New York Advisory Opinion TSB-A-09(11)C: Are unbundled sales of energy commodities subject to the local gross receipts taxes under General City Law section 20-b and Village Law section 5-530?

Plain-English summary

An energy provider asked whether "unbundled" sales of energy commodities (selling the commodity separately from its delivery) are subject to the local gross receipts taxes that cities and villages can impose under General City Law section 20-b and Village Law section 5-530. The Department gave an informal opinion -- it doesn't administer these local taxes (the cities and villages do) -- but offered guidance because the local taxes are based on Tax Law section 186-a, which the Department does administer.

The answer: yes, unbundled commodity sales are subject to the local taxes. Cities and villages may impose the utility tax as it existed in Tax Law section 186-a on January 1, 1959, and that authority is frozen to the 1959 statute. The 1959 definition of "utility" reached every person who sells gas, electricity, steam, water, telephony, etc., whether or not they also deliver it -- the phrase "delivered through mains, pipes or wires" was merely descriptive. So a person selling only the commodity is a "utility" under the frozen definition. New York later restructured the utility market (1990s) to let separate entities sell the commodity and the delivery, and in 2000 amended section 186-a to phase out the state tax on the commodity while still taxing transportation/transmission/distribution. But that change did not affect the local taxing authority, which remains fixed to the 1959 law. Accordingly, both the sale of the commodity and the sale of its delivery are subject to the city and village gross receipts taxes -- even when sold by different parties.

What this means for you

Energy marketers, ESCOs, and competitive suppliers

Even if you only sell the commodity (and someone else delivers it), you can owe local city/village gross receipts taxes, because those local taxes are locked to the 1959 version of Tax Law section 186-a that taxed the commodity regardless of delivery. The 2000 state-level phase-out of the commodity tax does not carry over to the local taxes.

Accountants and tax professionals

Don't assume the state-law unbundling treatment applies locally. The local taxes are administered by the cities and villages and are frozen to the 1959 section 186-a; confirm each locality's tax with that jurisdiction, since the Department does not administer them.

Common questions

Q: Are unbundled energy-commodity sales subject to New York city/village gross receipts taxes?
A: Yes. Those local taxes are frozen to the 1959 version of Tax Law section 186-a, which taxed the commodity regardless of who delivers it.

Q: Didn't the state stop taxing the energy commodity in 2000?
A: The state-level tax on the commodity was phased out, but that change did not affect the local taxing authority under General City Law section 20-b and Village Law section 5-530.

Citations and references

• Tax Law § 186-a (utility gross receipts tax; as in effect January 1, 1959)
• General City Law § 20-b (city authority to impose the local utility tax)
• Village Law § 5-530 (village authority to impose the local utility tax)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_2009.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a09_11c.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-09(11)C
Corporation Tax
June 29, 2009

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C090409A

Petitioner, name and address redacted requests an Advisory Opinion about whether
unbundled sales of energy commodities are subject to the local gross receipts taxes authorized to be
imposed by General City Law § 20-b and Village Law § 5-530. It is our informal opinion that they
are.
Preliminarily, we note that the Department is not responsible for administering the taxes about
which Petitioner inquires. Responsibility for interpreting and applying these taxes rests with the cities
and villages that impose them. Nevertheless, because this Department is responsible for administering
Tax Law section 186-a, the section of law on which the local taxes are based, we are providing this
informal opinion for Petitioner’s assistance.
Cities and villages in New York State are authorized to impose local taxes on utility services,
as such tax was imposed by Tax Law section 186-a in effect on January 1, 1959. See General City
Law § 20-b; Village Law § 5-530. Tax Law section 186-a, as it existed on that date, imposed tax on
the “gross income” of utilities doing business in this state that were subject to the supervision of the
Department of Public Service, and on the “gross operating income” of every other utility doing
business in this state, if the gross operating income exceeded $500 for the 12 month period ending on
May 31. For purposes of section 186-a, “utility” included “every person subject to the supervision of
the state department of public service” and “every person (whether or not such person is subject to
such supervision) who sells gas, electricity, steam, water or refrigeration, telephony or telegraphy,
delivered through mains, pipes or wires, or furnishes gas, electric, steam, water, refrigerator, telephone
or telegraph service, by means of mains, pipes, or wires; regardless of whether such activities are the
main business of such person or are only incidental thereto.” Tax Law § 186-a.2 (in effect on January
1, 1959). Thus, a “utility” includes persons who sell only the commodity (e.g., gas, electricity, etc.)
and those who sell both the commodity and the transportation, transmission, and distribution of the
commodity. The reference in the definition to commodities “delivered through mains, pipes or wires”
is merely descriptive; it does not require that the person selling the commodity also deliver the
commodity
In 1959, energy commodities were generally sold with the transportation, transmission and
distribution of those commodities. In order to foster competition in the generation of electricity and
increase consumers’ choice of energy providers, the Department of Public Service restructured the
utilities market in the 1990s. This restructuring allowed for the sale of energy commodities and
delivery of the commodities by separate entities. See Competitive Opportunities Proceeding, Case
No. 94-E-0952. In 2000, Tax Law section 186-a was amended to, among other things, phase out the
tax on energy commodities, while continuing to tax the transportation, transmission and distribution of
those commodities. However, this change did not affect the cities’ and villages’ authority to impose
tax, which remained fixed in time based on the statute in effect on January 1, 1959. Accordingly, both

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TSB-A-09(11)C
Corporation Tax
June 29, 2009

the sale of the commodity and the sale of the transportation, transmission and distribution of the
commodity are subject to the city and village gross receipts taxes imposed pursuant to the authority of
General City Law § 20-b and Village Law § 5-530, regardless of whether the commodity and the
delivery of the commodity are sold by different parties.

DATED: June 29, 2009

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited
to the facts set forth therein and is binding on the Department only with
respect to the person or entity to whom it is issued and only if the person or
entity fully and accurately describes all relevant facts. An Advisory Opinion
is based on the law, regulations, and Department policies in effect as of the
date the Opinion is issued or for the specific time period at issue in the
Opinion.