government are taxed by NYC and NYS; these are
added back to Federal AGI to arrive at NYAGI.
Other items subject to Federal taxation are not
taxed by NYS; these are subtracted from Federal
AGI to calculate NYAGI.
Figure 5.1: Calculating NYC Personal
Income Tax Liability
Federal Adjusted Gross Income
Plus
New York State Add-ons
Minus
New York State Subtractions
Equals
New York State Adjusted Gross Income
Minus
NYS Deductions and Exemptions
Equals
New York City Taxable Income
Multiplied by
NYC Tax Rates
Equals
NYC PIT Liability Before Credits
Minus
NYC Tax Credits
Equals
NYC PIT Liability Add-backs to FAGI include state, local and foreign
income taxes deducted for Federal income tax
purposes, interest on bonds issued by other states
and their localities, and certain retirement and
flexible benefits paid to NYC and NYS
employees. Other add-backs result from NYS
decoupling from the Federal tax code, e.g., certain
depreciation allowances.4
Subtractions from FAGI include interest income
on U.S. government bonds, taxable Social
Security payments, all Federal, NYS and local
government pension income, qualifying private
pension and annuity income up to $20,000. NYS
residents are also permitted to subtract their
contributions of up to $5,000 ($10,000 for joint
filers) per year to the NYS College Choice Tuition
Savings Program.
Once NYAGI is determined, taxpayers subtract
NYS deductions and exemptions from this value
to determine their NYC taxable income – the base
for determining NYC tax liability.
Deductions. New York City PIT filers may deduct
either the NYS-defined standard deduction or
State-defined itemized deductions from their
NYAGI to arrive at NYC taxable income.5
5-­‐2 Taxpayers taking the standard deduction for
Federal purposes must use the NYS standard
deduction in calculating their taxable income for
NYC Personal Income Tax purposes. Standard
deductions range from $7,000 for single filers to
$15,000 for joint filers. Deductions for taxpayers who itemize are the
same as those allowed for Federal income tax
purposes with modifications including those for
higher income filers.



For single NYC PIT filers with NYAGI over
$100,000, and for married filers with NYAGI
over $200,000, deductions are limited to 75%
of their modified Federal
itemized
deductions.
For all filers with NYAGI greater than
$525,000 up to $1 million, deductions are
limited to 50% of their modified Federal
itemized deductions.
For filers with more than $1 million of
NYAGI, itemized deductions are limited to
50% percent of charitable deductions taken on
the Federal return.
Exemptions. NYC Personal Income Taxpayers
may take an exemption of $1,000 per dependent
person to arrive at taxable income for City PIT
purposes. Unlike the Federal government, the City
does not permit an exemption for the taxpayer or
spouse.
Tax Liability. Figure 5.1 shows that City PIT
liability is calculated by (1) multiplying NYC
taxable income by the appropriate tax rates and (2)
subtracting the dollar value of tax credits
allowable by NYC, where applicable. NYS tax
credits are not considered here, since they are not
used in the calculation of NYC tax liability.
The five credits allowed by the City are: the
Unincorporated Business Income Tax (UBT)
Credit and four credits related to family income.
They are: the Earned Income Tax Credit, the Child
Care Credit, the School Tax Relief Credit
(STAR)6 and the Household Credit. All but the
UBT and Household Credit are refundable, which
means that if the value of the credit exceeds tax
liability, the excess is refunded to the taxpayer.7
UBT Credit. NYC residents who pay the
Unincorporated Business Tax (UBT) are permitted
to take a credit against their PIT liability for UBT
payments.




For taxpayers whose City PIT taxable income
is $42,000 or less, a credit against PIT liability
for the full amount of the UBT paid is
permitted.
For taxpayers with NYC taxable incomes
above $42,000 but below $142,000, the credit
against PIT liability declines from 100% to
23% of UBT taxes paid.
For residents whose City PIT taxable income
is $142,000 or more, the credit is 23% of the
UBT paid.
The UBT credit cannot exceed the City PIT
liability, and any unused credit cannot be
refunded or carried over to another tax year.
5.5 Personal
Jurisdictions
Income
Taxes
in
Other
Forty-one states plus the District of Columbia
impose some type of broad-based income tax. Of
these, 15 give all or certain local governments the
option to impose a similar tax.
The use of the PIT by local governments is much
more extensive in other states than in NYS where
only two localities – NYC and Yonkers – are
permitted to impose the tax. In Indiana, for
example, all 92 counties impose the tax. In Ohio,
235 cities and 331 villages impose it.
Local personal income taxes in other places are
generally imposed at much lower rates than in
NYC. For instance, in Indiana, county tax rates
range from 0.01% to 0.255%; in Ohio, they range
from 0.50% to 2.75%. Only Philadelphia has a
higher tax rate than NYC – but it has a lower
combined City/State rate.
5.6 New York City PIT Revenue Trends
In FY 2009, NYC Personal Income Tax revenues
stood at $6.5 billion, a 25% decline over the $8.6
billion in 2008. Figure 5.2 shows that in current
dollars, PIT revenues increased in six of the nine
years from 2000 to 2009, and declined in three:
2002, 2003 and 2009. In constant dollars,
5-­‐3 revenues declined in 2007 as well as in 2002, 2003
and 2009.
base rate, a 12.5% surcharge and a 14% additional
tax.
Figure 5.2: NYC Personal Income Tax Revenues, Current
and Constant 2000 Dollars, 2000-2009
5.8 Issues and Concerns
Sources: Current Dollars, NYC OMB; Moody’s Economy.com NY
State & Local Government Product Deflator used to convert current
dollars into constant dollars.
Figure 5.3 shows that PIT revenues are
economically sensitive. This means that tax
revenues generally rise and fall with changing
economic conditions. The increase in the City’s
PIT rates to offset declining tax collections may
have prevented even larger revenue fluctuations in
several years including 2009.
Figure 5.3: Constant 2000 Dollar PIT Revenues and Real
NYC Economic Growth, 1980-2009
Double Taxation. Income passed through to
owners/shareholders of elected Subchapter S
Corporations is subject to the City PIT. These
taxpayers are also liable for their share of the
City’s GCT or Bank Tax payments and are thus
taxed twice on the same income stream. No credit
against PIT liability is given for GCT or Bank Tax
taxes paid by New York City S Corporation
owners/shareholders. A credit against PIT liability
is, however, allowed for Unincorporated Business
Taxpayers.
High Tax Rates. The increased marginal PIT rates
imposed by the State for tax years 2009-2011
bring the combined NYC/NYS top marginal rate
to 12.62%. This is the highest combined rate
imposed in any jurisdiction in the nation.
Sensitivity to Economic Fluctuations. The
increasing reliance by the City on the
economically sensitive PIT makes City revenues
much more vulnerable to business cycle
fluctuations.
Sources: Index of Coincident Economic Indicators, NY Federal
Reserve Board; Moody’s.com NY State & Local Government
Product Deflator used to convert current dollar values from NYC
OMB to constant 2000 dollars.
5.7 History of the NYC Personal Income Tax
NYC has imposed a Personal Income Tax since
1966. Extensive changes made since then in the
tax rates, surcharges, tax base and in deductions
and exemptions are shown in Exhibit 5.3. These
changes, at times, have resulted in as many as
three separate components of the PIT rate: the
5-­‐4 Endnotes
1
Does not include the $138 million in PIT revenues dedicated
to the Transitional Finance Authority (TFA). The City did not
begin including these revenues as part of its General Fund
until FY 2010. Inclusive of these revenues, PIT revenues
were $6,588 million in FY 2009.
2
Payments by non-residents, often referred to as Section 1127
revenues, are not reported as PIT revenues, but are included
in Other Taxes. In 2009 they totaled $116.4 million. 3
The law to repeal the commuter tax sought to eliminate the
tax for NYS residents as of July 1, 1999. Because the
selective repeal raised constitutional issues, the legislation
provided for repeal for out-of-state residents upon decision by
the Courts. The NYS Court of Appeals, the State’s highest
court, overturned the selective repeal in April 2000,
retroactive to July 1, 1999.
4
Because the calculation of NYS Adjusted Gross Income
starts with Federal AGI, changes enacted at the Federal level
to modify Federal AGI will also modify NYAGI. NYS must
pass legislation if it does not want the Federal provisions to
apply to NYS and NYC tax calculations. Such legislative
action is referred to as “decoupling.”
5
The NYS Standard Deduction ranges from $7,500 to
$15,000 depending on taxpayer filing status.
6
NYS reimburses NYC for revenues forgone as a result of the
STAR credit.
7
For information on NYC tax credits see
http://www.tax.state.ny.us/pit/income_tax/new_york_city_c
redits.htm. Also see NYC Department of Finance Tax
Expenditure Report,
http://www.nyc.gov/html/dof/html/pdf/10pdf/ter_2010.final
.pdf
5-­‐5 Exhibit 5.1: New York City PIT Tax Rates by Filing Status, Tax Year 2009*
New York City Taxable Income
2009 Rates
Single Filer*
Head-of Household-Filer
2.907%
$12,000 or less
$14,400 or less
3.534%
Over $12,000 to $25,000
Over $14,400 to $30,000
Married Filing Jointly
$21,600 or less
Over $21,600 to $45,000
3.591%
3.648%
Over $45,000 to $90,000
Over $90,000
Over $25,000 to $50,000
Over $50,000
Over $30,000 to $60,000
Over $60,000
*Includes 14% additional tax (also referred to as the surcharge). For example, the 3.648% base rate without the 14% additional tax is
3.2%.
**Also applies to Married Filing Separately taxpayers
Source: New York State, Personal Income Tax Return IT150/201 2009
Exhibit 5.2: New York State PIT Tax Rates by Filing Status, Tax Year 2009
New York State Taxable Income
Tax
Single Filer*
Head of Household Filer
Married Filing Jointly
Rates
4%
$8,000 or less
$11,000 or less
$16,000 or less
4.5%
Over $8,000 to $11,000
Over $11,000 to $15,000
Over $16,000 to $22,000
5.25%
Over $11,000 to $13,000
Over $15,000 to $17,000
Over $22,000 to $26,000
5.9%
Over $13,000 to $20,000
Over $17,000 to $30,00
Over $26,000 to $40,000
6.85%
Over $20,000 to $200,000
Over $30,000 to $250,000
Over $40,000 to $250,000
7.85%
Over $200,000 to $500,000
Over $250,000 to $500,000
Over $250,000 to $500,000
8.97%
Over $500,000
Over $500,000
Over $500,000
*Also applies to Married Filing Separately taxpayers.
Source: New York State, Personal Income Tax Return IT150/201 2009
5-­‐6 Exhibit 5.3: Major NYS Legislative Actions Affecting the NYC Personal Income Tax, 1966-2009
Year
Action
1966 PIT imposed on NYC residents with top marginal rate set at 2%. Personal exemption set at $600. Standard
deduction set at $1,000 for every filing status. Non-resident earnings tax (known as the Commuter Tax)
imposed at 0.25% of wages and 0.375% on self-employed income from NYC sources.
1971 PIT rates increased with top marginal rate set at 3.5%. Commuter Tax rates increased to 0.45% on wages and
0.65% on self-employment income from NYC sources. Commuter Tax rates remain at this level until State
repealed tax in 1999.
1976 PIT rates increased. Top marginal rate set at 4.3%.
1982 A temporary surcharge imposed at rates ranging from 2.5% to 5% of PIT liability.
1983 Surcharge imposed in 1983 doubled what it was in 1982.
1987 NYC 5-year Tax Reduction Program enacted to prevent windfall tax gains associated with Federal Tax
Reform Act of 1986. Program modified definitions of taxable income, decoupled City PIT from Federal tax
changes, reduced number of brackets, created 3 filing statuses and lowered maximum marginal rate to 4.1%
for Tax Year 1987 to be reduced to 3.4% by 1991. Limitations placed on itemized deductions allowable for
higher income filers.
1990 Last two years of tax reductions postponed. Top marginal rate set at 3.91%. A 12.5% temporary income tax
surcharge imposed for TY 1990-1992. Surcharge subsequently extended through 2001 when it was rescinded.
Surcharge reinstated for TY 2002.
1991 Itemized deductions for high income taxpayers reduced. Beginning TY 1991, a 3-year additional tax of 14%
imposed across all PIT rates (including the 12.5% surcharge). Additional tax extended and still in effect as of
2009.
1997 Non-refundable credit permitted against PIT liability for sole proprietors and partners for UBT taxes paid.
1998 PIT rates to be reduced over 3 years beginning in TY 1999 with top marginal rate (including 14% additional
tax) to be set at 3.83%. State School Tax Relief (STAR) program provides refundable tax credit for NYC
Personal Income Taxpayers; State to reimburse City for forgone revenues.
1999 Commuter Tax repealed by State as of July 1, 1999. Repeal initially limited to NYS residents. After Court
ruling in early 2000, repeal applied to all Commuter Taxpayers.
2001 Under local authority granted by State legislation, City reduced the 14% additional tax effective TY2001.
Rate reduction and restructuring of the 14% additional tax resulted in top marginal rate reduction to 3.592%.
For TY 2002, rates rolled back to pre-200l levels
2003 Two new brackets and rates added for higher income taxpayers. For TY2003-2005, existing tax rates
(including 14% additional tax) replaced by a new rate schedule.
2006
2002 base rates including 14% additional tax reinstated. Top marginal rate of 3.648% (including 14%
additional tax) imposed.
2007
Non-refundable UBT credit against PIT increased to 100% for taxpayers with NYAGI of $42,000 or less with
sliding scale to 23% for taxpayers with NYAGI of $142,000 or more. Refundable NYC low-income credit for
child care provided,
Itemized deductions for taxpayers with NYAGI over $1 million limited to 50% of Federal charitable
deductions (or State standard deduction, whichever is larger). No other Federal itemized deductions are
permitted.
2009
Sources: NYC Office of Management and Budget. PIT Legislative History, Appendix II. Tax Revenue Forecasting
Documentation. Financial Plan Fiscal Years 2009-2013.
NYC Personal Income Tax Webpage http://www.nyc.gov/html/dof/html/services/business_tax_nys_income.shtml, last accessed
on June 8, 2010.
5-­‐7 Sales and Use Tax
6.0 SALES AND USE TAX
6.1 Overview
NYC has levied a Sales/Use Tax since 1934 when
it was imposed as a temporary tax to raise
revenues during the Depression. In FY 2009, the
tax generated $4.6 billion, accounting for 12.8%
of total NYC tax revenues and 7.6% of City
revenues from all sources. The NYC Sales/Use
Tax has been collected and administered by the
NYS Department of Taxation & Finance since
1965. 


