When it comes to your building’s utility bill, most of the time you just grumble about the rising cost of energy and write a check. (Or watch as your managing agent does the same thing.) But what if you’re paying too much? Energy consultant Herb Rose says many condos and co-ops in New York City are doing just that and the culprit is not the cost of actual energy but an incorrect sales tax rate on your utilities. In 1980, he notes, the state eliminated the sales tax on utilities for residential buildings but many condos and co-ops have been listed as commercial, thus paying a higher rates.
Rose works with condos and co-ops to file the proper paperwork with a building’s utility provider (such as Con Edison) to change a building’s status from commercial to residential as it pertains to the sales tax. He also files the correct documents with the state Division of Taxation to secure refunds for overpaid taxes (he takes a percentage as a commission from the saved money). He says refunds can only cover three years and that generally he secures between $1,500 and $3,000. In one case, he said he won a $20,000 refund for a client.
Rose says it is certainly possible for boards or managing agents to file the paperwork themselves but it is a time-consuming and complicated process. He says there is no easy, quick way to check on a request to change a building’s status or a get cash back. “My personal suspicion is that it’s been made so complicated that a lot of people just won’t do it,” says Rose, who estimates that he works with about a dozen co-ops or condos a month on this issue.
On the other hand, Michael T. Lockhart, president of American Utility Consultants, a firm that does utility audits for residential, commercial, and industrial properties, says he does not encounter this issue frequently with his condo and co-op clients. “I’ve been in this business for 20 years, and I don’t see it as a widespread problem,” notes Lockhart, who adds that he’s known a “handful” of buildings that are paying commercial sales tax when they should pay residential. On several occasions it occurred at buildings that had been converted from hotels.
Several managing agents report that they had never heard of the problem before. Lynn Whiting, director of management at the Argo Corporation, now says she will look into the matter. The reason? She pulled the Con Edison bill for one of her buildings, a 100-unit co-op on the Upper West Side, and discovered that it was paying nearly 10 percent sales tax on utilities, despite the fact that it had no commercial space.
To check what sales tax rate your building is paying, you need to take a closer look at your utility bill. A building considered to be commercial would pay a total of 8.875 percent sales tax on utilities. That’s a 4 percent state sales tax, a .365 percent Metropolitan Commuter Transportation District sales tax, and New York City’s 4.5 percent sales tax. A building considered to be residential would pay only the 4.5 percent.
If you discover that you are being charged at the commercial rate, you then need to determine if your building should be considered residential. You’ll need the state taxation form TP-385. If 75 percent or more of the space is for residential use, then the building is considered to be residential. If less than 75 percent is residential, you can still get a discount. Indicate how much of the space is residential to the nearest 10 percent and then you can pay the correct rate on that amount. According to spokeswoman Sara Banda, Con Edison does not track how often buildings file the form to change from commercial to residential.
If you’ve determined that you’ve been overpaying in sales taxes, the next step is to seek a refund from the state. Rose says the most crucial part of this process is to include the documentation required to prove you overpaid. This means not only the first page of your utility bill that shows the total dollar amount but also the other pages of the bill that includes the tax rate, he says. The form indicates that you’ll also need to include proof that you paid the bill and that all documentation must “clearly identify the purchaser,” i.e. the condo or co-op seeking the refund.
From December 2008 to November 2009, a total of 1,049 claims for sales tax refund were made statewide, reports the state Division of Taxation, which also notes that the state paid out a total of $4,051,802 in claims during that time period. Spokeswoman Susan Burns says those claims were made by condos, co-ops, rentals, and occasionally nursing homes. She adds that it is unclear whether those claims include those made for reasons other than in cases where buildings are mistakenly listed as commercial.
To file with Con Edison, the forms should be mailed to:
P.O. Box 138,
New York, NY 10116-1701
If you have another utility provider, you’d need to check with them about the mailing address.
To get the state taxation form, TP-385, go to:
For a refund, AU-11, go to: