Middletown Adopts New Sales Tax Sharing Contract With Orange County

City Hall in Middletown, N.Y., on Jan. 9, 2023. Cara Ding/The Epoch Times

The City Council of Middletown, New York, adopted a new three-year sales tax sharing contract with Orange County on Jan. 17.

Middletown now gets the largest share of sales tax among all three cities in the county, largely due to its population advantage.

Based on the 2020 census, Middletown has a population of just over 30,000, Newburgh about 28,800, and Port Jervis at 8,775.

Mayor Joe DeStefano told The Epoch Times that the effort by various city agencies to get residents counted in the census worked.

“Middletown is now the largest city in Orange County, for the first time I’ve ever known it to me—and I’ve been around for quite some years,” DeStefano said.

In 2o23, the city is estimated to collect $14 million in sales tax from the county, according to city treasurer Leonora Liz.

That accounts for 22 percent of the city’s annual budget.

Under the new contract, the county retains about three-quarters of the sales tax, or 73.616 percent to be exact, and shares the rest with cities, towns, and villages.

About 70 percent of the shared taxes go to the towns and villages; the rest 30 percent or so goes to the three cities, of which 45 percent goes to Middletown, a little over 42 percent to Newburgh, and 17 percent to Port Jervis.

Sales tax distributions are based on population.

Orange County has one of the most generous sales tax sharing agreements with local municipalities, according to a tally by the Office of New York State Comptroller.

In 2022, nearly $378 million in sales taxes was collected in the county through the New York Department of Taxation and Finance, an almost 8 percent increase from the previous year.

The state transfers sales taxes to the county after deducting administrative fees, and the county then distributes due portions to local governments on a quarterly basis.

For 2022, Middletown has received sales taxes for the first three quarters, totaling $10.4 million.

Under New York Tax Law, the three cities have the right to collect sales taxes independently, but they agree not to do so by having a tax-sharing agreement with the county.

The city-county sharing agreement has existed in the county for a quarter of a century, according to DeStefano.

Towns and villages are included in the agreement as third-party beneficiaries.

The county currently collects a sales tax rate of 3.75 percent.

The current tax-sharing contract expires on Feb. 28.

Newburgh and Port Jervis are expected to adopt the new contract by the end of January and forward it to the county legislature for final approval in early February, DeStefano said.

The new contract covers a three-year period between March 2023 and February 2026.