Governor's Veto Of Fuel Tax Exemption Makes Waves Among Fishing Fleet

By Aaron Boyd

New York Governor David Paterson vetoed a bill that would exempt commercial fishermen from paying fuel tax at the pump, rather than applying for reimbursement from the state tax assessor, creating undue hardship on an already depleted industry. Photo by Aaron Boyd

The bill does not consider the adverse effects on fuel
distributors, according to Governor David Paterson.

Hampton Bays - New York Governor David Paterson vetoed a bill that would exempt commercial fishermen from paying fuel tax at the pump, rather than applying for reimbursement from the state tax assessor. Currently, East End fishermen are required to pay the tax on diesel motor fuel, approximately $0.49 per gallon, and subsequently file with the state for a refund.

Governor Paterson vetoed the bill on Thursday, Sept. 4, citing administrative gaps in the legislation. "While the purpose of this bill is commendable," Paterson contended, "it is flawed from both a technical and policy perspective."

Opposing the veto, New York State Assemblyman Fred Thiele charged, "The current law has caused a great deal of hardship for commercial fishermen. A fisherman, operating a trawler vessel burning approximately 85,000 gallons per year, must advance more than $25,000 annually in taxes to the state," Thiele explained.

The proposed legislation, which passed the state senate and assembly on June 18 and June 19, respectively, would add commercial fishermen to a list of other tax-exempt diesel consumers, including fuel purchased for the purposes of heating and farming.

The Cost Of Doing Business
The bill does not consider the adverse effects on fuel distributors, according to Paterson. The legislation "does not provide a mechanism for the retailer to recover the taxes it paid to the supplier," he explained. "Retailers would either have to absorb the cost of the tax paid or refuse the fisherman's exemption certificate," Paterson argued, "Certainly not a result intended by the Legislature."

Bob Soleau, owner and manager of Soleau's Wharf and Marina
in Hampton Bays, was disappointed in the Governor's decision.

Bob Soleau, owner and manager of Soleau's Wharf and Marina in Hampton Bays, was disappointed in the Governor's decision. The veto was in direct contrast to a campaign promise from former Governors Elliot Spitzer and Paterson during a stop in Hampton Bays before the 2006 gubernatorial election, according to Soleau.

As a fuel retailer, Soleau asserted that a fuel tax exemption would not adversely affect his business. "We make our money packing fish," he explained, "not on fuel sales." Soleau is more concerned that without the fuel tax exemption there won't be a fishing industry to support, than with incurring the tax-cost himself.

Commercial fishermen and fuel distributors agree, Thiele assured. "They support the bill because it's more money in the economy," he explained. Rhode Island has a tax-exemption for commercial fisheries that is deducted at the time of purchase, which brings in New York fishermen looking to save money immediately when they refuel.

"The result is the loss of thousands of dollars in revenue for the state's fuel distributors," Thiele asserted, "If Rhode Island could do it, certainly New York can figure it out."

No Free Rides
Paterson voiced concern over the heightened risk of tax evasion that could ensue under the revised legislation. A fisherman's credentials are currently verified by their commercial fishing license and Coast Guard registration when they file the refund application with the State Tax Department.

Opposing the veto, New York State Assemblyman Fred
Thiele charged, "The current law has caused a great deal
of hardship for commercial fishermen."

"Under this bill, retail stations could simply sell the fuel without including the tax in the selling price," Paterson explained, "which would make it extremely difficult for the Tax Department to determine whether the fuel was indeed sold for an exempt purpose."

That would not be too difficult to identify, according to Soleau. "We can tell a commercial boat from a recreational boat pretty easily," Soleau explained, and he imagines it wouldn't be hard to enforce on a wider scale.

Assemblyman Thiele, an avid proponent of the bill, contends the Tax Department could have worked through evasion issues with better regulatory language in the legislation. Thiele asserted that Governor Paterson vetoed the bill for fiscal reasons. Before the state refunds the taxes, they gain revenue by using the capital for investments and recouping the interest, according to Thiele.

"This bill would have a negative fiscal impact of approximately $500,000 annually," Paterson contended, citing the potential loss of revenue, "At a time when the state is facing a significant budget deficit."

Without the bill's passage, Soleau hopes that the state will at least work on reimbursing commercial fishermen within a few weeks, rather than the current three-month waiting period. "We give [the state] our money and they're using it" rather than returning it instantly, he argued

"The losers are the commercial fishing industry, marinas, the economy and the people of New York," Thiele asserted. "Unfortunately, Governor Paterson ignored these facts. He was persuaded by the bureaucratic argument of the state tax department who was too lazy to change their procedures."

Sticking to his veto decision, Paterson countered, "Considering the technical deficiencies, it is difficult to justify this bill." Thiele, along with other members of the State Assembly and Senate, plan to sit with the governor to rework the bill before the end of the year and reintroduce it in January 2009.

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