Surprise!!--New York City Raises Sales Tax Rate

Flash!! Surprise--New York City has been given permission to raise it's city sales tax rate to 4.50% from 4.0%.  That is a 12.50% rate increase.  In addition to this change at the city level, the state has now repealed the sales tax exemption on clothes costing over $110 and now subjects the transmission and distribution fees paid for electricity and natural gas to the full New York City Rate.  I apologize for the sarcasm but it comes as no surprise that New York City or any other taxing jurisdiction for that matter will be increasing its tax rate and expanding the tax base to make up the short fall in revenue.  For businesses these costs just get passed on to customers in the form of higher prices.  For consumers, these additional taxes is just lost purchasing power.  I call it "taxflation"-the loss of purchasing power due to increases in transaction based taxes.  In New York City, your purchasing power just decreased by 12.5%.  That's $5.00 on every $1,000 of purchases you make in New York City.  It may not sound like much, but over time and in the aggregate, it amounts to millions of dollars of income that was diverted from actual consumption into taxes. These changes are effective August 1, 2009.

For a business that does not have good tax collection systems in place, this will also make tax assessments 12.5% higher in the future if they fail to collect and remit the proper amount due. 

New York is becoming very aggressive on audits and in their rulings.  As reported last week, New York now has a provision that requires franchisers to report the income of franchisees. This tactic is going to be used to desk audit the sales tax returns of every fast food restaurant in the state without actually having to leave the office.  I'm sure that these audits will be fair and accurate.

Get used to it folks, techniques like these and many others not yet discovered is the new sales tax frontier.  Once these provisions are in place, they are not going away. 

Your thoughts?