February 8, 1997

Copyright 1997 by Gary D. Borek

Many internet service providers have been collecting state and local sales taxes on the access fees paid by their customers. Before February 1, 1997, the sales tax had to be collected and paid to the state because the NYS Department of Taxation had not determined that internet access fees were exempt from sales tax. As of February 1, 1997, internet access fees are no longer subject to state and local sales taxes in New York, as announced by the New York State Department of Taxation and Finance in Technical Service Bureau memorandum TSB- M-97(1)S (Jan. 24, 1997). The announcement, however, did not state whether internet access fees paid before February 1, 1997 were subject to state and local sales taxes. Customers who paid the sales tax for internet service before February 1, 1997 should consider filing an application for a refund directly with the New York State Department of Taxation and Finance.

An application for refund of state and local sales taxes must be made within three years of the date on which the sales taxes were due and payable to the State by the person who collected the tax. December 1, 1993 is the earliest date for which a refund can be claimed because New York State sales tax returns are generally filed on a quarterly basis and the quarterly sales tax returns are due on the 20th of March, June, September, and December. (The sales tax quarters run from December 1 to February 28, March 1 to May 31, June 1 to August 31, and September 1 to November 30, respectively). Thus, an application for refund can be made for sales taxes paid on or after December 1, 1993 if the application is filed on or before March 20, 1997. The Tax Department has not yet announced whether such refund claims will be honored.

For most individual customers in Erie County, a refund claim might not amount to very much. For example, on a monthly access fee of $20, a customer living in Erie County would have paid a sales tax of $1.60 per month (the combined state and local sales tax rate in Erie County is 8%). A consumer who paid such fees for the entire 38 months from December 1, 1993 to February 1, 1997 would be entitled to a refund of $60.80. A business or other organization that purchased multiple internet access rights would, of course, be entitled to a much larger refund. Using the previous example, a business that purchased 20 monthly internet accounts for the entire 38 months would be entitled to a refund of $1,216.00.

Refund claims must be made by filing a claim for refund with the New York State Department of Taxation and Finance at the Central Office Audit Bureau, Sales Tax Section, Building 9, W.A. Harriman Campus, Albany, NY 12227. Preprinted refund application forms may be obtained from the Department of Taxation and Finance by contacting the Taxpayer Assistance Bureau at 1-800-462- 8100 (ask for Form AU-11). Ironically, the preprinted form is not available on the Tax Department's world wide web site (located at http://www.tax.state.ny.us). Use of the official form, however, is not required. A refund claim can be made by filing a letter that contains the following information:

1. The name and address of the applicant.

2. The period covered by claim.

3. The amount of refund or credit claimed.

4. A full explanation of facts on which the claim is based, including substantiation of the basis for and the amount of the claim (invoices from the internet service provided showing the separate charge for New York state and local sales taxes and proof of payment of the invoices should suffice).

5. A certification that no part of the tax paid for which the claim is made has been refunded or credited to the applicant by the person to whom it was paid.

6. The date of application.

7. The signature of the applicant and, if the applicant is an officer of a corporation or a partner in a partnership, the individual's title.

Regardless of the form of the claim, it should be sent by certified mail, return receipt requested, with a United States Post Office postmark (as opposed to a postmark generated by a private postage machine or private delivery service). The receipt given by the post office for the certified mail should be attached to the customer's copy of the refund claim as should the return receipt when it is received by the customer. Those receipts will serve as proof that the refund claim was filed and the date on which it was filed.

If the Tax Department denies the claim, it will send the applicant a notice of denial with instructions for filing an appeal. Refund claims and appeals should be filed even if the state denies the claims. A subsequent appeal by another taxpayer might result in a ruling that the refunds must be paid and only those taxpayers who have previously filed timely claims will be able to obtain refunds.

A refund claim letter by an individual might read as follows:

New York State Department of Taxation and Finance
Central Office Audit Bureau
Sales Tax Section
Building 9
W.A. Harriman Campus
Albany, NY 12227

RE: Claim for refund for state and local sales taxes
Social Security Number: 000-00-000
Employer ID Number (if applicable): 00-0000000

Date of Claim: February 28, 1997

Dear Sirs:

This is a claim for refund for New York state and local sales taxes I paid to the Always Busy internet service provider for access to the internet for the period from December 1, 1993 to January 31, 1997. I believe that the sales taxes were erroneously collected from me because the New York State Department of Taxation and Finance has recently announced that such services are not subject to state and local sales taxes. See Technical Service Bureau memorandum TSB-M- 97(1)S (Jan. 24, 1997).

My name and address are: My Name, My Address.

Enclosed are copies of the relevant invoices and copies of my canceled checks that show I paid a total of $60.80 of state and local sales taxes for the period from December 1, 1993 to January 31, 1997 as follows:

Month/Year Tax Paid

[List Month/Year and amounts paid]

I certify that no part of the tax paid for which this claim is made has been refunded or credited to me by the person to whom it was paid or by any government entity.

Thank you for your prompt attention to this matter.

Sincerely yours,

_________________ (signature)