On April 1, 2019, the State Legislature approved a $175.5 billion budget for 2019-2020, which, among other things, eliminates an important sales tax exemption that allowed certain commercial customers of Energy Service Companies (“ESCOs”) to receive electric and gas supply without paying sales tax on transmission and distribution charges.

Since 2000, shortly after New York restructured its energy markets, the NYS Tax Law has included an exemption for commercial ESCO customers that was designed to incentivize consumer choice and enhance the ability of ESCOs to offer competitive prices (“Exemption”). Under the Exemption, commercial customers that received service from an ESCO would pay sales tax on the commodity portion of their bills, but not the delivery service. In contrast, default utility customers paid sales tax on both the commodity and delivery provided by the utility.
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