The NYC Sales Tax is imposed on the sale of most
commodities and enumerated services in the City.
The Use Tax is imposed on purchases made
outside of NYC but brought into it for use in the
City. The Sales/Use Tax rate is 4.5% on most
commodities and services.1 6.2 Factoring in the State
The NYC Sales/Use Tax is levied in addition to
the NYS Sales/Use Tax. In FY 2009, the State tax
generated $10.4 billion, accounting for 17.6 % of
total NYS tax revenues and 8.9% of State
revenues from all sources.
The NYS Sales/Use Tax rate is 4%. An additional
0.375% tax is levied by the State on sales in NYC
and the other 7 counties that comprise the
Metropolitan Commuter Transportation District
(MCTD).2
6.3 The NYC Sales/Use Taxpayer
The NYC Sales/Use Tax is generally collected by
vendors who remit the tax to the NYS Department
of Taxation and Finance.

When a taxable purchase is made in person in
NYC, the Sales Tax is collected by the vendor
who is required to remit the taxes to the NYS
Department of Taxation and Finance. NYC
also imposes a Use Tax on purchases made
outside of the City that would have been taxed
had they been made in it.3
When a taxable purchase is made outside
NYC, and the Sales Tax is less than the tax
in the City, a Use Tax on the difference
between the two rates must be paid by the
customer to NYS.
When the purchase of a taxable commodity is
made remotely – by mail, over the phone,
from a catalog or online – and the tax is not
collected by the vendor, the customer is liable
for remitting the entire Use Tax to the NYS
Department of Taxation and Finance.
When a purchase is made outside of the City
and shipped to a NYC address, vendors are
responsible for collecting the Use Tax if they
have nexus – the legal term for connection –
to the City. If the vendor does not have nexus,
the customer is responsible for paying the Use
Tax to the NYS Department of Taxation &
Finance.
Nexus. For decades, state and local governments
have been trying to define physical presence and
the extent to which this presence establishes
nexus.

Nexus gives the taxing jurisdiction the right to
collect taxes on out-of-jurisdiction sales.
The explosion of e-commerce sales, especially
sales made over the Internet, has increased the
complexity and urgency of addressing the nexus
issue. The combined NYC/NYS loss of revenues
in FY 2009 resulting from untaxed e-commerce
sales to NYC residents has been estimated at $257
million.4
Defining Nexus. In NYS and elsewhere in the
U.S., the determination of nexus is based on two
U.S. Supreme Court decisions: National Bellas
Hess v. Department of Revenue in 1967 and Quill
v. North Dakota in 1992.5
The Court ruled in Bellas Hess and reaffirmed in
Quill that a vendor is exempt from collecting the
Sales/Use taxes in a jurisdiction in which it does
not have an identifiable physical presence. In both
cases, the Court acted on what it saw to be the
potential adverse impact on interstate commerce if
vendors were required to know the wide range of
rates and taxable items in all taxing jurisdictions.
6-­‐1 
Although both Bellas Hess and Quill dealt
with catalog mail orders, the Court’s decisions
have also been applied to sales made over the
Internet.
In Quill, the Court acknowledged the power of
Congress to overturn its decision. In the absence
of any such congressional action, the states have
tried to reconcile their Sales/Use tax differences –
the basis for the Quill decision – primarily through
the Streamlined Sales Tax Project (SSTP),
organized in 2000 by representatives from state
legislatures, local governments and the private
sector.
In 2002, the SSTP group approved the Uniform
Sales and Use Tax Administration Act, known as
the Streamlined Sales Tax and Use Agreement
(SSUTA).6 The Agreement combines uniform
administration procedures with simplification
measures but does not mandate any actions by the
states.
By signing onto the SSUTA, states agree to revise
their Sales Tax processes and to make changes to
their collection practices. The SSUTA streamlined
sales tax system does not, however, give
participating states the authority to require
vendors to collect taxes on purchases made
outside the taxing jurisdiction.
Although NYS was party to the development of
SSUTA, it has not become a signatory to it. To do
so, the State would have to make extensive
revisions to its Sales Tax law including changing
its exemptions for telecommunication services,
clothing, drugs and medical equipment.
Nexus in NYS. In 2008, NYS amended its
Sales/Use Tax Law to address the issue of
physical presence and nexus as it relates to
Internet vendors. The amendment expands the
State’s definition of nexus to include companies
that have no physical presence other than in-State
affiliates.

Referred to as the Amazon Law, the State’s
amendment is directed at Internet vendors
using affiliates to promote in-state sales.
These affiliates, or independent in-state
website owners, place a link to the Internet
vendor on their own websites and earn a
commission on sales made from referrals.
Amazon.com appealed the amendment to the NYS
Supreme Court arguing that its affiliates are
independent contractors that are advertisers and
that Amazon.com does not have nexus in New
York.
The Court ruled that Amazon’s New York-based
associates are solicitors, thus giving Amazon.com
nexus in New York. Amazon.com is therefore
required to collect the NYS Sales/Use Tax and
whatever local taxes are applicable, including
those in NYC. Amazon.com has appealed the
decision to the NYS Court of Appeals – NYS’s
highest court. No decision has yet been reached.
6.4 The NYC Sales/Use Tax Base
The Sales/Use Tax base for NYC consists of all
tangible personal property purchased in the City
with some exemptions, and enumerated services.
Exemptions from the NYC (and NYS) Sales/Use
tax include:

Most food for at-home consumption,
except for some items such as soft drinks,
candy and alcoholic beverages;
 Prescription drugs;
 Clothing and footwear costing less than
$110 per item;  Newspapers and periodicals;  Textbooks for college students;  Public transportation.
Purchases by Federal, NYS and local government
agencies, and by non-profit institutions such as
schools and hospitals are also exempt from the
Sales/Use Tax, as are purchases by diplomats and
employees of certain international organizations.
Some business expenditures are also exempt. They
are:
6-­‐2 

Retailer purchases from manufacturers or
wholesalers for items that will be resold
Purchases by manufacturers of machinery and
equipment to be used or consumed in the
production process.
Source of Sales/Use Tax Revenues. As shown in
Table 6.1, sales by the retail trade sector are the
primary source of NYC Sales/Use Tax revenues,
accounting for 32.5% of all taxable sales in 20072008, almost 3 times the 12% generated by the
accommodations/food services sector, the secondlargest source.
Table 6.1: Source of Taxable Sales by Major
Economic Sector, 2007-2008
Retail Trade
32.5%
Food Service
12.4
Wholesale
9.6
Information Service
9.2
Business Services
4.5
Utilities
4.1
Construction
2.8
Manufacturing
2.6
All Other Sales
22.4
Source: NYC Annual Sales of State Tax Base (3/072/08), NYS Department of Taxation and Finance
Taxing Services. As mentioned earlier, the
NYC/NYS Sales/Use Tax applies to most
purchases of goods with certain exemptions. In
contrast, services taxed are specifically
enumerated. NYC imposes its Sales/Use Tax on
almost all of the services taxed under the NYS
Sales/Use Tax. They are:









Sales of utility and telecommunication
services;
Protective and detective services;
Maintenance, installation, service and repair
of tangible personal property;
Maintenance, service and repair of real
property;
Storage;
Food and beverages sold by restaurants and
caterers;
Admission charges to places of amusement; Receipts from the sales of the service of
parking, garaging, or storing motor vehicles; Interior decorating and design (NYC Sales
Tax does not apply); 


Sales of entertainment and/or information
provided, for example over 800 or 900 phone
numbers; Hotel occupancy; Social and athletic club dues.
NYC also taxes other services not taxed by the
State:



