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Volume 6 - Opinions of Counsel SBEA No. 6

Opinions of Counsel index

Sales tax (apportionment of local revenue) (county equalization rate) - Real Property Tax Law, Article 8; Tax Law, § 1262:

For purposes of disposition to villages of revenues from sales taxes imposed by counties, the term “full valuation of real property” means the assessed valuation of real property within the village on the town assessment roll divided by the equalization rate determined for such roll by the county pursuant to Article 8 of the Real Property Tax Law.

We have received a request for an interpretation of section 1262 of the Tax Law, which provides a statutory scheme for the distribution to cities, towns and villages of local sales tax revenues which are not used for county or educational purposes.

This section provides that the amount of such revenue shall be distributed to the cities within the county considered as one unit and the towns and villages within the county considered as one unit on the basis of population or any other basis agreed upon by the elective governing bodies of the county and each city with the approval of the State Comptroller.

Section 1262 further provides that the amount to be distributed to the town and villages as a unit shall be distributed among the towns (including their villages) on the basis of the full valuation of real property or, in the alternative, upon the basis of population. Subject to the options hereinafter discussed. such distribution is made by reducing county and town real property taxes to be levied in each town (including its villages) by the amount of the allocated share.

However, a town may elect that the share, which would otherwise have been applied to reduce county and town taxes, be paid directly to the town to be used for any town purpose. Likewise, a village may elect that that amount, which would otherwise be applied to reduce county and town taxes levied upon real property in the village, be paid directly to the village.

Upon the exercise of such option by a village, the amount to be paid to the village is determined by the ratio that the full valuation of real property in the village bears to the full valuation of real property in the entire town.

Paragraph (d) of subdivision (f) of section 1262 defines full valuation of real property as “the assessed valuation of real property divided by the equalization rate as determined by the board of supervisors or commissioners of equalization of the county.”

Pursuant to Article 8 of the Real Property Tax Law, the county equalization agency (i.e., the-board of supervisors or the commissioners of equalizatIon) is required to annually determine an equalization rate for each city and town within the county. The county equalization agency does not, and is not authorized to determine equalization rates for villages.

Since county and town taxes upon property within the village are levied on the town assessment roll, a distribution of sales tax revenue, which would otherwise have been applied in reduction of such taxes, must have references to the town assessment roll. Use of the town-wide county equalization rate to determine the full value valuation of property within the area of the town outside villages and within the area of each village guarantees that a village electing to be paid directly will receive the amount which otherwise would have been applied to reduce county and town taxes within the village.

There would be no such guarantee if the full valuation of real property in the area outside the village were determined on the basis of the county equalization rate determined for the town assessment roll while the full valuation of real property in the village were determined on the basis of the state equalization rate determined for the village assessment roll while the full valuation of real property in the village were determined on the basis of the state equalization rate determined for the village assessment roll. In such case, the amount to be paid directly to the village might be more or less than the amount which would otherwise have been applied to reduce county and town taxes within the village. This could result from a variety of factors including differences in sampling techniques employed by the county and the State, and the determination of equalization rates on the basis of different market value standards.

Accordingly, in distributing such revenue between a town and a village located therein, the first computation to be made is the determination of the full valuation of the town-wide assessment roll by dividing the total assessed value of taxable real property on the town assessment roll by the equalization rate determined for such assessment roll by the county equalization agency. The second computation to be made is the determination of the full valuation of taxable real property within each village by dividing the total taxable assessed valuation on the town assessment roll of real property located within each village by the equalization rate determined for the town assessment roll by the county equalization agency.

This interpretation appears to be supported by the State Comptroller’s office which noted, in an opinion concerning section 1262 of the Tax Law, that “the term ‘full valuation of real property’ must be determined with reference to taxable real property only...[T]he definition of the aforesaid term, as set forth in Tax Law, §1262(f)(3), is the assessed valuation of real property divided by the [county] equalization rate...” (24 Op.State Compt. 653).

February 3, 1977

Updated: