IATR — IN FOCUS
by Matthew W. Daus, Esq. President, International Association of Transportation Regulators Distinguished Lecturer, University Transportation Research Center, Region 2 Contact: mwdaus@juno.com

"A REPEAL FOR ALL!"

LBOA and NY State Senator Golden launch a "grass roots" effort to repeal transportation sales taxes for limousines, black cars, liveries and the MTA taxi surcharge.

On March 18th, I was proud and privileged to introduce New York State Senator Marty Golden to a packed house of limousine, black car, taxicab and livery business owners at the Luxury Base Operators' Association (LBOA) breakfast. Senator Golden, now once again a member of the Senate majority, announced, to extensive applause and support, that he would shortly be introducing legislation to:

(1) repeal the sales and use tax for all for-hire ground transportation passengers presently collected by luxury limousine, black car and livery companies; and

(2) to repeal the Metropolitan Transportation Authority (MTA) taxicab surcharge.

Congratulations go to LBOA President Sergio Sanchez, and the staff and Board of LBOA for organizing such a successful and well attended event. The event's success was also due primarily to LBOA's generous sponsor – Capital One Bank, one of the country's most prominent vehicle, equipment and medallion finance institutions whose committed senior executives, Walter Rabin and Richard Antonacci, attended the event as well.

Senator Golden is no stranger to the industry. He was a prime sponsor of the "reciprocity law" that we helped pass together when I was TLC Commissioner. This law put an end to all TLC border wars between New York City, Nassau and Westchester Counties once and for all, and ensured that all neighboring jurisdictions met NYC's stringent safety and customer service standards. Senator Golden was recently appointed to represent Senate Majority Leader Dean Skelos and the Republican majority on a committee that oversees and approves the MTA capital program.

The Senator promised to hold the MTA more accountable fiscally, and this committee requires a "unanimous vote" in order to appropriate all specially earmarked revenue raised by payroll taxes and taxicab surcharges. Senator Golden promised not to simply introduce these bills, but to also work closely with the industry to use every possible effort and angle to see that these taxes are repealed. The Senator cited numerous examples of many tax laws he has already helped to repeal, and noted that these taxes are entirely unjustified as:

(1) hardworking immigrant drivers and businesses are unfairly treated with certain segments of the for-hire vehicle industry having lost over 40% of its business; and

(2) the MTA taxi surcharge involves the only instance in the U.S. where a private taxi industry subsidizes its public transit competition, namely, the bus and subway system.

Taking a page out of New Jersey's playbook where Barry Lefkowitz and the Limousine Association of New Jersey recently managed to pass legislation to repeal their limousine sales tax, New York City operators will be banding together as well to accomplish this goal. LBOA has launched – in conjunction with the Senator's office – a campaign that will be known as "A Repeal for All!" This effort seeks to coordinate the efforts of all regulated NYC ground transportation industries, as well as its sister organizations in other NY State Counties and New Jersey, to commence a petition and letter writing campaign by passengers, drivers and ground transportation companies. "A Repeal for All's" website, at www.arepealforall.com, is coming soon and will provide information about the repeal effort and how individuals can comment or sign up to help the cause.

Until "A Repeal for All" – How do transportation businesses comply with the sales tax laws?!

New York State and most of its localities impose a sales tax on sales of tangible personal property and certain enumerated services. Tax liability rests upon the consumer who cannot shift the liability for payment to another person. The vendor, service provider or other person required to collect the tax must do so along with the taxable receipt or charge to which the tax applies. The person required to collect the tax collects it as trustee for and on account of the state, and, like the consumer, is personally liable for the tax.

As of June 1, 2009 New York State and local sales tax has applied to transportation services including liveries, limousines and black cars except yellow taxicabs. Sales tax will be imposed on receipts from the sale of transportation services regardless of whether the charge is paid in or outside of New York as long as services are provided in the state. The receipts from the sale of such services are subject to sales tax only if the service begins and ends in New York State, and transportation services that begin or end outside the state are not subject to sales tax. Even if a portion of the trip passes outside the state it is still taxable if the service begins and ends in New York State. Effective August 11, 2010, and applicable retroactively to June 1, 2009, transportation services provided by affiliated livery vehicles wholly within New York City are excluded from sales tax. Businesses that qualify for the exclusion are no longer required to register for sales tax purposes and are eligible for a sales tax refund or credit for tax collected on such livery services after June 1, 2009.

Currently, the New York State sales tax is generally imposed at the rate of 4%. Added to that is any local sales tax which varies from locality to locality. For example, New York City's sales tax is currently 4.5%. An additional tax is imposed in the Metropolitan Commuter Transportation District (MCTD) which includes New York City and the Counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester. Such additional tax is at the rate of 0.375%. The combined state, city and MCTD sales tax rate is 8.875%. For transportation services the amount subject to tax includes any amount the service provider charges the customer for the transportation service. The charge to the customer may be based on mileage, trip, time consumed, or any other basis. Any handling, carrying, baggage, booking service, administrative, mark up, additional, or other charge, of any nature made in conjunction with the transportation service is also part of the receipt subject to tax i.e., service charge, fuel surcharge, no show charge, overnight charge, waiting service charge, parking fees and tolls. Additionally, a mandatory charge for gratuities is subject to sales tax unless all of the following conditions are met:

(1) the gratuity charge is separately stated on the bill, invoice, or other statement given to the customer,

(2) the charge is specifically designated as a gratuity, and

(3) the service provider pays the entire amount of the charge to the driver.