Beauty, barbering, hair restoring, manicures,
pedicures, electrolysis, massage, and other
similar services;
Services provided by, or use of, facilities of
weight control salons, health salons,
gymnasiums and similar establishments;
Sales of credit rating and credit reporting
services.
6.5 The Sales/Use Tax in Other Jurisdictions
New York is one of 45 states plus the District of
Columbia to impose a Sales/Use Tax. State tax
rates range from a low of 2.9% in Colorado to a
high of 7% in several states, including New
Jersey.
In 36 states, local governments are permitted to
impose a Sales/Use Tax. The 10.25% combined
state/local rate in Chicago is the highest in large
cities in the U.S. followed by Los Angeles with its
9.75% combined rate (see Exhibit 6.1).
Exemptions to the Sales/Use Tax permitted in
NYC and NYS are similar to those permitted in
other taxing jurisdictions. For example, all but one
state exempts prescription drugs and more than
half exempt food.
6.6 NYC Sales/Use Tax Revenue Trends
In FY 2009, NYC Sales/Use Tax revenues stood
at $4.59 billion, a 5.6% decrease over the $4.87
billion in 2008. Figure 6.1 shows that in current
dollars, Sales/Use Tax revenues have increased
every year since 2000 with the exception of 2002
and 2009. In constant 2000 dollars, tax revenue
declined in 2006 as well as in 2002 and 2009.
6-­‐3 Figure 6.1: NYC Sales/Use Tax Revenues, Current and
Constant 2000 Dollars, 2000-2009
the NYS takeover of the collection and
administration of the NYC Tax and the pledging
of NYC Sales Tax revenues as security for
repayment of Municipal Assistance Corporation
(MAC) bonds from 1975 to 2008.7 These and
other legislative changes to the NYC Sales/Use
Tax are shown in Exhibit 6.2.
6.8 Issues and Concerns
Tax Administration
Sources: Current Dollars, NYC OMB; Moody’s Economy.com NY
State & Local Government Product Deflator used to convert current
dollars into constant 2000 dollars.
Figure 6.2 shows that since 1980, NYC Sales/Use
Tax revenues have generally moved in sync with
fluctuations in economic conditions in the City.
Annual changes in Sales/Use Tax revenues reflect
the repeated elimination and restoration of the
clothing tax exemption as well as increases and
decreases in the tax rate. These changes confound
the relationship between Sales Tax revenues and
economic conditions.
Figure 6.2: Constant 2000 Dollar Sales/Use Tax Revenues
and Real NYC Economic Growth, 1980-2009
The Use Tax. The Use Tax is inserted as its own
line on the NYS Personal Income Tax form. The
State also provides a table based on income to
help taxpayers determine their Use Tax liability.
Most individuals, however, do not pay the Use
Tax when it is not collected at the time of
purchase. Failure to collect the Use Tax is a
nationwide problem, causing states to lose
significant amounts of revenue annually.
E-commerce. NY and several other states are
adopting laws that enable them to capture
Sales/Use taxes lost to online Internet sales.
Vendors are, however, fighting back to keep states
from forcing them to collect the tax on ecommerce transactions, specifically those made
over the Internet.
North Carolina, Rhode Island and most recently
Colorado adopted laws requiring affiliates of online companies with no other physical presence in
the state to collect the Sales/Use Tax. As a result,
Amazon.com, a large Internet vendor, cancelled
its affiliate programs in all three states.
Sources: Index of Coincident Economic Indicators, NY Federal
Reserve Board; Moody’s.com NY State & Local Government
Product Deflator used to convert current dollar values from NYC
OMB to constant 2000 dollars.
6.7 History of the NYC Sales/Use Tax
The New York City Sales/Use Tax was
established as a temporary tax in 1934 to enable
the City to raise revenues during the Depression.
Many changes have been made since then to the
tax rate, base and administration. These include
Other online vendors have indicated that these
laws would force them out of business. The
governors of California and Hawaii have vetoed
Amazon-type laws, but other states are moving
ahead with similar laws to address the nexus issue.
Tax Coverage
Taxing Services. NYC and NYS tax some of the
168 services identified by the Federation of Tax
Administrators (FTA) as potentially taxable.8 The
6-­‐4 taxation of additional services would broaden the
NYS and NYC tax bases, thus generating
additional tax revenues.
Taxing some services such as those of medical
doctors, would, however, make the tax more
regressive meaning that it would take a greater
percentage of income from lower income
taxpayers than higher income taxpayers.
4
See Bruce et al. State and Local Government Sales Tax
Revenue
Losses
from
Electronic
Commerce
http://cber.utk.edu/ecomm/ecom0409.pdf
5
National Bellas Hess v Department of Revenue (386 U.S.
753) (1967); Quill v. North Dakota (504 U.S. 298 (1992).
6
http://www.streamlinedsalestax.org/index.php?page=faqs
7
The State suspended the City’s authority to impose its own
Sales Tax from July 1, 1975, through July 1, 2008, and
replaced it with an identical 4% Sales Tax dedicated to the
repayment of MAC bonds.
8
See http://www.taxadmin.org/fta/pub/services/tan0505_
services.pdf
Taxing other types of services raises questions
relating to the administration of the tax, e.g., the
equal treatment of services performed internally
and externally. For example, the services of
accountants and lawyers working within a
company would not be taxed; these same services
supplied externally would be taxed.
Endnotes
1
NYC imposes a 6% tax and an additional 8% surtax on
parking, garaging or storing motor vehicles in Manhattan.
Manhattan residents who own a motor vehicle registered in
the County may be eligible for an exemption from the surtax.
2
The Metropolitan Commuter Transportation District
(MCTD) is comprised of NYC, Rockland, Nassau, Suffolk,
Orange, Putnam, Dutchess and Westchester counties.
3
Not all Use Tax derives from sales transactions. There are
some transactions internal to a company that can be subject to
the Use Tax.
6-­‐5 Exhibit 6.1: Sales Tax Rates, New York City and Other Large U.S. Cities, 2009*
City
City Tax Rate
State Tax
Rate
Other Sales
Taxes
Total
Sales
Tax Rate in
City
8.875%
9.75
10.25
8.25
9.0
8.0
6.0
6.0
6.25
6.52
8.0
8.75
9.25
New York City
4.5%
4.0%
0.375%***
Los Angeles
1.5
8.25
Chicago
1.25
6.25
2.75 ***
Houston
1.0
6.25
1.0 ***
Phoenix
2.0
6.3****
0.7***
Philadelphia**
2.0
6.0
Detroit
6.0
Baltimore
6.0
Boston
6.25
Denver**
3.62
2.9
Atlanta
1.0
4.0
3.0
San Diego
8.25***
0.50
San Jose
8.25***
1. 0
*Includes 10 largest U.S. Cities plus Boston, Atlanta and Denver
** City coterminous with county. *** Includes tax for public transportation in area.****Rate increased to 6.6%
June 1, 2010.
6-­‐6 Exhibit 6.2: Major NYS Legislative Actions Affecting the NYC Sales /Use Tax , 1934-2009
Year
Action
1934
2% tax imposed on the sales and use of tangible personal property and selected services in NYC.
1959
Tax rate increases to 3% for most sales and to 5% for restaurant meals and drinks.
1963
Tax rate increases to 4% for most sales.
1965
Tax rate decreases to 3%; NYS takes over administration of Sales/Use Tax in all State localities.
1970
6% tax imposed on parking and garaging services.
1974
Overall rate increases to 4%.
1975
NYC Sales/Use Tax revenues 1975 level pledged to Municipal Assistance Corporation (MAC) to meet debt
obligations. Revenues derived from future growth in tax to flow directly to City.
Non-MAC Sales Tax extended to protective/detective services, credit reporting, collection services, barber and
beauty shops and health salons.
Credit for Sales Tax paid on machinery used in production can be claimed against NYC business taxes.
1976
1977
1980
1985
1989
1990
1991
1992
1995
1996
8% tax surcharge imposed on parking and garaging services in Manhattan, bringing the total Sales Tax on parking
in Manhattan to 18.25%.
Manhattan residents exempted from the parking/garaging tax surcharge of 8%.
Tax applied to interior decorating, contract cleaning and maintenance services. Credit against business tax liability
for sales taxes paid on machinery used in production changed to a sales tax exemption.
Tax extended to cover entertainment services.
Tax extended to cover shipping, transportation, postage and delivery charges, telephone answering services and
sales of pre-written software.
Tax exemption applied to the additional cost of a new alternative fuel vehicle above the sales price of a comparable
gasoline or diesel powered vehicle.
Interior decorating and design services exempted.
2005
Several types of transactions and services exempted from tax, including the shipment of papers to publishers,
printed promotional materials delivered through shipping services and parking charges paid to municipality-owned
and operated parking facilities.
NYC (and NYS) sales tax removed from clothing purchases of individual items priced under $100. Additional sales
and services exempted from Sales Tax including Internet access services.
Additional goods/transactions exempted from Sales Tax, including textbooks, coin phone calls costing $0.25 or less
and parking charges paid by members of homeowner associations to the association-owned or operated parking
facilities.
NYC (and NYS) sales taxes removed on clothing and footwear purchases under $500. Certain food items sold by
vending machines that accept credit/debit cards exempted.
Purchases of gas and electricity from out-of-state suppliers subject to Use Tax. Additional sales and services
exempted from Sales Tax, including machinery used by Internet data centers that sell website services, and
purchases of tangible personal property and services used by qualified enterprises located in Empire Zones.
Tax rate temporarily increased to 4.125% from 6/2003 through 5/2005. Sales Tax exemption for clothing and
footwear purchases under $110 suspended temporarily, with some exceptions. NYC excise tax on cigarettes added
to the sales price of cigarettes on which NYC (and NYS) Sales Taxes are applied.
Exemption for clothing and footwear purchases under $110 suspended temporarily. Exemption on additional costs
of purchasing hybrid vehicles extended to 2005.
Tax rate reduced to 4.0%. Exemptions for clothing and footwear purchases under $110 reinstated.
2006
Exemptions on clothing and footwear purchases under $110 made permanent.
2007
Clothing and footwear purchases costing $110 and more exempted from tax.
1997
1998
1999
2000
2003
2004
2008
NYC fulfills all MAC obligations. Non-profit organizations required to collect Sales Tax on a wider range of retail
sales.
2009
Tax rate increased to 4.5%. Tax reinstated on purchases of clothing and footwear costing $110 or more per item;
purchases costing less than $110 are still fully exempt.
Sources: NYC Office of Management and Budget Tax Revenue Forecasting Methodology. Financial Plan Fiscal Years 20082012. Sales Tax Law Changes in New York City - Effective August 1, 2009, obtained from:
http://www.tax.state.ny.us/pdf/notices/n09_12.pdf, accessed on March 4, 2010.
6-­‐7 Cigarette Tax
7.0 CIGARETTE TAX
7.1 Overview
7.3 The NYC Cigarette Taxpayer
New York City imposed a temporary tax on
cigarettes from 1938 to 1940. The tax was
reinstated in 1952 and has been in place since
then.1 In FY 2009, the NYC Cigarette Tax
yielded $96 million, accounting for 0.3% of total
City tax collections and 0.2% of City revenues
from all sources.2 The administration and
collection of Cigarette Tax revenues is assigned
to the NYS Department of Taxation and
Finance. The NYC Department of Finance
shares this responsibility with the State. NYC and NYS Cigarette Taxes must be paid at
the time the cigarettes are brought into the State
for sale/use in the City. As proof of payment,
authorized agents must purchase NYS tax
stamps and affix them to individual cigarette
packs before they can be sold at wholesale or
retail. If the cigarettes are to be sold in NYC, a
joint NYC/NYS tax stamp must be affixed to
each pack.
The NYC Cigarette Tax is $1.50 for a pack of
20. It is imposed on agents or distributors and
passed along to the NYC consumer in the cost of
each pack of cigarettes. The color-coded tax stamps on the cigarette pack
indicate that the NYC and NYS Cigarette Taxes
have been paid. If the NYC tax has not been
paid prior to final purchase by consumers, they
are responsible for remitting it to the City
Department of Finance.
7.2 Factoring in the State
7.4 The NYC Cigarette Tax Base
The NYC Cigarette Tax is imposed in addition
to the NYS tax on licensed agents who bring
cigarettes into the State for sale or use in NYC.
In FY 2009, the NYS Cigarette Tax generated
$1.4 billion, accounting for 2.3 % of all NYS tax
revenues and 1.1% of State revenues from all
sources.
Revenues from the NYC Cigarette Tax accrue to
the City from taxes applied to cigarettes and, as
of 2008, to little cigars. The NYC/NYS Cigarette
Taxes are applied to each pack of 20 cigarettes
and cigars with some exceptions including:
Effective July 1, 2010, the NYS Cigarette Tax
was increased to $4.35/pack of 20. NYC, NYS
and MCTD sales taxes are imposed on the total
price of the cigarettes, which includes Federal,
State and City Cigarette Excise Taxes. 
The NYC/NYS combined $5.85/pack
Cigarette Tax is the highest in any U.S.
jurisdiction.3
Cigarette and other tobacco product vendors are
required to pay an annual registration fee for
every location in the State where they sell their
products. Vendors must also display valid State
permits. Retailers who sell cigarettes to
consumers must have a NYC Retail Cigarette
Dealer License.




