NORWOOD — The Norwood village Board of Trustees' decision not to charge a 5 percent surcharge for residents who pay taxes in installments could cause a ripple effect across the county — and even the state.

When the board opted to process village tax bills through the St. Lawrence County Real Property Tax Office last year, trustees found out that state law appeared to require the municipality to collect a 5 percent surcharge from taxpayers who pay in two installments.

"The Norwood board is a conservative board, and our members simply dug in their heels and said we're not going to collect it. They refused to budge on this," said Mayor James H. McFaddin. "We felt that people who paid in installments were the people who needed a break the most."

The installment surcharge is meant to reimburse villages for the cost of processing two payments, said Jane B. Powers, St. Lawrence County director of real property.

Under the village's $15.40-per-$1,000 property tax rate for village residents in the town of Potsdam, a homeowner with a $100,000 house would pay $1,540, and the installment surcharge would be $38.50 on their second payment of $770.

But the village of Norwood hadn't budgeted for the revenue that would come from charging taxpayers for paying in installments, and didn't see the point of collecting it, Mr. McFaddin said.

"We hadn't budgeted it, so it's money we didn't want, and we would have been adding a 5 percent tax to those with a hard time paying their taxes," the mayor said.

After consulting with village attorney Robert H. Ballan, the board voted Tuesday not to charge residents who pay their tax bills into two installments.

The village board's decision revealed a "vagueness" in state Real Property Tax Law which could allow Norwood — and other municipalities — not to collect the installment surcharge, Mrs. Powers said.

"The attorneys in Albany said there was enough vagueness in the statute that it could be read to allow the village of Norwood the leeway not to charge that 5 percent," she said.

Though Mrs. Powers still will recommend that villages charge the installment fee, there is room for boards to decide not to take the money.

She also said it's possible that the precedent set by Norwood trustees could impact tax bills statewide, if other communities decide to challenge the surcharge requirement.

"It's possible. But honestly, I don't know what other villages in the state do," she said. "The decision for changes could be made next year based on their individual counsel."

Mr. McFaddin said he would contact the New York Conference of Mayors to advise them of Norwood's decision. He's also telling taxpayers to deduct 5 percent from their second installment.

"It's up to the villages now," he said. "This could be all over the state, they tell me."

"Probably the only place this will ultimately be decided would be in court," Mrs. Powers said.