According to the latest Ways and Means Committee meeting, the Orange County government in New York collected 17 percent more sales taxes than budgeted in the first quarter.
Sales taxes are the county’s lifeline, accounting for nearly 45 percent of its estimated revenue.
Nearly $394 million in sales taxes were budgeted for this year.
The county’s sales taxes picked up quickly following the pandemic year 2020 and have consistently grown at a rate higher than expected.
In 2021, the county collected $42 million more in sales taxes than estimated.
Last year was even better, with annual receipts that were $57 million more than budgeted.
Booming sales taxes contributed to a property tax levy reduction of over $7 million in this year’s budget.
According to the New York State Department of Taxation and Finance, industries that produce the most sales taxes are clothing stores, gas stations, auto dealers, restaurants, e-commerce, and construction.
The county has a sales tax rate of 8.125 percent, of which 4 percent goes to the state, 3.75 percent to the county, and the rest to the Metropolitan Transportation Authority (MTA).
In New York, sales taxes are collected by the state, which distributes due shares to local governments after deducting administrative fees.
The growing sales taxes benefit the county, cities, towns, and villages.
According to a longstanding joint tax-sharing agreement, the county government retains about three-quarters of the sales tax receipts while sharing the rest with local municipalities.
About 70 percent of the shared taxes go to towns and villages; the remaining 30 percent goes to the county’s three cities, Middletown, Newburgh, and Port Jervis.
Local distributions are based on population size.
For Middletown, the largest city in the county, sales taxes account for 22 percent of its budget.
According to the New York State Comptroller’s Office, Orange County has one of the most generous tax-sharing agreements with local municipalities in the Hudson Valley.
On March. 28, the county legislature passed a resolution requesting the state to extend its sales tax rate increase of 0.75 percent to the end of November 2025.
About 20 years ago, the county raised its share of the sales tax rate to 3.75 percent via a local law that needs to be periodically extended with state approval.
There were legislative attempts in the past to raise the county share to 4 percent, but the effort failed to advance to the state level.