The state of New York has not escaped the current economic downturn and has seen its budget deficit swell.  In a recent proposal, NY Governor David Paterson announced his intent to implement a variety of new taxes – 88 in total – covering everything from gas and beer, luxury items like $60,000 cars or $500,000 planes and entertainment services such as movie theaters or sports venues.  Overall, these new taxes are expected to bring in an additional $4 billion in revenue for the state and plug some of its deficit.

As with the TARP program, Gallop Services performed an in-depth review of the specifics of the Governor’s Budget Briefing Book and 2009-10 Executive Budget Economic and Revenue Outlook.  Paterson’s proposed budget identified several areas which may impact technology services users including Cable and Satellite Television and Radio, Digital Content, Telephone and Internet Sales.  

• Cable and Satellite Television and Radio:  At present, New York does not apply its 4% sales tax to standard providers of cable and satellite TV services such as Cablevision (Etilities Forum), Charter Communications (Etilities Forum), Comcast (Etilities Forum), DirecTV (Etilities Forum), Dish Network (Etilities Forum), and others.  The Governor’s proposal will make it so that the state of New York will apply its sales tax to these services, as 23 other states currently do.  For a typical consumer spending between $50 to $150 per month on television, this would translate to $24-$72 per year in new taxes per household.
• Digital Content: Today, New York also does not apply sales taxes to digital content such as “digital audio, audio-visual and text files, digital photographs, games, and other electronically delivered entertainment services”.  Under the proposal, the standard 4% sales tax would apply to those who purchase items from iTunes (Etilities Forum), Amazon (Etilities Forum), Netflix (Etilities Forum), and countless other providers of digital media content.  While some of you may hope to bypass the TV sales tax by using online providers, no such luck…  For households spending $100-$200 per month on digital content purchases, this could lead to $48 to $96 per year in new taxes.
• Telephone:  In general, New York plans to increase the fees on utilities including “electric, gas, water and telephone”.  The current fee of 1/3 of 1 percent helps pay for state regulatory and management oversight; this fee alone will be raised to a full 1 percent.  Another 1% fee would be levied on these same services from 2009 to 2012 to help pay for the utility service conservation assessment.  The net impact for the next few years would be a raise of 1.66% for all utility fees including telephone.  Here, again, a household spending $100 per month on telephone service would pay an additional $20 per year.  This is an example where cheaper providers such as Vonage (Etilities Forum) may save you money not only because you pay less for the service itself, but also by reducing the tax impact.
• Internet Sales:  Today, many internet sales of general products bypass the New York sales tax because they do not have physical presence in New York.  Under the new plan, the state would expand the definition of a “nexus” is by rendering liable for sales tax any company whose ”in-state affiliate uses a trademark, service mark, or trade name the same as or similar to that of the remote affiliate”.  This change in legislation would apply the general 4% sales tax to many more companies trying to expand their businesses in the state through online sales.  Here, again, the impact on the consumer is proportional to his spending habits.

Though the new proposal would affect consumers differently, most New York residents may see increased fees ranging from $100 a year for conservative users to several hundreds of dollars for more high-volume users of internet and technology service.  As we analyzed the proposal, we were surprised to see that internet connectivity, especially broadband, escaped the wide-ranging changes.  Still, short of using free services such a Hulu (Etilities Forum) or Blinkx (Etilities Forum), few will manage to escape the impact of the taxes.

The plan will now be submitted to the state legislature to be  vote on and possibly implement many of the recommended actions proposed by the Governor.  The detailed publications are available on the New York State Executive Budget website.

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