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SALT TALK:  “I Wanna Be a Lifeguard” – But Not in New York

Wayne Berkowitz CPA, J.D., LL.M. 05.30.2017 | SALT TALK

Memorial Day has come and gone.  Visions of the beach are swirling through my head and memories from my high school and college summers take over and surmount any state tax concerns I may have at the moment.  I had the second best job in the world (SALT Partner at Berdon being number one) back in those days.  I was a lifeguard.

Not one of those muscle-bound Jones Beach types, but at a day camp, where I made lots and lots of extra money giving swim lessons after the camp day was done.  Since one hundred percent of my income was disposable in those days (thanks Mom and Dad) I had more money to go around than I do now.  A typical day consisted of getting to the pool early, commiserating about our previous night out, teaching bright eager minds to swim (to this day, I still bump into doctors, lawyers, accountants, engineers, school teachers and the like, who I taught to do so) and listening to the hit song by the Band Blotto, “I Wanna Be a Lifeguard” over and over.

I never imagined I would ever connect these fond memories with anything remotely related to sales tax, until now.  One of my colleagues was asking me about a New York State Sales Tax audit he is currently handling and informed me that the auditor was asserting that payments made for lifeguard services were subject to tax.  My reply; if you read my blog, (See my March 7, 2016 blog) you would know that New York has somehow reached the conclusion that lifeguard services are protective services.  Protective services are enumerated as taxable in New York and subject to the tax.

This conclusion was reached in an Advisory Opinion and is certainly not binding authority on other taxpayers, but I wouldn’t want to be the one to fight the uphill battle and apparently no one else has done so either. 

Remember, when a lifeguard is an employee (like I was) the wages paid to an employee are not subject to sales tax.  However, the same services, if taxable, paid to a third party or independent contractor will be taxable.  I imagine this issue hasn’t come up as most lifeguards are likely compensated as employees and if not, the issue is generally too small to pursue a reasonable challenge.  As a side note, my quick perusal of the law in the other 49 states shows that New York is the only one to attempt to tax this. A dubious distinction.

So what’s the moral of the story?  New York State Department of Taxation and Finance; please end this summer bummer of continuous administrative expansion.  Especially with the little guys, who don’t have a former lifeguard and SALT partner to fight for them.

Contact me at WBerkowitz@BerdonLLP.com or your Berdon advisor.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.

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