Cigarettes sold to Federal, State or local
government entities, the UN and certain
diplomatic personnel and not for resale;
Cigarettes sold to or by a voluntary
unincorporated organization of the armed
forces operating a place for the sale of goods;
Two cartons of cigarettes or less used in
NYC, if the user brings the cigarettes into
the City for use, not for sale;
Cigarettes possessed by an agent or
wholesale dealer for sale to an out-of-City
dealer, or for sale and shipment to a person
in another state for use there.
7.5 The Cigarette Tax in Other Jurisdictions
All states plus D.C. impose some type of tax on
cigarettes; 11 have given local governments the
option to do so. NYC is the only jurisdiction in
NYS permitted to tax cigarettes. Other states
permit extensive use of the tax by local
governments, most with relatively low tax rates.4
7-­‐1 7.6 NYC Cigarette Tax Revenue Trends
7.7 History of the NYC Cigarette Tax
In FY 2009, NYC Cigarette Tax revenues stood
at $96 million, a 22% decrease over the $123
million in 2008. As shown in Figure 7.1, current
dollars revenues have declined in all years since
2000 with the exception of 2003 – following a
jump in the tax rate from $0.08/pack to
$1.50/pack – and 2008 when there was an
increase of less than 1%. In constant 2000
dollars, collections fell in every year with the
exception of 2003, following the rate increase.
NYC imposed a temporary $0.01/pack tax on
cigarettes from 1938 to 1940, when the price of
cigarettes was $0.15 a pack. The tax was
reinstated in 1952. Since then, it has been
increased several times.
Figure 7.1: NYC Cigarette Tax Revenues, Current and
Constant 2000 Dollars, 2000-2009
In 2002, when the NYS Legislature, at the City’s
request, increased the tax to $1.50 per pack, the
State was concerned that the higher City tax
would reduce cigarette sales, and thus NYS
Cigarette Tax revenues. In a compromise
allowing for the increased tax, 46% of NYC’s
revenue from the tax is redirected to the State.
Additional information on the history of the
NYC cigarette tax is presented in Exhibit 7.1.
7.8 Issues and Concerns
Sources: Current Dollars, NYC OMB; Moody’s Economy.com NY
State & Local Government Product Deflator used to convert
current dollars into constant 2000 dollars.
Figure 7.2 shows that constant dollar Cigarette
Tax revenues have experienced a long term
decline, and have dropped in every year since
1982 with the exception of 2003, the year
immediately following the jump in the NYC
Cigarette Tax rate to $1.50/pack.
Figure 7.2: Constant 2000 Dollar Cigarette Tax
Revenues and Real NYC Economic Growth, 1980-2009
Sources: Index of Coincident Economic Indicators, NY Federal
Reserve Board; Moody’s.com NY State & Local Government
Product Deflator used to convert current dollar values from NYC
OMB to constant 2000 dollars.
Bootlegging. Bootlegging, i.e., bringing untaxed
cigarettes into NYC has been a problem as far
back as 1938 when the City’s temporary
cigarette tax was imposed.5 Growing price
differentials
between
NYC
and
other
jurisdictions in the region and nation provide a
greater incentive for bootlegging.
Sales on Indian Reservations. A 1994 U.S.
Supreme Court decision affirmed the right of the
states to assess and collect taxes on sales made
on Indian reservations to persons who are not
members of the Indian nation. In 2009, stronger
enforcement by the City of sales made on Indian
reservations to New York City residents led to
charges filed against eight Long Island
reservations for failing to collect as much as
$195 million in City taxes associated with over a
$1 billion in cigarette sales to City residents.6
Compliance by Internet vendors. Internet
purchases of cigarettes have enabled individuals
to avoid paying state and local taxes. NYS
enacted legislation, which took effect in 2003,
banning Internet and mail-order cigarette sales
directly to individual consumers in the State.
Federal legislation signed into law in March
2010 (the Prevent All Cigarette Trafficking Act)
prohibits the mailing of cigarettes through the
U.S. Postal Service. While it would appear that
7-­‐2 cigarettes can no longer be bought over the
Internet for delivery to NYS consumers, ongoing
surveillance is needed to ensure compliance.
Endnotes
1
Since 2008, the NYC Cigarette Tax has also applied to
“little cigars,” which are small cigarette-style cigars, with
20 in a pack. They resemble cigarettes in shape, packaging
and filters but are cigars because of their tobacco wrapper.
The Federal government recently changed the definition of
cigarettes to include little cigars and now imposes the
Federal excise tax on them at the same rate.
2
NYC revenues from the Cigarette Tax are net of the 46%
percent of City Cigarette Tax collections redirected to the
State in accordance with the 2002 legislation that raised the
City’s tax rate to $1.50 a pack.
3
http://tobaccofreekids.org/research/factsheets/pdf/0267.pdf.
4
Ibid.
5
For a discussion of bootlegging associated with the
Cigarette Tax, see Patrick Fleenor, “Cigarette Taxes, Black
Markets, and Crime: Lessons from New York’s 50-Year
Losing Battle.” Policy Analysis, Cato Institute, February 6,
2003. http://www.cato.org/pubs/pas/pa468.pdf
Also see Advisory Commission on Intergovernmental
Relations, Cigarette Bootlegging: A State and Federal
Responsibility, Washington, D.C., 1977.
6
NYC Office of the Mayor, Press Release, PR 385-8,
September 29, 2008.
7-­‐3 Exhibit 7.1: Major NYS Legislative Actions Affecting the NYC
Cigarette Tax, 1938-2009*
Year
Action
1938
NYC imposes a temporary $0.01 tax per pack until
1940.
1952
NYC reinstates $0.01/pack tax
1959
Tax rate increases to $0.02/pack
1963
Tax rate increases to $0.04/pack
1971
Additional tax of $0.03-$0.04/pack depending on tar
and nicotine content
1976
Tax rate of $0.08/pack imposed on all cigarettes;
tar/nicotine tax repealed
2002
Tax rate increases to $1.50/pack
2008
Packs of small cigars now taxed at the same rate as
cigarettes
Sources: New York City Office of Management and Budget.
Tax Revenue Forecasting Documentation.
Financial Plan Fiscal Years 2009–2013.
Cato Institute http://www.cato.org/pubs/pas/pa468.pdf
7-­‐4 Hotel Tax
8.0 HOTEL TAX
8.1 Overview
8.4 The NYC Hotel Tax Base
The New York City Hotel Room Occupancy Tax,
known as the Hotel Tax, has been imposed by the
City since 1970. In FY 2009, the tax yielded $342
million, accounting for 1.0% of total NYC tax
collections and 0.6% of City revenues from all
sources. The NYC Department of Finance collects
and administers the City’s Hotel Tax.
NYC’s Hotel Tax is levied on the total price of a
room regardless of how it is booked.
The NYC Hotel Tax is imposed on guests who
occupy a hotel, motel, bed-and-breakfast,
boardinghouse or transient club/apartment room.
The City’s tax has two components: 5.875% of the
room price plus $0.50-$2.00/day/room depending
on the room price.1
8.2 Factoring in the State
NYS levies a $1.50/day/fee on hotel room
occupancy, which is earmarked for the Jacob K.
Javitz Convention Center and administered as part
of the State Sales Tax. The fee applies only to
hotel rooms in NYC. The combined NYC/NYS
Sales Tax rate of 8.875% is imposed on the price
paid for a hotel room in NYC, exclusive of the
NYC and NYS hotel excise taxes.
8.3 The NYC Hotel Taxpayer
As mentioned above, the NYC Hotel Tax is
imposed on the transient occupancy of a room in a
hotel, motel, boardinghouse, bed-and-breakfast,
bungalow or club. Rooms occupied by permanent
residents, i.e., those who occupy a room for at
least 180 consecutive days, are exempt from the
tax.2 Other exemptions include:



Federal, State and City government entities;
The UN and similar organizations;
Not-for-profit organizations including
charitable, religious and educational
institutions.


For rooms booked directly by customers or
their agents at the full retail price, the Hotel
Tax is collected and remitted by the hotel
operator to the NYC Department of Finance.
For bookings made on the Internet through
room remarketers such as Expedia and
Travelocity, the hotel operator is responsible
for collecting and remitting the tax on the
price it charges to the remarketer. The
remarketer is responsible for the tax on the
mark-up, i.e., the difference between the price
paid to the hotel and the price paid by the
guest.
8.5 The Hotel Tax in Other Jurisdictions
Just about every jurisdiction in the U.S. with a
hotel imposes a general retail sales tax, a separate
excise tax, or both, on transient hotel room
occupancies. The total tax rate on hotel rooms in
NYC is at the higher end of those imposed in other
large U.S. cities such as Los Angeles, Philadelphia
and Atlanta.
In some places, a portion of Hotel Tax revenues
pays for regional transportation uses. Many local
governments in NYS and elsewhere dedicate all or
part of their revenues from the hotel tax to
tourism-related activities.
8.6 NYC Hotel Tax Revenue Trends
In FY 2009, NYC Hotel Tax revenues stood at
$342 million, a 9.8% decrease over the $379
million in 2008. Figure 8.1 shows that in current
and constant dollars, Hotel Tax revenues
increased in every year from 2000 to 2009 with
the exception of 2002 and 2009.
8-­‐1 Figure 8.1: NYC Hotel Tax Revenues, Current and
Constant 2000 Dollars, 2000-2009
8.7 History of the NYC Hotel Tax
NYC imposed an excise tax on hotel occupancies
between 1946 and 1965 and has levied the current
tax since 1970. The several changes to the tax rate
and to the type(s) of taxes imposed can be found
in Exhibit 8.1.
8.8 Issues and Concerns
Sources: Current Dollars, NYC OMB; Moody’s Economy.com NY
State & Local Government Product Deflator used to convert current
dollars into constant 2000 dollars.
Figure 8.2 shows that constant dollar Hotel Tax
revenues generally are in sync with the trend in
economic conditions in the City. The 1987 spike,
however, was due to a significant rate increase in
the Hotel Tax in 1986 (see Exhibit 8.1)
Figure 8.2: Constant 2000 Dollar Hotel Tax Revenues
and Real NYC Economic Growth, 1980-2009 Sources: Index of Coincident Economic Indicators, NY Federal
Reserve Board; Moody’s.com NY State & Local Government
Product Deflator used to convert current dollar values from NYC
OMB to constant 2000 dollars.
Online Bookings. NYC and other taxing
jurisdictions maintain that OTCs should be liable
for the Hotel Tax on the full retail price of the
rooms that they book for customers, and not on the
lesser wholesale price that they pay to the hotels.
OTCs claim that they are intermediaries who
should not have to collect the Hotel Tax on the
difference between the wholesale and retail prices
of the rooms they book online.
In December 2009, a lawsuit was filed against
NYC with respect to its 2009 law that holds
intermediaries responsible for the Hotel Tax on
the retail rate of rooms booked online. The U.S.
Congress has been considering legislation that
would prohibit governments from taxing the retail
price of a hotel room booked online. Such a law
would have a negative impact on NYC Tax
revenues if hotels restructure their operations to
take advantage of preferential treatment of online
bookings.
Endnotes
1
The tax is $0.50/day on rooms rented at $10 up to $20;
$1.00/day on rooms rented at $20 up to $30; $1.50/day on
rooms rented at $30 up to $40; and $2.00/day on rooms
rented at $40+/day.
2
An occupant cannot qualify as a permanent resident of any
room for any days on which the room is sublet or resold to
another occupant.
8-­‐2 Exhibit 8.1: Major NYS Legislative Actions Affecting the NYC Hotel Occupancy Tax,
1970-2009
Year
1970
1986
1990
1994
2009
Action
NYC tax imposed on hotel rooms in the City at $0.50 to $2.00 per night based on room
price.
5% tax imposed on hotel rooms in NYC in addition to $0.50-$2.00 room charge
Tax rate increased to 6% with 25% of the increase in tax collections earmarked for
tourism. Increase was rolled back in 1994. Proceeds from the NYC Hotel Tax have not
been earmarked for visitor or tourism-related spending since then.
Tax rate reduced from 6% of the room rate to 5%.
Beginning March 1, 2009, tax rate increased from 5% of the room rate to 5.875%.
Source: NYC Office of Management and Budget Tax Revenue Forecasting Methodology.
Financial Plan Fiscal Years 2008-2012.
8-­‐3 General Corporation Tax
9.0 GENERAL CORPORATION TAX
9.1 Overview
New York City has levied the General
Corporation Tax (GCT) since 1966. In FY 2009,
the tax yielded $2.3 billion, accounting for 6.5%
of total NYC tax collections and 3.8% of City
revenues from all sources. The NYC Department
of Finance collects and administers the GCT.
The City’s GCT is imposed on corporations that
have business activities, employ capital, own or
lease property or maintain an office in the City,
with certain exceptions (see Section 9.3). The
GCT rate is 8.85% on income allocated to NYC.
Corporations pay on one of three other bases if a
higher tax will result (see Section 9.4).
9.2 Factoring in the State
The New York City GCT is levied in addition to
the NYS Corporation Franchise Tax, generally
referred to as the 9A Franchise Tax. In FY 2009,
the State 9A Franchise Tax yielded $2.7 billion,
accounting for 4.6% of total NYS tax collections
and 2.3% of total State revenues.
The State tax is imposed on corporations for the
privilege of exercising their corporate franchise in
New York. It applies to general business
corporations not taxed under another article of the
State’s Tax Law. The tax rate is 7.1% of net
income allocated to NYS unless a higher tax
results on a different base (or 6.5% for qualified
small business and manufacturers).1
Companies doing business in NYC and the other 7
counties in the Metropolitan Commuter Transportation District (MCTD) have two additional
NYS tax liabilities. The first is a 17% surcharge
calculated based on the 9% State Corporate
Franchise Tax rate in effect in 1997. Although
originally enacted in 1982 as a temporary tax to help
finance mass transportation, the surcharge has been
extended several times since then.
January 1, 2009. Known as the MTA Payroll Tax,
the MCTMT rate is $0.34 for every $100 of
payroll allocated to the District. Similar to the 17%
surcharge, the MTA Payroll Tax was enacted to help
finance mass transportation expenditures in the
MCTD.

The combined 15.95% NYC/NYS tax rate on
corporate income exceeds that in any other
U.S. city, with only Philadelphia coming
close. The 17% surcharge and the MTA
Payroll Tax widen the gap between NYC and
other jurisdictions.
9.3 The NYC General Corporation Taxpayer
As discussed above, the New York City GCT is
imposed on all domestic and foreign corporations
having business activities, employing capital,
owning or leasing property or maintaining an
office in the City, with certain exceptions. They
include:







Corporations subject to the NYC Banking
Corporation Tax or regulated utilities subject
to the Utility Tax;
Corporations organized exclusively for the
purpose of holding title to property and
turning over net income from the property to
an exempt organization;
Insurance corporations;
Certain limited profit housing and housing
development fund companies ;
Non-stock corporations organized and
operated exclusively for non-profit purposes;
Corporations exclusively engaged in operating
vessels in interstate or foreign commerce;
Certain corporations solely engaged in
interstate sales solicitation activities in NYC.
The second additional State tax imposed on
companies doing business in the MCTD is the
Metropolitan Commuter Transportation Mobility
Tax (MCTMT), effective for tax years beginning
9-­‐1 Treatment of Special Corporations
Taxpayer Reporting
S Corporations. NYC taxes corporations that
make an S Corporation election as if they were
regular corporations for purposes of both the GCT
and the Bank Tax.2 This means that NYC residents
who are elected S Corporation owners/
shareholders pay their share of the GCT or the
Bank Tax, whichever is applicable, as well as the
NYC Personal Income Tax on the same income
stream.
Each corporation subject to the City’s GCT must
file an annual tax return reporting its income and
capital. An affiliated group of corporations may
file on a separate return basis or on a combined
return basis.
Following the Federal approach, NYS does not tax
the business profits of S Corporations. The State
does, however, tax the income received by all
owners/shareholders of S Corporations through its
Personal Income Tax (PIT), which is imposed
regardless of place of residence of the taxpayer.

Because the NYC Personal Income Tax
applies only to residents, the City is not able
to tax personal income received by nonresidents from S Corporations. NYC captures
this income by taxing S Corporations in the
same manner as C Corporations for purposes
of the GCT, thereby subjecting its residents to
double taxation.
Limited Liability Corporations. Beginning TY
1994, the State allowed the formation of Limited
Liability Corporations (LLCs). LLCs are
unincorporated entities that are subject to the New
York City UBT unless they elect – for Federal
Income Tax purposes – to file as a corporation. If
they do so, they must file under the City GCT.
Regulated Investment Companies and Real
Estate Investment Trusts. Both Regulated
Investment Companies (RICs) and Real Estate
Investment Trusts (REITS) are subject to the
City’s GCT on the entire net income base (see
Section 9.4). There is no tax on the capital of a
REIT or RIC. Because the taxable income of both
REITs and RICs is calculated for Federal tax
purposes and for the City GCT after a deduction
for dividends paid, they are generally taxed only
on undistributed income. Thus, to the extent that a
REIT or RIC passes through its income to its
shareholders, the company pays no City GCT on
that income. The dividend or distributed gains are
taxed at the shareholder level. Any undistributed
income is subject to the GCT.


