Wiktor Wise
New York's electricity taxes are a complex system of levies imposed on energy consumption in the state. The taxes vary depending on factors such as the type of energy source, the locality, and the purpose of use. For instance, residential energy sources like gas and electricity are generally exempt from certain taxes, such as state sales tax, while utility services in New York City are subject to a city utility excise tax (UXT) and various other taxes and surcharges. The cost of these taxes can vary based on factors such as property type and ownership. Additionally, certain energy sources used for specific industrial purposes may be exempt from certain taxes. Understanding the intricacies of New York's electricity taxes is essential for residents and businesses alike to navigate the energy market and manage their energy-related expenses effectively.
| Characteristics | Values |
|---|---|
| Energy sources and services for residential purposes | Exempt from state sales and use taxes and possibly local taxes |
| Energy sources that qualify for exemption | Highway diesel motor fuel, wood pellets, and other wood products |
| Local tax rates | Vary depending on the locality |
| School district taxes | Imposed by certain school districts in addition to county or city taxes |
| Utility Study Requirement for Exemption Qualification | A New York utility tax study must list all equipment and appliances using utility and their annual consumption |
| Utility services in New York City | Subject to a 2.35% city utility excise tax (UXT), a 3.25% state gross receipts tax (GRT), and a 0.75% state franchise tax, along with a Metropolitan Transit Authority (MTA) surcharge |
| Utility sales taxes | Include a 4% state sales tax, a 4% city sales tax, and a 0.25% MTA sales tax surcharge |
| Residential consumption of gas and electricity | Exempt from state sales tax and MTA sales tax surcharge |
| Sales to government and non-profit entities | Exempt from all sales taxes |
| New York City government spending on utilities | Upwards of $500 million per year |
| Electricity provided by the New York Power Authority (NYPA) | Not subject to the city's utility tax |
| Utility industry deregulation and competition | May lead to changes in utility property taxes |
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![[First-]Second annual report of the Commission of gas and electricity of the state of New York Volume 1907 1907 [Leather Bound]](https://m.media-amazon.com/images/I/71FOopB+ikL._AC_UY218_.jpg)
![Annual report of the Commission of Gas and Electricity of the State of New York. Volume 2nd 1907 1907 [Leather Bound]](https://m.media-amazon.com/images/I/61kelb6mFML._AC_UY218_.jpg)
What You'll Learn
Residential energy sources and services
New York's energy sector is diverse, with the transportation sector accounting for one-third of state energy consumption, the residential sector accounting for about three-tenths, and the commercial sector accounting for almost three-tenths. The residential sector, where only one in six households use electricity for heating and about three in ten have central air conditioning, consumes more than one-third of the state's power.
Energy sources and services for residential purposes in New York are generally exempt from state sales and use taxes, but local taxes may still apply and vary depending on the locality. Some localities exempt residential energy sources from taxes, while others impose taxes at a full or reduced rate. Certain school districts may also impose sales tax on energy sources and services, in addition to taxes imposed by the county or city in which the school district is located.
For mixed-use properties, the percentage of the property used for residential purposes must be determined to claim an exemption from sales or use taxes. If the percentage of residential use is 75% or more, the property is exempt from state and MCTD taxes, and any exemption or reduced rate of local taxes will apply to 100% of the energy sources or services purchased. If the percentage of residential use is less than 75%, the exemption is allowed only for the residential-use portion, rounded to the nearest 10%.
In New York City, the cost of utility services includes a 2.35% city utility excise tax (UXT), a 3.25% state gross receipts tax (GRT), and a 0.75% state franchise tax, both of which are augmented by a Metropolitan Transit Authority (MTA) surcharge. Residential consumption of gas and electricity is exempt from the state sales tax and MTA sales tax surcharge. Additionally, utility sales to government and non-profit entities are exempt from all sales taxes.
New York City residents are also impacted by energy costs, with an estimated 600,000 families in NYC, amounting to over 1.5 million residents, considered "energy-cost burdened" in 2019. The city is taking steps towards a clean and affordable energy system, with plans to transition to a fossil fuel-independent electricity grid by 2040.
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Sales and use taxes
Sales and uses of energy sources and services for residential purposes in New York are exempt from state sales and use taxes and possibly local taxes. This includes fuel, gas, electricity, refrigeration, and steam. However, local tax rates may apply and vary depending on the locality. Some localities exempt residential energy sources and services from tax, while others impose tax at a full or reduced rate. Certain school districts may also impose sales tax on these energy sources and services, in addition to taxes imposed by the county or city in which the school district is located.
For mixed-use properties, the percentage of the property used for residential purposes must be determined to claim an exemption from sales or use taxes. If the percentage of residential use is 75% or more, the exemption from state and MCTD taxes and any exemption or reduced rate of local taxes will apply to 100% of the energy sources or services purchased for the property. If the percentage of residential use is less than 75%, the exemption is allowed only for the residential-use portion, rounded to the nearest 10%.
