The New York Department of Taxation and Finance has issued a bulletin providing transitional provisions for sales tax rate changes. Local sales tax jurisdictions are generally allowed to increase or decrease their local sales and use tax (sales tax) rate effective on March 1, June 1, September 1, or December 1 of each year. The bulletin describes how sales tax is applied when the sales tax rate in a locality changes.
In general, all taxable sales and uses occurring on or after the effective date of a local sales tax rate change are taxed at the new rate of sales tax. However, the following special transitional provisions describe certain transactions where the sales tax is collected at the rate in effect prior to the rate change.
Layaway sales: When a local sales tax rate increase occurs while items are being held at a store, the sales tax is due at the prior lower rate only if the following conditions are met: at least four months prior to the rate increase, a written agreement for the sale is made and the items sold are segregated from other similar inventory in possession of the seller; and before the effective date of the rate increase, the purchaser paid at least 10% of the sales price. If these conditions are not met, tax is due at the rate in effect when the customer makes final payment and takes delivery of the merchandise.
If a sales tax rate decrease occurs while an item is on layaway, the sales tax is due at the new lower rate in effect when the customer takes delivery of the merchandise.
Utility bills based on meter readings: If a sales tax rate change occurs during a billing period, the rate of sales tax to be charged depends on the number of days during the period before and after the effective date of the rate change. The previous tax rate will be due if more than half of the days in the billing period are prior to the rate change. If more than half of the days in the billing period are after the date of the rate change, the tax due is computed using the new rate.
Telephone bills: Charges for services provided on or after the date of the first bill issued to the customer after a rate change takes effect should be calculated at the new tax rate. Charges for services furnished before the date of the first bill issued to the customer after a rate change should be calculated at the prior rate, even though the service may have been provided after the effective date of the rate change.
Telephone answering services: Charges for telephone answering services that cover a period beginning before and ending after the date of a sales tax rate change are prorated.
Social and athletic club dues: Dues covering any period that begins before a sales tax rate change are taxed at the prior rate, regardless of the date of the bill. Dues that cover a period that begins on or after a rate change are taxed at the new rate, regardless of the date the bill is mailed to the club member.
Admissions: Admission charges to an event occurring on or after the effective date of a rate change are taxed at the new rate, unless the ticket to the event was sold and delivered to the purchaser prior to the effective date of the rate change.
Hotel occupancy: Hotel occupancy charges for daily rentals are taxed at the rate in effect on the day of the occupancy. If a new sales tax rate takes effect during a guest’s stay, the sales tax rate will vary based on the tax rate in effect on each day of the stay. If the rental is on other than a daily basis, the overall charge can be prorated and taxed accordingly at the rate in effect before and after the date of the tax rate change. The portion of the stay prior to the effective date of a rate change will be taxed at the old rate, and the remaining time of the stay will be taxed at the new rate.
TB-ST-895, New York Department of Taxation and Finance, March 10, 2014, ¶408-044