Under separate entity reporting, a corporation
with sufficient nexus – the legal term for
connection – with NYC is required to file its
own corporate income tax return.
Under combined reporting, an affiliated group
of taxpayers meeting certain capital stock
ownership and unitary business tests3 could be
permitted or required to file combined reports
if filing on a separate basis would distort the
activities, business, income or capital of the
taxpayers. To determine the tax liability of the
combined group, the incomes of its members
are added together, i.e., combined.
Beginning in TY 2009, NYC related corporate
taxpayers with substantial inter-corporate
transactions must report income on a combined
basis in calculating their GCT tax liability.
NYC also requires combined reporting of captive
REITs and RICs. Both are considered captive if
they are not regularly traded on an established
securities market and are more than 50% owned
by a single corporation which is not exempt from
the Federal Income Tax.
9.4 The New York City GCT Base
In general, the NYC General Corporation Tax is
computed by four (4) different methods and is
paid on the one that produces the largest tax
payment. For certain small corporations, the
second and third methods do not apply.
(1) Entire net income base – tax rate of 8.85%
on net income allocated to NYC.
(2) Alternative tax base – tax rate of 8.85%
of 15% on net income plus salaries/
compensation paid to certain shareholders
minus $40,000.
(3) Total capital base – tax rate of 0.15% on
business and investment capital allocated to
NYC.4
4) A fixed dollar minimum tax which is
calculated on a sliding scale ranging from $25
9-­‐2 to $5,000 based on taxpayer annual receipts
allocated to NYC.
In addition to the tax paid under the highest of
these four methods, a 0.075% tax on the
taxpayer’s subsidiary capital allocated to NYC is
also imposed.
Net Income. The starting point for calculating
entire net income for NYC General Corporation
Tax purposes is U.S. corporate taxable income,
subject to certain add-backs, subtractions and
other modifications. Once these modifications are
made, entire net income is divided into three
categories, which are treated differently for
purposes of the GCT: subsidiary5 income, business
income and investment income.
Subsidiary Income. Subsidiary income is not
taxed by NYS or NYC for corporate income tax
purposes. Other states fully tax subsidiary income
if the corporate taxpayer has its headquarters in
their state. New York’s decision not to do so was
made in an effort to retain and attract corporate
headquarters.

In 2008, with its 56 corporate headquarters,
New York State was ranked second in the
nation in the number of Fortune 500
companies headquartered in the State. With its
64 headquarters, Texas, which levies a
corporate tax but no Personal Income Tax,
ranked first.6
Investment Income. Investment income is
calculated as gains, losses and deductions from
investment capital, i.e., investments in stocks,
bonds and other securities, not held for sale in the
regular course of business, excluding subsidiary
capital and stock issued by the taxpayer.
Regardless of whether the taxpayer is doing
business within or outside NYC, it is permitted to
allocate its investment income using its Investment
Allocation Percentage.

The Investment Allocation Percentage is not
based on the taxpayer’s corporate activities
but on the activities of the corporation(s) in
which it has invested.
Business Income. Business income is defined as
entire net income minus subsidiary and investment
income. For a corporation doing business solely in
NYC, business income constitutes its tax base, i.e.,
its taxable income. For a corporation doing
business inside and outside the City, how much of
its income may be taxed by the City can be
determined in one of two ways: (1) by using the
company’s books and records7 if they accurately
reflect the amount of business being done within
or without NYC; or (2) by using what is called an
allocation formula in NYC and NYS and an
apportionment formula elsewhere.



Until 2008, for purposes of the GCT, a
corporation’s income was allocated based on a
3-factor formula that took into account the
share of its total property, payroll and sales in
the City. Each factor was equally weighted
and accounted for one-third in determining the
percentage of income attributable to the City.
Manufacturers, however, have been permitted
to double-weight the sales factor since 1996.
Starting in TY 2009, the City’s 3-factor
formula has been modified so that allocation
for GCT taxpayers will only be based on the
sales factor. The change to a 1-factor formula
is being phased in over a 10-year period.
Manufacturers will retain their current doubleweighted sales factor until 2011 when they
will use the same allocation formula as all
other taxpayers.
A company will benefit or lose from the
change in the formula depending on the extent
of its payroll, property and sales in NYC
relative to its national payroll, property and
sales. Under a sales-only formula, a company
with production facilities in NYC but no Citybased sales will apportion none of its
corporate income to the City; a company with
sales to NYC customers but no production
facilities will apportion a part of its corporate
income to the City.
GCT Credits. Once taxable income is determined,
GCT liability is calculated. Several credits are
available that can be subtracted from taxable
income to reduce GCT liability. These include:
the Relocation and Employment Assistance
Program (REAP), the Lower Manhattan
Relocation and Employment Assistance Program
(LMREAP), the Film Production Credit and the
Biotechnology Credit.8
9-­‐3 9.5 The GCT in Other Jurisdictions
A tax on corporate income is levied by 47 states
and the District of Columbia. Nevada, Washington and Wyoming do not have state corporate
income taxes. Five states give all or some local
governments the option to impose a corporate
income tax: New York, Kentucky, Michigan, Ohio
and Pennsylvania. A few other states, such as
Illinois and Colorado, permit local governments to
impose alternative-based business taxes such as
those on gross receipts. The few jurisdictions with
local business taxes impose them at low rates. For
example, in Michigan cities, the tax rate is 1%.
Figure 9.2: Constant 2000 Dollar GCT Revenues and Real
NYC Economic Growth, 1980-2009
Sources: Index of Coincident Economic Indicators, NY Federal
Reserve Board; Moody’s.com NY State & Local Government
Product Deflator used to convert current dollar values from NYC
OMB to constant 2000 dollars.
9.6 New York City GCT Revenue Trends
In FY 2009, GCT revenues stood at $2.3 billion, a
21% decline from the $2.9 billion in 2008. Figure
9.1 shows that in current and constant dollars,
GCT revenues declined in each year from 2001
through 2003 as well as in 2008 and 2009. As with
all other revenue trends discussed in the Guide,
audit revenues have not been included in the
revenue trend analysis. Audit revenues for the
GCT can, however, be substantial. For example, in
2009 GCT audit revenues stood at $486 million.
Figure 9.1: NYC General Corporation Tax Revenues,
Current and Constant 2000 Dollars, 2000-2009
9.7 History of the NYC General Corporation
Tax
In 1966, New York City established a General
Corporation Tax to be imposed on the net income
of corporations doing business in the city. Prior to
1966, the City had imposed a tax on the gross
receipts of corporations. Because this tax was seen
as unfair since it was not related to profitability,
the City asked the State Legislature for the
authority to impose a tax based on net income,
rather than on gross receipts. Since 1966, many
changes have been made to the GCT rate and base.
These changes are shown in Exhibit 9.1.
9.8 Issues and Concerns
Sources: Current Dollars, NYC OMB; Moody’s Economy.com NY
State & Local Government Product Deflator used to convert current
dollars into constant 2000 dollars.
Figure 9.2 shows that GCT revenues are sensitive
to economic conditions in the City. This means
that tax revenues generally rise and fall with
fluctuations in the economy, frequently with larger
changes especially when the economy is slowing
down or in decline.
Double Taxation. As discussed in Section 9.3,
NYC treats S Corporations doing business in the
City in the same manner as C Corporations for
purposes of the GCT. This means that NYC
residents who are owners/shareholders of S
Corporations are being taxed twice on the same
income stream – once under the GCT and again
under the NYC Personal Income Tax.

In 2006, S Corporations accounted for 35% of
total GCT liability.9 The City would thus
experience a serious decline in GCT tax
revenues if it were to conform to Federal and
State tax treatment of S corporations. Such a
change in treatment of S Corporations would
also mean that non-residents would pay no
NYC income taxes – corporate or personal.
9-­‐4 Combined Reporting. In implementing the new
rules related to combined reporting, the City will
have to increase its efforts to address several
difficult issues such as (1) defining which
taxpayers comprise the unitary group for
combined reporting; (2) deciding how to combine
the group’s income and how to treat intercompany transactions, net operating losses, credits
and deductions as well as non-business income;
and (3) how to apportion income.
Endnotes
1
NYS alternative bases for the 9A tax are: (1) Capital base,
taxed at 0.15%, with a lower rate (0.04%) for qualified
cooperative housing corporations; (2) Minimum taxable
income, which is entire net income with Federal preferences
added back and Federal adjustments subtracted, taxed at
1.5%; and (3) A minimum tax, ranging from $25 to $5,000,
depending on NYS receipts.
2
An S Corporation is a regular corporation that has elected S
Corporation status for Federal tax purposes.
http://www.irs.gov/businesses/small/article/0,,id=98263,00.ht
ml.
3
Unitary business means a business entity in which there is
a sharing or exchange of value between the members of the
group as demonstrated by: (1) centralized management or
a common executive force; (2) centralized administrative
services or functions resulting in economies of scale; or (3 )
flow of goods, capital resources or services demonstrating
functional integration.
4
For co-operative housing corporations, the rate is .04%,
not to exceed $1,000,000 for tax years beginning in or after
2009.
5
Subsidiary is defined as 50% or more of ownership by one
company of another
6
http://money.cnn.com/magazines/fortune/fortune500/2009/
states/CA.html
7
Books and records refers to a separate set of books and
records for the business including books of original entry and
ledger accounts, both general and subsidiary, or similar
records.
8
A discussion of GCT credits can be found at
http://www.nycedc.com/FinancingIncentives/Financing/Docu
ments/NYCEDC_BusinessIncentivesGuide.pdf
9
NYC Business Tax Report
http://www.nyc.gov/html/dof/html/pdf/09pdf/bit
9-­‐5 Exhibit 9.1: Major NYS Legislative Changes Affecting the New York City General
Corporation Tax, 1966-2009
Year
1966
Action
NYC imposes GCT at a rate of 5.5% on net corporate earnings.
1971
Rate increased to 6.7%.
1973
Rate increased to 10.05%.
1977
1978
Rate reduced to 9.5%.
Rate reduced to 9.0%.
1982
NYC decouples from Federal Accelerated Cost Recovery System (ACRS).
1987
Rate reduced to 8.85%.
1996
The allocation formula for NYC manufacturers changed to double weight the
sales factor.
Federal legislation increased depreciation allowance. In conformity with NYS
law, NYC to disallow deduction expenses for royalty and interest payments
made by a firm to a related firm. The excluded payment deductions are related
to expenses from the use of licenses, trademarks, copyrights, trade names and
other intangible assets.
Film production credit is established (in addition to credit on NYS 9A
Franchise Tax).
The film production credit is expanded. An Industrial Business Zone (IBZ)
Relocation tax credit for eligible businesses is established.
The alternative income-plus-shareholder compensation tax base and the capital
tax base eliminated for certain small taxpayers.
GCT minimum tax changed from $300 to a graduated minimum tax range of
$25 to $5,000, based on the taxpayers’ annual receipts allocated to New York
City. The maximum amount that can be owed under the alternative GCT
measured by business and investment capital increased from $350,000 to $1
million. Taxpayers with substantial inter-corporate transactions required to file
a combined return. Income allocation formula using single sales factor rather
than three factors, being phased-in over 10 years, starting in 2009.
2003
2004
2006
2007
2009
Source: NYC Office of Management and Budget Tax Revenue Forecasting Methodology.
Financial Plan Fiscal Years 2008-2012
9-­‐6 Unincorporated Business Tax
10.0 UNINCORPORATED BUSINESS TAX
10.1 Overview
New York City has imposed the Unincorporated
Business Tax (UBT) since 1966. In FY 2009,
the tax yielded $1.8 billion, accounting for 5%
of NYC tax collections and 2.9% of total City
revenues. The New York City Department of
Finance collects and administers the UBT.
NYC levies the UBT on the income of
unincorporated businesses carried on – wholly or
partly – in the City, with some exceptions (see
Section 10.3). The UBT tax rate of 4% is
imposed on taxable business and investment
income.
10.2 Factoring in the State
The State of New York does not levy a specific
tax on unincorporated businesses. Effective for
tax years beginning on or after January 1, 2009,
however, individuals – including members of
partnerships and limited liability companies
(LLCs) that are treated as partnerships – who
have annual net earnings from self-employment
greater than $10,000 allocated to the
Metropolitan Commuter Transportation District
(MCTD) are subject to the MTA Payroll Tax.
The tax rate is 0.34% of total net earnings from
self-employment allocated to the MCTD for the
tax year.

