Introduction – New York State exempts all residential heating fuels from the State level 4% sales tax, but gives counties, cities and school districts the option to levy sales and use taxes. The current situation is reviewed in the Publication 718-R.
It turns out that only 16 of 62 counties levy sales taxes (ranging from 1 ½ to 4 ¾ %) on the grouping that includes coal, fuel oil, firewood, and other biomass fuels (e.g. wood pellets). Counties do not have the option to select which of the fuels in this group they wish to tax: it is all or none. This is the considered opinion of Joe Mareane, the county administrator of Tompkins County, who was asked for his opinion about how the law was to be interpreted. It is not clear why fuels are grouped in this manner, however this is apparently the way that counties are interpreting the Tax Law as written.
There are a number of reasons why these taxation practices are out of step with current realities. Perhaps most importantly, New York has a number of state level programs that recognize and attempt to address greenhouse gas emissions: principally RGGI and RPS. Given that biomass energy is, arguably, carbon neutral, equal taxation of biomass fuel and fossil fuels runs counter to the idea of incentivizing renewables. Indeed, Tompkins County has a greenhouse gas element in its master plan that aims to reduce greenhouse gas emissions by 80% by 2050. It is widely recognized that America’s dependence on foreign oil is unsustainable and increases national debt. Locally sourced biomass fuels not only address this problem, but create local jobs and support local economies. Ongoing technological improvements in biomass combustion have largely eliminated concerns about environmental impacts. At this time, the revenue impacts on local governments caused by eliminating local taxes on residential biomass heating fuels is minimal because these fuels represent a very small fraction of the residential fuel supply. In addition, most small firewood producers do not even collect the sales tax; this is unfair to larger firewood businesses and wood pellet retailers who do collect the tax.
Objective – The fundamental objective is to use State and local sales taxes to incentivize use of renewable energy (in particular, locally produced and utilized residential biomass heating fuels) over fossil fuel energy. This can be accomplished by reducing taxes on renewables and/or increasing taxes on fossil fuels. Here are several approaches that could be taken:
1) exempt all residential biomass heating fuels at the State level;
2) ungroup coal, fuel oil and biomass to give Counties the choice of different tax rates on each;
3) re-impose State sales tax on non-renewable heating fuels;
4) remove State sales tax on biomass thermal equipment (as with solar equipment);
5) give Counties the option to exempt biomass thermal.
Strategy – The most straightforward way to go after this is at the State level (1,3,4 above). Solid arguments can be made based on local job creation, supporting local economies, increased fuel security, and greenhouse gas emissions reductions. NYBEA is uniquely qualified to make the case. Thus far, I have also enlisted the help of Barabara Lifton’s office (125th Assembly District) and the Tompkins County Environmental Management Council (citizen advisors to the County Planning Department). Similar actions can be taken in other Counties, particularly those that impose sales taxes.
Allies – There are lots of potential allies: large firewood processors, pellet and stove retailers, and environmentally conscious citizens. Push back is likely from coal and fuel oil distributors unless they can be convinced to make biomass fuel sales part of their business.
Breaking News – It was recently brought to my attention that legislation was proposed in January to exempt all renewable residential heating fuels (click here to read proposed legislation). Please contact your NY State representative and request that they support this legislation.