Orange County takes step to preserve disputed sales tax sharing

Orange County legislators approved a home rule request to keep an extra three-quarters of one percent of sales-tax revenue flowing to towns, villages and cities, a move meant to shield municipal budgets from a statewide legal dispute that could cost local governments about $19.8 million in 2026.

The county had been sharing 3.75% of its sales-tax receipts for more than a decade, but the State Comptroller’s Office told officials that only 3% could legally be distributed. Orange County’s finance page lists the current sales tax as 8.125%, made up of 4% for the state, 3.75% for the county and 0.375% for the Metropolitan Transportation Authority, with the county share shown as effective June 2004.

County Attorney Rick Golden told legislators that Orange County had been taxing the extra 0.75% since 2004 but did not begin sharing it with municipalities until 2014. He said the problem was complicated because the session law was never codified, making it harder to catch in the state statutes. The Comptroller’s Office later concluded the extra share could not be passed through under state law.

The potential hit is immediate and local. Mid-Hudson News reported that Middletown could see about a $721,000 reduction in its first quarterly 2026 payment once the correct rate is applied, while Wallkill could lose more than $300,000 over the same period. The countywide shortfall would land on municipal budgets that rely on sales-tax receipts to help balance spending, protect reserves and limit property-tax increases.

Orange County’s move came as state lawmakers filed bills in Albany to fix the problem retroactively. Senate Bill S10188, sponsored by James Skoufis, and Assembly Bill A11249, sponsored by Chris Eachus with co-sponsors Jonathan Jacobson, Paula Kay, Brian Maher and Karl Brabenec, would repeal section 2 of Chapter 316 of the Laws of 2025. The Senate bill was referred to the Investigations and Government Operations Committee on May 5, and the Assembly bill went to Ways and Means on May 4.

The county’s April 28 special-session agenda framed the request under Article IX of the New York Constitution and Municipal Home Rule Law Section 40, asking Albany to amend the 2025 law so Orange County can continue redistributing the extra 0.75%. A January sharing plan said the county retained 73.6% of receipts while 26.4% went to municipalities, underscoring that the dispute is not over whether Orange County shares sales tax, but whether the extra quarter-point can stay in the local formula. If Albany acts, Orange County’s cities, towns and villages can avoid a sudden budget shock. If it does not, the losses will fall quickly on local services and tax planning across the county.