Businesses engaged primarily in qualifying
investment activities are partially exempt from
the UBT. Associations and publicly traded
partnerships treated as corporations for Federal
Corporate Income Tax purposes are subject to
the NYC General Corporation Tax.
10.4 The New York City UBT Base
The UBT tax is levied on business income and
investment income. After taxable income is
calculated for both, the tax rate of 4% is
imposed on the sum of the two to determine tax
liability before credits. Credits are then deducted
to arrive at final tax liability.
Business Income. The UBT business income
calculation starts with the definition for Federal
tax purposes of net profits from business
operations and is modified to reflect differences
between City and Federal rules. Thus modified,
this income constitutes UBT business income
for entities whose activities are conducted
wholly in NYC. For entities whose business is
conducted both inside and outside the City,
business income is allocated for purposes of the
UBT.

10.3 The NYC Unincorporated Business
Taxpayer
The NYC Unincorporated Business Tax is
imposed on sole proprietors, partnerships and
limited liability companies (LLCs) doing
business in the City with certain exceptions.
Exceptions include:


Services performed by an individual as an
employee or as an officer/director of a
corporation or as a fiduciary;
Persons or entities, other than dealers, who
are only engaged in the purchase, holding,
and sale of property for their own personal
accounts (e.g., stocks, bonds or other
securities);
Owners, lessees or fiduciaries who are
engaged in holding, leasing or managing
real property for their own accounts.

In NYC, until 2008, income was allocated
based on the taxpayer’s share of property,
payroll and sales in the City. Each factor
accounted for one-third in determining the
percentage of income attributable to NYC.
Manufacturers,
however,
have
been
permitted to double-weight the sales factor
since 1996.
Starting in Tax Year 2009, the City’s threefactor formula has been modified so that
allocation for unincorporated business
taxpayers will be based only on the sales
factor. The change to a one-factor formula is
being phased in over a 10-year period.
Manufacturers will retain their current
double-weighted sales factor until 2011
when they will begin to apply the same
allocation formula as all other taxpayers.
10-­‐1 All UBT taxpayers are permitted to exempt the
first $5,000 of income from their calculation of
taxable income. They are also permitted to take
a deduction for the lesser of two values: (1) 20%
of allocated income, or (2) $10,000 per
individual/ active partner.
Investment Income. Investment income is
income derived from investment capital minus
deductions allowable in computing entire net
income – directly or indirectly attributable to
investment capital/income – and a portion of the
taxpayer’s net operating loss.
Investment income for the Unincorporated
Business Taxpayer is allocated to NYC using an
Investment Allocation Percentage based on the
allocation to NYC of the corporation(s) in which
it has invested.
Credits. A full credit against UBT liabilities up
to $3,400 is available; the credit is phased down
for UBT liabilities between $3,400 and $5,400.
NYC residents may claim a credit against their
City Personal Income Tax liability for a portion
of UBT payments made as a sole proprietor or
partner of an unincorporated business. 


For residents with up to $42,000 in NYS
taxable personal income, a 100% credit may
be taken against PIT liability for the UBT
payment that flows through to them.
The credit against PIT liability for UBT
payments phases down to 23% for taxpayers
with more than $142,000 in taxable income.
A corporation subject to the NYC General
Corporation Tax, or a partnership subject to
the UBT, is allowed a credit against tax
liability for a portion of the UBT payments
made as a partner of an unincorporated
business.
Other available credits against UBT liability
include the Relocation and Employment
Assistance Program (REAP) credit, the Lower
Manhattan
Relocation
and
Employment
Assistance Program Credit (LMREAP), the Film
Production Credit and the Biotechnology Credit.
10.5 The UBT in Other Jurisdictions
New York City and Washington, D.C., are the
only two jurisdictions in the U.S. to impose a
specific tax on unincorporated businesses.
Philadelphia does not impose a UBT, as such,
but imposes a tax that explicitly targets sole
proprietorships and partnerships as well as
limited partnerships (LLPs) and limited liability
companies (LLCs). Unincorporated businesses
in Philadelphia are also subject to the City’s
Business Privilege Tax. Local governments in a
few other states, such as Michigan and Ohio,
include the taxation of unincorporated
businesses under their Business Privilege Tax.
10.6 New York City UBT Revenue Trends
In FY 2009, NYC Unincorporated Business Tax
revenues stood at $1.79 billion, a 3% decline
over the $1.85 million in 2008. Figure 10.1
shows that in current dollars, UBT revenues
increased in all but two years from 2000 to
2009. In constant 2000 dollars, revenues
declined slightly in 2001, 2002 and in 2009.
Figure 10.1: NYC Unincorporated Business Tax
Revenues, Current and Constant 2000 Dollars, 20002009
Sources: Current Dollars, NYC OMB; Moody’s Economy.com NY
State & Local Government Product Deflator used to convert
current dollars into constant 2000 dollars.
Figure 10.2 shows that constant dollar UBT
revenues generally follow the trend in NYC
economic conditions with some lags especially
when the economy is in decline.
10-­‐2 Figure 10.2: Constant 2000 Dollar UBT Revenues and
Real NYC Economic Growth, 1980-2009
Sources: Index of Coincident Economic Indicators, NY Federal
Reserve Board; Moody’s.com NY State & Local Government
Product Deflator used to convert current dollar values from NYC
OMB to constant 2000 dollars.
10.7 History of the NYC Unincorporated
Business Tax
In 1966, NYC established the UBT at a rate of
4% where it has remained. Since 1966, many
legislative changes have been made to the UBT
base and several credits and exemptions have
been added. Many of these changes, especially
those adopted in recent years, have eliminated or
reduced the UBT for many unincorporated
businesses. Major changes to the UBT base are
shown in Exhibit 10.1.
10.8 Issues and Concerns
Double Taxation. For City residents with more
than $42,000 in taxable income for NYC
Personal Income Tax purposes, the UBT
constitutes double taxation since taxpayers pay
the UBT and the PIT on the same stream of
income.
Uniqueness of UBT. NYC and Washington,
D.C., are the only two jurisdictions in the U.S. to
impose a specific tax on the income of
unincorporated businesses. Philadelphia imposes
a similar tax but does not call it a UBT.
Non-transparency of the UBT. NYC allows for
specific exemptions, deductions and credits in
calculating UBT liability. While all reduce the
burden of the tax, they also make it less
transparent to the taxpayer.
10-­‐3 Exhibit 10.1: Major NYS Legislative Actions Affecting the NYC Unincorporated
Business Tax , 1966-2009
Year
1966
1971
Action
Unincorporated Business Tax imposed at a rate of 4% on income of unincorporated
businesses in the City.
Attorneys, doctors, accountants and other professionals included in tax base.
1987
UBT credit increased to a maximum of $600; taxable income exemption threshold
increased to $15,000 from $2,500.
1996
UBT credit increased to a maximum of $1,000 over 2 years and phase-out threshold
raised to $1,000 in 1996 and to $2,000 in 1997; taxable income exemption threshold
raised. Rules governing the allocation of business income revised, including the
repeal of the regular place of business requirement. Broadcasters and publishers
allowed income allocation based on audience location.
1997
UBT credit increased to a maximum of $1,800 and phase-out threshold raised to
$3,200. Sole proprietors with net income $55,000 or less exempted from UBT.
Income allocation formula of UBT amended, permitting income from management,
administration or distribution services for mutual funds to be allocated based on
shareholder locations.
2000
2005
Film and television companies allowed a UBT tax credit equal to 5% of specified
production costs. Several disincentives for establishing unincorporated businesses
removed, including determining the location of service receipts based on the
location where the service is performed instead of the office where the employee
performing the service works.
2007
2009
A $10,000 unincorporated business per partner or proprietor deduction allowed.
UBT credit increased to $3,400 and phase-out threshold raised to between $3,400
and $5,400. Registered brokers and dealers required to source certain receipts based
on their customer’s location.
Source: NYC Office of Management and Budget, Tax Revenue Forecasting Methodology.
Financial Plan, Fiscal Years 2008-2012.
10-­‐4 Banking Corporation Tax
11.0 BANKING CORPORATION TAX
11.1 Overview
11.3 The NYC Bank Taxpayer
New York City has levied the Banking
Corporation Tax, generally referred to as the
Bank Tax, since 1966. In Fiscal Year 2009, the
tax yielded $1.1 billion, accounting for 3.1% of
total NYC tax revenues and 1.8% of City
revenues from all sources. The Bank Tax is
administered by the NYC Department of
Finance. The NYC Bank Tax is imposed on corporations
for the privilege of doing banking business in
the City.
The Bank Tax rate is 9% of entire net income
allocated to NYC. The tax is to be paid on a
different base if a higher tax liability occurs (see
Section 11.4). The minimum tax to be paid is
$125.
11.2 Factoring in the State
The NYC Bank Tax is imposed in addition to
the NYS Bank Franchise Tax. In Fiscal Year
2009, the New York State Bank Tax yielded
$1.1 billion, accounting for 1.8% of total NYS
tax collections and 0.9% of total State revenues.
The NYS Bank Tax rate is 7.1% of entire net
income allocated to the State. The tax is to be
paid on a different base if a higher tax liability
occurs.1 The minimum tax to be paid is $250.
Similar to the General Corporation Tax, Bank
Taxpayers doing business in NYC and the other
7 counties in the Metropolitan Commuter Transportation District (MCTD) have two additional
tax liabilities. The first is the 17% surcharge2
calculated based on the 9% State Corporate
Franchise Tax rate in effect in 1997.
The second tax liability results from the
Metropolitan Commuter Transportation Mobility
Tax (MCTMT), effective for tax years beginning
January 1, 2009. Known as the MTA Payroll
Tax, the MCTMT rate is $0.34 for every $100 of
payroll allocated to the District. Similar to the
17% surcharge, the MTA Payroll Tax was enacted
to help finance mass transportation expenditures in
the MCTD.
 Banking business is generally defined as
making loans and obtaining funds, primarily
by accepting deposits. Banking business
may also include activities carried on in
offices that are not banks or branches, such
as loan production offices.
 Banking business does not apply to the
occasional acquisition of a security interest
in real estate or personal property located in
the City, or to holding a board of directors
meeting in the City.
Several types of corporations conduct banking
business in NYC. They include: banking
corporations, commercial and savings banks,
savings and loan associations, bank holding
companies, trust companies and certain
subsidiaries of banks owned by a bank/bank
holding company.

Beginning in Tax Year 2011, credit card
issuing companies with at least 1,000
customers having a mailing address in NYC
will be subject to the Bank Tax, regardless
of whether the banks have any physical
presence in the City.
S Corporations. NYC taxes S Corporations as if
they were regular C Corporations for purposes
of both the NYC Bank Tax and the NYC
General Corporation Tax. This means that NYC
residents who are S Corporation owners/
shareholders pay their share of the Bank Tax or
the GCT, whichever is applicable, as well as the
NYC Personal Income Tax on the same income
stream.
The Federal government and New York State do
not tax the business profits of S Corporations.
Instead, all of its profits pass through to the
owners/shareholders who report their share of
profits as income for purposes of the Federal
Individual Income Tax and the State Personal
Income Tax.
11-­‐1 Taxpayer Reporting
Each corporation subject to the City's Bank Tax
must file an annual tax return with the NYC
Department of Finance reporting its income and
capital. A banking corporation that is a member
of an affiliated group of corporations may file on
a separate return basis or on a combined return
basis.


