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A Rapid Infusion of Tax Dollars for the State Treasury by State Sen. Ruben Diaz
Mon, 11 Feb 2008 14:33:00
In the 2008 State of the State Address, Gov. Eliot Spitzer offered several proposals to attempt to help close New York State’s budget deficit. As part of this statewide initiative, I have re-introduced Senate Bill No. 774 to ensure that New York State promptly receives all of the sales tax revenues to which it is entitled. This bill could increase the state’s budget by up to $300 - $500 million dollars in revenue.
This modification of the New York State Tax Law will require credit card companies to remit the state’s portion of sales tax amounts from receipts of retail sale of taxable foods and services directly to the State Department of Taxation and Finance—and not keep them within the accounts of businesses and retail establishments pending remittal to the state.
This change will affect all sales tax vendors registered with the NYS Department of Taxation and Finance, and put our state tax dollars to use immediately and directly.
The anticipated increase in revenues to the state from my proposal are expected due to the following factors: reduced tax agency costs associated with reduced processing of these quarterly sales tax returns, the financial benefit the state will receive from the ability to use and manage sales tax funds immediately, the reduction of loss of sales tax revenue due to underreporting of taxable sales, and the ability of the state to avoid loss of collected sales tax revenue when businesses fail or file for bankruptcy protection.
Presently, businesses are required to file and submit sales and use tax returns, usually on a quarterly basis. Eliminating the need for calculating and filing quarterly sales tax returns would benefit business owners by reducing their own accounting costs.
Under the current system, businesses have the opportunity to invest already collected state sales tax in their own accounts and accrue interest for themselves and their businesses. These businesses get the benefit of the float. By allowing months to pass before receiving these already collected taxes, the state does not have use of that money until it is remitted with the tax. My bill would prevent the state from losing interest on this float by requiring that tax amounts be paid simultaneously at the time the purchase is made. Statewide, this should result in substantial revenues.
Unfortunately, either through error or otherwise, too many businesses operating in New York State underreport their taxable income. My proposed change would mean that payment will take place at the point of sale. The total price of the goods plus the tax will be charged to the consumer's debit or credit card, and simultaneous payments to the merchant and the state’s taxing authority will be made by the credit card company. This will reduce the problem of underreporting of taxable sales by businesses. If the business gets paid for a sale, the state gets paid its sales tax.
With passage of this bill, there will be less possibility that New York State will be a creditor in the traditional case of a failed business. At present, a failing business might continue to bring in sales tax receipts that are deducted from a credit card holder’s account, but, due to financial strains within the company, retain those sales tax proceeds rather than pay them to the state. A failing business might choose to do whatever it needs to survive and divert from paying business obligations such as taxes, just in order to keep the business running for a couple of months longer.
All too often these businesses never catch up with their obligations. When it comes to their time to fold, or file for bankruptcy protection, too many of them never pay off the withheld sales taxes. My bill will allow the state to get ahead of the bankruptcy game, never be owed money, and always get paid on time—at least in this realm.
This expedient method of collecting sales tax revenues will reduce administrative expenses presently needed to process sales tax returns before the taxes actually become credited to the State Treasury. We will no longer have to wait until the end of the year to figure out how much money is coming into the state from these businesses, because it will be coming in daily.
Ruben Diaz, a Democrat representing parts of the Bronx in the State Senate, is a member of the Banking Committee.
This modification of the New York State Tax Law will require credit card companies to remit the state’s portion of sales tax amounts from receipts of retail sale of taxable foods and services directly to the State Department of Taxation and Finance—and not keep them within the accounts of businesses and retail establishments pending remittal to the state.
This change will affect all sales tax vendors registered with the NYS Department of Taxation and Finance, and put our state tax dollars to use immediately and directly.
The anticipated increase in revenues to the state from my proposal are expected due to the following factors: reduced tax agency costs associated with reduced processing of these quarterly sales tax returns, the financial benefit the state will receive from the ability to use and manage sales tax funds immediately, the reduction of loss of sales tax revenue due to underreporting of taxable sales, and the ability of the state to avoid loss of collected sales tax revenue when businesses fail or file for bankruptcy protection.
Presently, businesses are required to file and submit sales and use tax returns, usually on a quarterly basis. Eliminating the need for calculating and filing quarterly sales tax returns would benefit business owners by reducing their own accounting costs.
Under the current system, businesses have the opportunity to invest already collected state sales tax in their own accounts and accrue interest for themselves and their businesses. These businesses get the benefit of the float. By allowing months to pass before receiving these already collected taxes, the state does not have use of that money until it is remitted with the tax. My bill would prevent the state from losing interest on this float by requiring that tax amounts be paid simultaneously at the time the purchase is made. Statewide, this should result in substantial revenues.
Unfortunately, either through error or otherwise, too many businesses operating in New York State underreport their taxable income. My proposed change would mean that payment will take place at the point of sale. The total price of the goods plus the tax will be charged to the consumer's debit or credit card, and simultaneous payments to the merchant and the state’s taxing authority will be made by the credit card company. This will reduce the problem of underreporting of taxable sales by businesses. If the business gets paid for a sale, the state gets paid its sales tax.
With passage of this bill, there will be less possibility that New York State will be a creditor in the traditional case of a failed business. At present, a failing business might continue to bring in sales tax receipts that are deducted from a credit card holder’s account, but, due to financial strains within the company, retain those sales tax proceeds rather than pay them to the state. A failing business might choose to do whatever it needs to survive and divert from paying business obligations such as taxes, just in order to keep the business running for a couple of months longer.
All too often these businesses never catch up with their obligations. When it comes to their time to fold, or file for bankruptcy protection, too many of them never pay off the withheld sales taxes. My bill will allow the state to get ahead of the bankruptcy game, never be owed money, and always get paid on time—at least in this realm.
This expedient method of collecting sales tax revenues will reduce administrative expenses presently needed to process sales tax returns before the taxes actually become credited to the State Treasury. We will no longer have to wait until the end of the year to figure out how much money is coming into the state from these businesses, because it will be coming in daily.
Ruben Diaz, a Democrat representing parts of the Bronx in the State Senate, is a member of the Banking Committee.