If a passenger gives a gratuity directly to the driver voluntarily the gratuity should not be a charge for transportation service, and should not be subject to sales tax. Please note, however, that a black car operators' injury compensation fund surcharge imposed on the passenger, that black car operators are required by law to collect from the passenger, are not part of the receipt subject to tax.

A provider of transportation services required to collect sales tax must register for sales tax purposes with the New York State Department of Taxation and Finance (the "Tax Department") and obtain a Certificate of Authority at least 20 days before making taxable sales. If taxable sales are made prior to obtaining a Certificate of Authority significant penalties may apply. This certificate authorizes transportation service providers to collect the required sales taxes on taxable transportation services, and to issue or accept sales tax exemption documents. Registration can be accomplished online, and once you are registered for sales tax purposes you are responsible for collecting and remitting both state and local sales tax to the Tax Department. Additionally, you must timely file returns, remit the tax and keep records. Failure to do so can result in the imposition of penalties and interest. Persons required to collect the sales tax, including, but not limited to, officers of a corporation are personally liable for collecting the tax. Detailed records of every sale, the amount paid, charged or due on the transaction and the sales tax due must be kept. Additionally, if you change your organization's structure the new organization must register for sales tax purposes.

For further information on how to comply with the laws governing sales taxes for for-hire ground transportation providers please contact my office at Windels, Marx, Lane & Mittendorf, LLP, at (212) 237-1106 or email me at mdaus@windelsmarx.com where I can ensure that our experienced Transportation Practice Group tax attorneys can advise and counsel your company on how to comply and avoid significant penalties and liabilities that could be imposed for even innocent mistakes.

U.S. DEPARTMENT OF TRANSPORTATION PROPOSES NEW RULES RESTRICTING CELL PHONE USE IMPACTING INTERSTATE MOTOR COACH AND LIMOUSINE BUSINESSES AND DRIVERS

New Federal rules are being proposed by the United States Department of Transportation's (U.S. DOT's) Federal Motor Carrier Safety Administration (FMCSA) to restrict the use of hand-held mobile telephones by Commercial Motor Vehicle (CMV) drivers operating in interstate commerce. These proposed rules allow for hands-free communication as long as the driver does not "reach for, hold or dial" a mobile phone. These new regulations are expected to affect many bus, motor coach, limousine and related ground transportation companies.

Last year, the Safe, Accountable, Flexible, Efficient Transportation Equity Act (SAFETEA) removed the "limousine exemption" that applied to commercial motor vehicles (CMVs) that transport between 9 and 15 passengers in interstate commerce within a 75 air mile radius. SAFETEA and subsequently implemented FMCSA regulations now apply motor carrier licensing and safety requirements to limousine businesses that conduct any type of pick up or drop off in a different state, for any distance whatsoever.

Likewise, the proposed Federal cell phone restrictions appear to apply to many businesses and drivers of ground transportation companies deploying buses, shuttles, motor coaches and limousines in interstate commerce. The proposed rules would amend Parts 383, 384, 390, 391 and 392 of Title 49 of the Code of Federal Regulations. These proposed rules would sanction CMV drivers via civil penalties of up to $2,750 per violation as well as disqualify them from driving a CMV for a specific period of time. Furthermore, these rules require interstate motor carriers, which include limousine and other bus and motor coach companies, to "ensure compliance" by their drivers or else face a civil penalties of up to $11,000 per violation.

With regard to those businesses that utilize buses and motor coaches where the CMV is required to be driven by the holder of a Commercial Drivers License (CDL), the CDL holder will be disqualified from driving for 60 days after a second cell phone conviction and 120 days after a third or subsequent conviction within a 3 year period. In addition, State or local laws restricting or prohibiting hand-held cell phone use would be added to the Federal regulations' list of "serious" traffic offenses. At present, only nine (9) states and the District of Columbia ban all drivers from driving while using hand-held cell phones, including: California; Connecticut; Delaware; Maryland; New Jersey; New York; Oregon; Utah and Washington. These CDL amendments would apply to Federal, State or local government agencies, transit authorities and school districts. Each state would have up to 3 years to amend their CDL statutes to impose identical penalties or else not be eligible for grants issued under the Motor Carrier Safety Assistance Program (MCSAP).

The proposed and final FMCSA rules as well as all public comments can be found on its website www.fmcsa.dot.gov. The public comment period closed on March 21, 2011.

NJ Motor Vehicle Commissioner Raymond Martinez and Matthew W. Daus at LANJ Luncheon.