Villages file $21.5M lawsuit against Nassau over sales tax revenue

Freeport is leading dozens of villages in a $21.5 million lawsuit against Nassau County and its three towns over allegations that the county shortchanged the villages in distributing sales tax revenue.

The lawsuit, filed in late October, states the county “unlawfully and arbitrarily withheld tax revenue from the Villages” meant to help them keep local property taxes low and defray the cost of municipal solid waste services and environmental control.

The legal action, which now involves 27 villages, also names Hempstead, North Hempstead and Oyster Bay towns as defendants over allegations Nassau counted the village populations as part of the town populations in divvying up sales tax revenue, which unfairly inflated the amount the towns received.

"I just want to see that the Village of Freeport gets its fair and equitable share," Mayor Robert Kennedy said. "This has been going on for many many years, and it has to stop somewhere."

Spokesmen for Nassau County and Oyster Bay said they could not comment on pending litigation. A North Hempstead spokeswoman and a Hempstead Town spokesman declined to comment.

The Nassau County sales tax rate is 4.25 percent, according to the state Department of Taxation and Finance. Nassau should direct one-third of 0.75 percent of revenue to towns and cities and as much as one-sixth of the 0.75 percent to the villages, according to a 2015 report by the Office of the New York State Comptroller. 

Freeport Village Attorney Howard Colton said the county and villages previously negotiated the amount transmitted to the villages, but former County Executive Edward Mangano's administration did not, and sent only about $120,000 in sales tax revenue to Freeport annually. In 2017, the county sent the village no sales tax revenue at all, he said.

The Nassau Interim Finance Authority warned in October that the county could have a $59 million deficit next year. 

The average sales tax rate in New York State — including both the state and local portions —is 8.45 percent, according to the state comptroller report.

Nassau and Suffolk counties have some of the highest sales tax rates in the state, per the report.