Under separate entity reporting, a corporation with sufficient nexus – the legal
term for connection – with NYC is required
to file its own Bank Tax return.
Under the combined return basis, banking
corporations that are members of an
affiliated group of taxpayers meeting certain
capital stock ownership and unitary
business3 tests may be permitted or required
to file on a combined reporting basis if filing
on a separate basis would distort the
activities, business, income or capital of the
taxpayers. To determine the tax liability of
the combined group, the incomes of its
members are added together, i.e., combined.
In NYC, a banking corporation may be required
or permitted to file a combined return with other
corporations under certain circumstances. The
factors determining which companies are to be
included in a combined return are ownership,
inter-corporate transactions and the extent of
related activities. Foreign banks may not be
included in a combined return with U.S. banks.
Beginning with Tax Year 2009, captive real
estate investment trusts (REIT) and captive
regulated investment companies (RICs)4 must be
included in a combined Bank Tax return if the
business owning them is subject to the tax.
11.4 The NYC Bank Tax Base
The NYC Bank Tax is computed by four
different methods and is paid on whichever
produces the largest tax payment.
(1) 9% on entire net income allocated to NYC;
(2) 3% on alternative entire net income allocated to
NYC adjusted to eliminate the effect of certain tax
benefits allowed in the calculation of entire net
income;
(3) Taxable Assets on U.S. banks at 1/10 mills per
dollar, or Capital stock base on non-U.S. banks at 2
and 6/10 mills per dollar;
(4) $125 minimum tax.
(1) Entire Net Income Base. Entire net income
is defined differently for U.S. banks and for
foreign (non U.S.) banks.
For U.S. banks, entire net income is equivalent
to taxable income for Federal tax purposes with
certain add-backs and subtractions. For taxable
years beginning on and after January 1, 2009,
banks are allowed a net operating loss (NOL)
deduction, subject to certain restrictions:

For taxpayers exempt from the Federal
Corporate Income Tax but subject to the
NYC Bank Tax, entire net income is what the
taxpayer would have reported for Federal tax
purposes but for the exemption. An example
would be a Subchapter S corporation which is
subject to the Bank Tax in NYC but not to the
Federal Corporate Tax.
For foreign banks, entire net income is
attributable to the conduct of trade or business
within the U.S. subject to certain modifications.
These include add-backs of dividends or interest
income excluded from Federal taxable income
as a result of tax treaties between the U.S. and
the home country of the corporation.
Defining the Bank Tax Base
A banking corporation doing business inside and
outside NYC is entitled to allocate its income to
determine what part of its income the City may
tax, i.e., its tax base.
Similar to the GCT, there are two primary ways
to establish how much of a Banking
Corporation’s income the City may tax: (1)
using the company’s books and records if they
accurately reflect the amount of business being
done within or without NYC; or (2) allocation
by formula.
 The allocation formula for purposes of the
Bank Tax double-weights receipts and
deposits and includes 80% of the
corporation’s payroll. Starting in Tax Year
11-­‐2 2009 and phased in over the next 10 years,
allocation for banking corporations that
provide management, administrative or
distribution services to regulated investment
companies will be based on a single receipts
factor. For all other Bank Taxpayers the
existing formula will still be applied. Figure 11.1: NYC Bank Tax Revenues, Current and
Constant 2000 Dollars, 2000-2009 (2) Alternative Net Income Base. Under the
alternative net income base, taxpayers add back
certain deductions that were allowed in
calculating net income. These deductions are:


17% of interest from subsidiary capital;
60% of dividend income, and gains/losses
from subsidiary capital;
 22.5% of the interest income earned from
holding obligations of the U.S., NYS and
localities within the State.
(3) Taxable Assets/Capital Stock Base. For U.S.
banks, the NYC Bank Tax is imposed on taxable
assets allocated to the City. Taxpayer assets are
defined as the average value of balance sheet
assets during the tax year.
Beginning in Tax Year 2011, foreign banks will
be taxed in the same manner as U.S. banks –
using assets as the tax base. They will no longer
be required to compute their alternative tax
based on the par value of issued common stock. 11.5 The Bank Tax in Other Jurisdictions
New York State is one of 20 states to levy a
specific tax on banks instead of including them
under their General Corporation Tax (GCT).
Twenty-two states and the District of Columbia
tax banks under their GCT. New York is one of
a few states that permit one or more local
governments to impose a tax on banks.
Sources: Current Dollars, NYC OMB; Moody’s Economy.com NY
State & Local Government Product Deflator used to convert
current dollars into constant 2000 dollars.
Figure 11.2 shows that NYC Bank Tax revenues
are extremely volatile, with year-over-year
changes having little, if any, relationship to
fluctuations in the City’s economy. This revenue
volatility reflects the fact that NYC Bank Tax
liabilities are as much a function of national and
global conditions as local conditions.
The revenue volatility also reflects the timing of
bank losses and gains which is apparent in Bank
Tax refunds which are more volatile than
collections. The collection data shown in Figure
11.2 are net of refunds. The data also do not
include collections resulting from audits which
may produce substantial tax payments that
occur several years after the tax year for which
collections are reported.
Figure 11.2: Constant 2000 Dollar Bank Tax Revenues
and Real NYC Economic Growth, 1980-2009
11.6 NYC Bank Tax Revenue Trends
In FY 2009, NYC Bank Tax revenues stood at
$1.1 billion, a 75% increase over the $628
million in 2008. Figure 11.1 shows that in
current and constant dollars, NYC Bank Tax
revenues increased in 6 of the 9 years between
2000 and 2009 and declined in 3 of these years:
2002, 2003 and 2008.
Sources: Index of Coincident Economic Indicators, NY Federal
Reserve Board; Moody’s.com NY State & Local Government
Product Deflator used to convert current dollar values from NYC
OMB to constant 2000 dollars.
11-­‐3 11.7 History of the NYC Bank Tax
The Bank Tax has been imposed since 1966.
Major changes to the Bank Tax base and rate
since 1966 are shown in Exhibit 11.1.
11.8 Issues and Concerns
Double Taxation
NYC treats S Corporations in the same manner
as C Corporations for purposes of the Bank
Tax and the GCT. This results in double taxation
for NYC residents who are owners/shareholders
of S Corporations who also are liable for the
City’s Personal Income Tax (PIT).
Tax Administration
Credit Card Companies. Credit card companies
located outside of NYC but with a large number
of customers who have a NYC address will
experience a substantial Bank Tax increase as a
result of recent changes in the tax law. Credit
card companies with a smaller proportion of
card holders in NYC will have smaller increases.
The problems with the differential taxation of
banks and non-bank financial services
companies have led NYS to study the
possibility of creating a single tax structure for
financial institutions. However, no proposal has
yet been put forward.
Endnotes
1
Alternative tax bases for the NYS Bank Tax are (1)
3% of
alternative minimum taxable income
computed without regard to certain specified
exclusions, (2) one-tenth of 1 mill for each dollar of
taxable assets allocated to NY for institutions with a
net worth exceeding 5% of total assets or (3) $250.
2
The 17% surcharge is calculated based on the 9%
State Corporate Franchise Tax rate in effect in 1997.
3
The criteria used to determine whether a group of
business entities are unitary generally include: unity
of ownership, functional integration, centralization of
management and economies of scale.
4
A captive REIT/RIC is not regularly traded on an
established securities market and more than 50% of
its voting stock is owned or controlled by a single
corporation that is not exempt from Federal income
taxation and is not a REIT.
Taxing Financial Institutions. The difference
between banks and other financial institutions
has become blurred since the passage of the
Federal Gramm-Leach-Bliley Act (GLBA) in
1999.
GLBA repealed many of the restrictions in
place since the 1930s separating banks, security
firms and insurance companies. Under this
legislation, financial conglomerates are now
permitted, allowing banks, security firms and
insurance companies to be organized in a
holding company framework.
A bank holding company is now permitted to be
a financial holding company and to create or
purchase affiliates to do security investment
activities and provide insurance services. GLBA
also permits bank subsidiaries to engage in
some non-banking activities. For NYC tax
purposes, these changes have blurred the line
between businesses that have to file under the
Bank Tax and those that have to file under the
GCT.
11-­‐4 Exhibit 11.1: Major NYS Legislative Actions Affecting the NYC Bank Tax, 1966-2009 Year
1966
1971
1974
1975
1985
1999
2008
2009
Action
Bank Tax imposed on commercial banks, savings banks, savings and loan associations,
bank holding companies and foreign banks at 4.5% of net income.
Tax rate increased to 5.63%.
Tax rate increased to 6.756%.
Tax rate increased to 13.823% for commercial banks and 12.124% for savings banks.
Tax base broadened and separate accounting method for allocating income replaced by a
three-factor formula. Tax rate reduced to 9% of net income for all banking institutions.
Two new tax bases (alternative entire net income and taxable assets) established for U.S.
banks. Changes made regarding the taxation of foreign banks.
As a result of the Federal Gramm-Leach-Bliley Act of 1999, for purposes of NYC taxes,
some banking corporations are to be taxed under the GCT and some under the Bank Tax,
whichever applied to that corporation before the Act.
NYC allows certain corporations that no longer meet the definition of a banking
corporation to continue to pay the Banking Corporation Tax through 2010, instead of the
General Corporation Tax.
Beginning TY 2011, for foreign banks, assets rather than capital stock are to be used as
an alternative base. Beginning in 2011, credit card companies with a specified number of
customers having a NYC mailing address will be subject to the Bank Tax regardless of
whether the company has any physical presence in the City. Beginning in TY2009, for
banking corporations that substantially provide managerial, administrative or distributive
services to investment companies, the three-factor formula (payroll, receipts and
deposits) for allocating net income is changed to a single factor based on receipts, to be
phased in over a 10-year period.
Source: New York City Office of Management and Budget. Tax Revenue Forecasting Documentation.
Financial Plan Fiscal Years 2009-2013.
11-­‐5 Utility Tax
12.0 UTILITY TAX
12.1 Overview
total State tax collections and 0.5% of revenue
from all sources.
The NYC Utility Tax (UTX) is imposed on all
utilities and vendors of utility services doing
business in NYC. In FY 2009, the tax yielded
$398 million, accounting for 1.1% of total NYC
tax collections and 0.7% of revenues from all
sources. The UTX is administered by the NYC
Department of Finance.
Residential consumption of gas and electricity is
exempt from the NYS Sales Tax and the MCTD
Sales Tax surcharge. Sales of utility services to
government and non-profit entities are exempt
from all Sales Taxes.
The UTX is imposed on electric and natural gas
utilities and on telecommunication companies
whose services include wireless fiber optic and
other types of transmissions. For most types of
utility companies, the UTX rate is 2.35% of gross
income or gross operating income. Different rates
apply to bus companies and railroads, ranging
from 0.10% on the gross income of commuter
services to 3.52% on the gross income of
railroads.
Companies doing business in NYC and the other 7
counties in the Metropolitan Commuter
Transportation District (MCTD) are also liable for
the Metropolitan Commuter Transportation
Mobility Tax imposed at a rate of $0.34/$100 of
payroll allocated to the District.
12.2 Factoring in the State
The NYC Utility Tax is levied in addition to the
NYS Corporation and Utilities Tax imposed on
transportation and transmission companies
exercising their corporate franchise in the State
with certain exceptions. Most railroad and
trucking companies are taxed under the NYS 9A
Corporation Franchise Tax. Public utilities and
waterworks, gas, electric, steam heating, lighting
and power companies are subject to the 9A
Corporation Franchise Tax as well as specific
sections of the Corporation and Utilities Tax.
Corporations conducting business in the
Metropolitan Commuter Transportation District
(MCTD) are subject to a 17% surcharge on the
portion of the total tax liability allocable in the
MCTD.
In FY 2009, the NYS Corporation and Utilities
Tax yielded $646 million, accounting for 1.1% of
12.3 The NYC Utility Taxpayer
The NYC Utility Tax is imposed on utility
companies subject to the supervision of the New
York State Public Service Commission (PSC).
Companies that derive 80% or more of their gross
receipts from mobile telecommunication services
but are not necessarily supervised by the PSC are
also subject to the UTX.
Utility service vendors are subject to the NYC
Utility Tax and to the NYC General Corporation
Tax (GCT) or the NYC Unincorporated Business
Tax (UBT). Utility service vendors are permitted
to reduce business income reported on their GCT
and UBT returns by the ratio of gross operating
income subject to the UTX to total gross operating
income.

Utility service vendors are not utilities
themselves. They are companies that sell gas,
electricity, steam, water, refrigeration or
telecommunications services, or that operate
omnibuses, whether or not these activities
represent the vendor’s main business.
Utility taxes are passed along to consumers in
their monthly bills. Taxes levied on telecommunications services are usually billed to, and
paid by, individual consumers. For gas and
electric power, in single-family homes and in most
residential co-ops and condominiums, utility bills
are paid by owners.
In residential and non-residential rental buildings,
gas and electric bills may be sent to individual
tenants, but are usually sent to the landlord.
Residential landlords are barred by law from
making a profit on the resale of electricity and gas;
commercial building owners are not.
12-­‐1 


