The Governor, Assembly, and Senate are close to hammering out a deal for this year’s budget. A key issue in this budget is to raise revenue to fund mass transit in the New York City area. The MTA faces a $600 million budget gap that will grow to an estimated $3 billion in 2025 because federal aid will phase out. Ridership remains low at about 60% pre-pandemic levels.
The Governor proposed to fund the MTA by instituting a payroll tax on businesses located in the New York City MTA region. This plan was opposed in the Assembly. Instead of instituting a payroll tax in NYC, the Assembly proposes to extend the sales tax to digital streaming services purchased by consumers throughout the state. Importantly, this is not a tax on advertising. Rather, it is intended to be a tax on consumers for the retail purchase of digital and streaming products. Simply stated, it would apply the New York Sales tax to services like Netflix, Peacock, or Paramount+. It would also apply to subscription-based radio services.
NYSBA has concerns with this approach. The legislation exempts cable and satellite services. Similarly, we believe digital services provided by local radio and TV stations should also be exempt. While most broadcast services are provided for free, new digital services such as those that may be provided by Next Gen TV should be exempt. Revenue from these services will help fund free services that are provided by local stations. Moreover, we are concerned that extending the sales tax will set a precedent for extending the tax to advertising.
The Assembly’s proposal is not included in the Governor’s or Senate’s budget proposal. It may not pass. Nonetheless, New York needs to find revenue to fund the MTA. This issue will be resolved when the budget is negotiated over the next few weeks.
You can see NYSBA’s opposition to extending the sales tax here.
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