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Sales Tax Diversion and it’s Effect on Your Property Taxes

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From Brooke Harris, District 5 Allegany County Legislator

I’ve been asked by your devoted editor to explain some comments that I made at this week’s County Legislative Board meeting. The comments in question were in regard to the state’s diversion of local sales tax dollars. I’m glad for the opportunity to explain my position in greater detail. When the state “diverts” sales tax revenue, it means that they withhold sales tax money that was due to the county, and use it to pay for other things (without consultation or consent). My claim is that these continued diversions will cost the county millions of dollars, and will have dire effects on local property taxpayers.


How Sales Tax Used to (and should) Work
As we all know, the sales and use tax rate in Allegany County is 8.5%. The state collects the entire amount from businesses who sell goods and services that are subject to the tax. Of the total, four percent has always been retained by the state. The remaining 4.5% (until 2019) was remitted to the counties where the transactions took place.

Internet Sales Tax
In 2018, the Supreme Court ruled that internet retailers could be compelled to collect sales tax on all online transactions. This ruling enabled the State of New York to require the same. At the time, the impact on sales tax revenue statewide was estimated to be $150 million per year. There was some initial concern that the state would keep all of that money, without giving our 4.5% back. In the end, the state agreed to give counties their cut…but with a catch.

Aid and Incentives to Municipalities (AIM)

So often in New York State, Albany gives with one hand and takes away with the other. In 2019, when the State agreed to give counties their fair share of the internet sales tax, it also began siphoning off some of our local sales tax share to cover one of its own obligations: AIM payments. The AIM program is an annual state-level grant that supplies funding directly to towns and villages. It is not a small amount, and the funding is absolutely necessary for municipalities to balance their budgets and limit the burden on their property owners. In 2020, the State withheld over $500,000 in sales tax owed to Allegany County to make these AIM payments to our towns and villages. In 2021 it’s estimated to increase to nearly $600,000.

Distressed Hospital Fund
The other big chunk that Albany is taking out of our sales tax is for something called the “Distressed Provider Assistance Account”. When hospitals started realizing significant losses due to COVID, the state offered to step in and support them through the creation of this fund, totaling $50 million in 2021. Allegany County’s share is approximately $130,000 and that amount will also be stripped from our local sales tax. It should also be noted that that money will not necessarily be used to support any providers within our county.

How this Affects Property Tax Payers
Our county has three primary revenue sources: Property taxes, sales taxes, and state/federal aid. We rely on those funds to build a balanced budget. When any one of those funding sources increases, it relieves some pressure from the other two. Conversely, when one of those sources is cut, the difference has to be made up by one of the other two. We all know that our state aid is more likely to decrease in the coming years than increase. We also know that it would be unwise to assume additional support from the federal government. When the state withholds our sales tax revenue, there really are only two options: decrease services or increase property taxes. When so many of the services that we provide are state or federally mandated (cough, cough…Medicaid), we really have limited options to significantly reduce services. That means the burden falls to the tax levy, and ultimately to property owners.

What We Can Do
State Senator George Borrello and Assemblyman Joe Giglio are well aware of this issue and support our position. If you feel compelled to reach out to anyone, I’d recommend calling the Governor’s Office directly, as well as the Senate and Assembly leadership (links below).

Thanks to the Wellsville Sun for giving me the opportunity to clarify my position. If you have any questions or comments, please feel free to email me at [email protected] or call/text any time at 585-808-8207.

Brooke Harris, District V
Allegany County Legislature

Contact:

Office of the Governor
NYS Senate Majority Leader Andrea Stewart-Cousins
NYS Assembly Speaker Carl E. Heastie

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