In residential buildings in which individual
tenants do not contract directly with utility
companies, landlords contract with them and
resell to tenants based on usage measured by
sub-meters.
When utilities are sub-metered, their charges
are paid in addition to the rent. Under rent
inclusion, the tenant pays a fixed charge based
on expected usage.
In non-residential buildings, few offices are
individually metered. Owners generally bill
individual tenants based on their square
footage and usage.
12.4 The NYC Utility Tax Base
The NYC Utility Tax base derives from the tax
imposed on all utilities and vendors of utility
services doing business in the City. It is computed
by applying the prescribed tax rate to the utility
company’s gross receipts from services provided
in the City.
Major NYC Utility Taxpayers are Consolidated
Edison Company of N.Y., Inc. (Con Ed),
NationalGrid USA, both suppliers of electric
power, and Verizon New York, Inc., a
telecommunications provider.
12.5 The Utility Tax in Other Jurisdictions
Utility companies are taxed in just about every
state by either the state government, by one or
more local governments, or by both state and local
government. Many states tax utility profits under
their general corporation tax or franchise tax and
may levy additional taxes based upon gross
receipts. For electric utilities, a few states impose
a tax based upon kilowatt hours of electricity
generated.
At the local level, utility taxes take more varied
forms in structure and/or use. For example, in
Kentucky, local school districts impose an
Occupational License Tax, an Excise Tax and/or a
Utility Gross Receipts License Tax on utilities
providing services and/or cable and direct
broadcast satellite services within the district. In
California, cities are permitted to impose a Utility
User Tax on the consumption of utility services
either as a special tax or earmarked for a specific
purpose determined by the city council. In Detroit,
the tax is imposed on users of telephone, gas and
electricity services and is used exclusively to fund
the Police Department.
12.6 NYC Utility Tax Revenue Trends
In FY 2009, NYC Utility Tax revenues stood at
$398 million, a 1.5% increase over the $392
million in 2008. Figure 12.1 shows that in current
dollars, revenues increased in 6 of the 9 years
from 2000 to 2009, and declined in 3 years: 2002,
2004 and 2007. In constant dollars, they declined
in the same 3 years and in 2009.
Figure 12.1: NYC Utility Tax Revenues, Current and
Constant 2000 Dollars, 2000-2009
Sources: Current Dollars, NYC OMB; Moody’s Economy.com NY
State & Local Government Product Deflator used to convert current
dollars into constant 2000 dollars.
Figure 12.2 shows that constant dollar UTX
revenues generally follow long term trends in the
NYC economy, but with some deviations specific
to the tax. For example, the large decline in
collections during the 1980s is due to the
extensive credits allowed against UTX liability
(see Exhibit 12.1).
Figure 12.2: Constant 2000 Dollar Utility Tax Revenues
and Real NYC Economic Growth, 1980-2009
Sources: Index of Coincident Economic Indicators, NY Federal
Reserve Board; Moody’s.com NY State & Local Government
Product Deflator used to convert current dollar values from NYC
OMB to constant 2000 dollars.
12-­‐2 12.7 History of the NYC Utility Tax
A tax on utilities was first imposed by NYC in
1933. Major changes were made to the tax in
1965. Changes since then are shown in Exhibit
12.1.
12.8 Issues and Concerns
Issues relating to the UTX generally stem from the
deregulation of utilities, especially for companies
supplying telecommunications services and
electric power. Before deregulation, utilities were
permitted to operate only within specific service
territories, and customers could purchase
telecommunications services and electric power
only from their local regulated utilities.
Deregulation has changed the marketplace so that
government tax policies can have a major effect
on economic development. Cheaper telecommunications services and power in other parts
of the region and nation may become an
increasingly important issue for the City’s
competitive position, especially for industries
dependent on telecommunications and/or electric
power. Combined NYC/NYS utility taxes
contribute to the City’s ranking at the top end of
utility costs in the U.S.
Because deregulation is blurring the lines between
the traditionally regulated companies and other
utility providers, the distinction between NYC’s
General Corporation Taxpayers and UTX payers
may also become more problematic.
12-­‐3 Exhibit 12.1: Major NYS Legislative Actions Affecting the NYC Utility Tax, 1965-2000
Year
Action
1965
NYC imposes tax on utility companies subject to the supervision of NYS Public
Service Commission and on vendors of utility services at a rate of 2% of gross receipts.
1966
Tax rate increased to 2.35% of gross receipts.
1985
Energy Cost Savings Program (ESCP) initiated, giving rebates on electric and natural
gas charges to eligible nonresidential users located in Brooklyn, The Bronx, Queens,
Staten Island and Manhattan north of 96th Street. Utility companies give the rebate and
are compensated for forgone revenue through a credit against the City’s UTX. Full
benefits are allowed for 8 years, followed by a 4-year phase-out. Initial rebates set at
30% of electric charges and 20% of natural gas charges.
1995
Lower Manhattan Energy Program (LMEP) grants rebates on electricity and gas
charges to eligible commercial tenants south of Murray Street in Manhattan who have
improved their buildings by at least 20% of assessed value. A full benefit is allowed
for 8 years, followed by a 4-year phase-out.
1997
Effective January 1, 1998, the definition of telephone or telegraph services subject to
the City Utility Tax broadened to include telecommunication services including
directory information, call forwarding and call waiting.
2000
ESCP and LMEP programs revised, applying rebates solely on utility delivery charges,
only.
Source: New York City Office of Management and Budget. Tax Revenue Forecasting Documentation.
Financial Plan Fiscal Years 2009-2013.
12-­‐4 Other Taxes
13.0 OTHER TAXES
In addition to the 12 taxes previously described,
NYC levies another 7 taxes/surcharges, which
together generated $118 million in FY 2009,
accounting for 0.3% of total NYC tax revenues
and 0.2% of City revenues from all sources. Each
of these taxes is briefly described below. Also
described are the Fire Premiums Tax and the
Telecommunications Surcharge, which are not
included in the overall tax revenue totals used
throughout the Guide. Revenues from these two
sources are dedicated to either the Fire
Department or the Police Department.
The Auto Use Tax is imposed on NYC residents
who own or lease a passenger motor vehicle in the
City. Certain auto owners including disabled
veterans, Federal, State and local governments,
foreign consulates/ diplomats, the United Nations
and non-profit organizations are exempt from the
tax.
Taxi Medallion Transfer Tax. NYC has imposed
a tax on the Transfer of Taxi Medallions
(Licenses) since 1980. In FY 2009, the tax
generated $11.3 million, accounting for 0.03% of
total NYC tax revenues and 0.02% of City
revenues from all sources. The tax is collected by
the NYC Taxi and Limousine Commission.
13.1 Auto-Related Taxes
Commercial Motor Vehicle Tax. NYC has levied
a Commercial Motor Vehicle Tax (CMVT) since
1960. In FY 2009, the tax generated $47.7 million,
accounting for 0.1% of total NYC tax revenues
and 0.08% of City revenues from all sources. The
CMVT is administered by the NYC Department of
Finance but is collected on certain types of
vehicles by the State Department of Motor
Vehicles.
The City’s CMVT is imposed on vehicles used for
passenger transportation and on all other
commercial vehicles such as delivery trucks,
earth-moving equipment and forklifts that travel
on public highways in NYC. The tax is imposed at
different annual rates, depending on the purpose
for which the vehicle is used.



$1,000 for medallion taxicabs
$400 for other for-hire passenger vehicles
including livery cabs and omnibuses
$40-$300 for other commercial vehicles
depending on weight.
Auto Use Tax. NYC has imposed a $15 Auto Use
Tax since 1974. In FY 2009, the tax generated
$27.7 million, accounting for 0.08% of total NYC
tax revenues and 0.05% of City revenues from all
sources. The tax is administered by the NYC
Department of Finance but collected by the NYS
Department of Motor Vehicles when a vehicle is
registered.
The Taxi Medallion Transfer Tax is imposed at a
rate of 5% of the transfer price of a taxi medallion
or the transfer of a controlling economic interest in
a taxi license. Buyers are liable for the tax, but if
they do not pay it, the seller is liable. 13.2 Excise Taxes
Beer and Liquor Excise Tax. NYC has imposed
the Beer and Liquor Excise Tax since 1980. In FY
2009, the tax generated $23.5 million, accounting
for 0.07% of total NYC tax revenues and 0.04% of
City revenues from all sources. The tax is
administered by the NYS Department of Taxation
and Finance.
The tax is imposed on the sale of beer and liquor
by licensed distributors and non-commercial
importers located in NYC. The tax rate is $0.12
per gallon of beer and $0.264 per liter of liquor
with alcohol content greater than 24%. The City
does not tax wine.
Retail Beer, Wine and Liquor License Tax. NYC
has imposed the Liquor License Surcharge since
1980. In FY 2009, it generated $4.8 million,
accounting for 0.01% of total NYC tax revenues
and less than 0.01% of City revenues from all
sources. The tax is administered by the NYC
Department of Finance.
The Liquor License Surcharge is imposed for the
privilege of selling liquor, wine or beer at retail in
13-­‐1 NYC at a rate of 25% of the license fees payable
under the State Alcoholic Beverage Control Law.
is included as part of the City’s Police Department
budget. Horse Race Admissions Tax. NYC has levied an
admission tax on all patrons of horse races since
1952. In FY 2009, the tax generated $0.03 million,
accounting for less than one-tenth of 1% of total
NYC tax revenues and City revenues from all
sources. The tax is administered by the NYC
Department of Finance.
The surcharge is used to pay for the design,
construction, operation, maintenance and
administration of public safety communication
networks serving NYC.
The tax rate is 3% of the admission price for all
admissions to horse races held wholly or partly in
NYC. The tax is added to the admission price and
collected from patrons when the ticket is
purchased.
Off-Track Betting Surcharge. NYC has imposed
the Off-Track Betting (OTB) Surcharge since
1974. In FY 2009, the tax generated $3.6 million,
accounting for 0.01% of total NYC tax revenues
and less than 0.01% of City revenues from all
sources. The tax is administered by the NYC OffTrack Betting Corporation (OTB), a public benefit
corporation controlled by the State.
Voice over Internet Protocol (VoIP) Surcharge. Effective July 2010, Voice over Internet Protocol
(VoIP) providers are required to collect a $1.00
monthly E-911 surcharge. Fire Premiums Tax. NYC has imposed a tax on
fire insurance premiums on policies written by
non-NYS (foreign) and non-U.S. (alien) insurers
since 1968. In FY 2009, the tax generated $27.6
million. It is administered by the NYC Department
of Finance and dedicated to the Fire Department.
The 5% OTB Surtax is levied on bets placed at
NYC Off-Track Betting offices, and on most bets
placed Statewide on races held in NYC.
E-911 Surcharge for Telecommunications
Providers. NYC has imposed a surcharge on
telecommuni- cations providers since 1991 and on
wireless devices since 2002. In FY 2009, the tax
generated $37 million, which is included as part of
the City’s Police Department budget. The NYC
tax is imposed in addition to the $1.20 per device
surcharge imposed by the State.
The surcharge of $1.00/telephone access line per
month is imposed on customers of every telephone
service supplier in NYC.
Wireless/Cell Phone Surcharge. A surcharge of
$.30 per month is imposed on every wireless
communication device whose place of primary
use is within NYC. Users of wireless
telecommunications service pay the surcharge to
service providers who remit it to the City. In FY
2009, the surcharge generated $21 million, which
13-­‐2 Biographies
BIOGRAPHIES
Dr. Marilyn Marks Rubin is a Professor of Public Administration and Economics at John Jay College of
the City of New York where she teaches courses in Fiscal Policy, Economics and Research Methods and is
Director of the College’s MPA Program. She has served as a consultant on fiscal policy, revenue forecasting,
economic development and strategic planning for municipal, state and federal entities as well as Moody’s
Investors Service, the United Nations and the Port Authority of New York and New Jersey.
Dr. Rubin is currently a member of the Economic Advisory Board to the New York State Assembly Ways and
Means Committee and the Property Tax Advisory Board to the New York City Department of Finance. She has
authored several publications on fiscal policy and budget-related issues and has served as advisor to the Korean
Women’s Development Institute on gender budgeting; the government of Thailand on performance evaluation;
and in Ecuador under the Fulbright Senior Specialist Program where she worked to establish the country’s first
MPA program. She has also been a visiting professor at a number of universities outside the U.S.
A former Chairperson of The Association for Budgeting and Financial Management of the American Society
for Public Administration, Dr. Rubin is a member of the editorial board of Public Budgeting and Finance. She
is a fellow in the National Academy of Public Administration (NAPA) and winner of a Distinguished Research
Award from the American Society for Public Administration.
A graduate of Douglass College of Rutgers University with a B.A. in Economics, Dr. Rubin received both her
M.A. in Economics and her Ph.D. in Public Administration from New York University.
Peter J. Solomon is the Founder and Chairman of Peter J. Solomon Company, L.P. (PJSC). Established in 1989,
the Firm provides investment banking services to corporations, including advice on mergers, acquisitions and
divestitures, recapitalizations, refinancings, restructurings and private placements of debt. Previously, he was at
Lehman Brothers and became a Managing Director in 1970. He left Lehman Brothers as Vice Chairman in 1989.
From 1978 to 1980, Mr. Solomon was Deputy Mayor of Economic Policy and Development in New York City under
Mayor Edward I. Koch. He was responsible for matters within New York City relating to taxes, energy, ports and
foreign trade and investment as well as economic development. He was Mayor Koch’s principal advisor on economic
matters as the City began its recovery from its financial crisis. In addition, Mr. Solomon served as Chairman of New
York’s Health and Hospitals Corporation, managing 17 municipal hospitals.
In 1980, under President Jimmy Carter, he was Counselor to the United States Treasury where he was responsible for
formalization of the department’s industrial policy. He also had extensive involvement in economic policy matters
ranging from tax policy to automobile trade.
Mr. Solomon is currently a director and the principal shareholder of Monro Muffler/Brake Inc., a director of Zagat
Survey LLC and has served on the boards of many public companies. He is a director and Chairman Emeritus of the
Manhattan Theatre Club; a member of the Board of Overseers of Memorial Sloan-Kettering Cancer Center, a Trustee
of the Federation of Jewish Philanthropies of New York City and the Lucius N. Littauer Foundation and a Director-atLarge of the Montana Land Reliance. He is also a Lifetime Honorary Trustee of the American Museum of Natural
History. In addition, he serves on a number of advisory committees at Harvard University.
Mr. Solomon writes extensively on public policy issues and conflicts on Wall Street and appears frequently on
television.
Mr. Solomon received his B.A. degree cum laude from Harvard College and a Masters degree in Business
Administration from Harvard Business School.
Notes
Copyright © 2011 by Peter J. Solomon Family Foundation. All rights reserved, including the right to reproduce this guide or portions
thereof in any form whatsoever.