Purchases of highway diesel motor fuel used for residential heating purposes are subject to sales tax at the time of purchase but are eligible for a refund of any sales tax paid. Additionally, utility sales in New York City are subject to a 4% state sales tax, a 4% city sales tax, and a 0.25% MTA sales tax surcharge. However, residential consumption of gas and electricity is exempt from the state sales tax and MTA sales tax surcharge.
To qualify for a utility tax exemption in New York, a utility study must list every piece of equipment and appliance that uses the utility and its annual consumption.
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Utility property taxes
The cost of utility services in New York City includes various taxes and surcharges. Aside from the 2.35% city utility excise tax (UXT), there is also a 3.25% state gross receipts tax, a 0.75% state franchise tax, and a Metropolitan Transit Authority (MTA) surcharge. These rates apply to almost all utility company gross revenues, although reduced rates are offered to Con Ed service delivery charges billed to the New York Power Authority (NYPA).
Residential energy sources and services in New York are generally exempt from state sales and use taxes, as well as local taxes in certain localities. However, some school districts may impose additional sales taxes on energy sources and services. Mixed-use properties, which serve both residential and non-residential purposes, may qualify for partial exemptions based on the percentage of residential use.
In highly taxed areas like New York City, economists predict that utility product prices will rise in proportion to the utility property tax differential as the utility industry becomes more deregulated and competitive. This shift is expected to result in a more equitable distribution of utility taxes, with taxes on improvements primarily affecting owners of capital and local tax differentials influencing the cost of utility services.
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Utility sales tax exemption
In New York, fuel, gas, electricity, refrigeration, and steam are exempt from sales and compensating use tax when used directly and exclusively in manufacturing, processing, assembling, generating, refining, mining, or extracting. This exemption applies to the purchase of electricity, natural gas, and water used in qualifying production activities.
To qualify for the exemption, a New York utility tax study must be conducted to list every piece of equipment and appliance, along with their annual consumption. A detailed energy study is also required to identify the exact percentage of the utility that is exempt from sales tax. This includes calculating the annual consumption for each device and distinguishing between production and non-production devices.
Residential energy sources and services for residential purposes are also exempt from state sales and use taxes. This includes energy sources such as gas and electricity used for residential heating. However, purchases of highway diesel motor fuel for residential heating are subject to sales tax but are eligible for a refund. Additionally, certain school districts may impose sales tax on energy sources, which are separate from taxes imposed by the county or city.
Manufacturers can claim the Utility Sales Tax Exemption by filing the Exempt Use Certificate Form ST-121. For residential usage exemption, Form TP-385 must be filed. Once the exemption request is approved, businesses will receive a refund on overpaid taxes for the past 2-4 years and stop paying sales tax on certified production items.
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City utility excise tax (UXT)
Utility receipts in New York City are subject to seven different state and local excise or product taxes. One of these is the City Utility Excise Tax (UXT). The UXT is a 2.35% tax on utility services in New York City. This is in addition to a 3.25% (2.5% as of January 1, 2000) state gross receipts tax (GRT) and a 0.75% state franchise tax, both of which are augmented by a Metropolitan Transit Authority (MTA) surcharge. These rates apply to almost all utility company gross revenues.
Residential consumption of gas and electricity is exempt from the UXT. Sales of utility services to government and non-profit entities are also exempt from the tax. New York City residents paid $101 million in city utility excise taxes in 2000, an average of $37 per household. The residential UXT total includes an estimated $15 million paid by households in poverty.
The New York City government spends upwards of $500 million per year on heat, light, power, and phone services. The tax is not added to final sales by the New York Power Authority (NYPA), which provides most of the electricity consumed by the city. However, the cost of the electricity provided by NYPA includes delivery or "wheeling" charges paid to Con Ed for transmission of the electricity. State gross receipts tax and surcharge rates are reduced on these charges, but city UXT rates are not. The full city UXT rate is also charged on direct sales of utility services (steam, gas, and phone) to city government.
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Frequently asked questions
Residential consumption of electricity in New York is exempt from state sales tax and the MTA sales tax surcharge. However, it is subject to a 2.35% city utility excise tax (UXT), a 3.25% state gross receipts tax (GRT), and a 0.75% state franchise tax.
Commercial properties in New York are subject to a 4% state sales tax, a 4% city sales tax, and a 0.25% MTA sales tax surcharge on top of the UXT, GRT, and franchise tax mentioned above.
Yes, certain exemptions and reductions are available for mixed-use properties, where only a portion of the property is used for residential purposes. The exemption percentage depends on the percentage of residential use, with a full exemption applicable for 75% or higher residential use.
New York City has relatively high property taxes, which can impact the utility product prices faced by consumers. As the utility industry in New York moves towards deregulation and competition, economists expect utility property taxes to be more in line with normal property tax incidence, where taxes on improvements are borne by owners of capital.
