Local option sales tax: Bad for business?

Monday February 11, 2013

Bennington’s Select Board recently agreed to support legislation introduced in the Vermont Senate that would allow the town to raise nearly $1 million annually through a local 1 percent sales tax.

Senate Bill 39 would give all Vermont municipalities the option of having a local sales tax.

If such a measure received voter approval here in Bennington, a shopper purchasing a $10 sweatshirt in a downtown store, in addition paying to the state’s 6 percent sales tax ($0.60), would shell out an additional 1 percent ($0.10) for the local option sales tax. That "extra" one percent would be collected by the town for designated projects previously funded by property tax dollars.

Currently, state law allows only municipalities that are "sending" towns under the state’s Act 60 education funding mechanism to assess the tax. According to the Vermont Department of Taxes Agency of Administration website, as of July 2012, the following jurisdictions collect a 1 percent Local Option Sales Tax: Burlington, Dover, Killington, Manchester, Middlebury, Rutland Town, South Burlington, Stratton, Williston, Winhall, and Wilmington.

Bennington Town Manager Stuart A. Hurd has said he supports a local sales tax here.

"I’m not really interested in the rooms and meals because I think that in Bennington that’s not really a big deal, and probably just a hardship on our motel and hotel owners," he said. "But the sales tax, we have a lot of people who come in to our area for shopping."

Bennington residents and non-residents alike would be ponying up for the tax, however.

Business owners argue that this tax is going to hit their bottom line and they won’t simply be able to pass this expense on to their customers. It’s possible retailers might lose sales to neighboring towns or counties that don’t level a local sales tax.

According to Hurd, the additional revenue could help reduce the local property tax burden and help get work done on the town’s infrastructure. Hurd said $136 million was collected by the state in sales tax in Bennington alone. Using that number, a 1 percent local option sales tax would generate an additional $1.36 million in revenue for Bennington, of which $952,000 would go to the town.

Democratic Bennington County Sen. Dick Sears said he has been trying to garner support for expanding the local option sales tax since he was first elected to the Legislature about 20 years ago.

"This is the kind of thing that gives small towns like Bennington an opportunity to help raise some of the costs of being the central town in the area," he said.

But towns on the eastern side of the state have voiced opposition to such a tax because retailers in places like Brattleboro must compete with sales tax-free New Hampshire.

Sears noted that voters in each municipality must approve a local tax, and no town would be required to pass it.

Thirty percent of the revenue from would fund the state’s Payment in Lieu of Taxes program, which provides towns with some payments for state-owned land that is exempt from local property taxes.

"The more communities that are in the local option tax the more money that will be collected for the program," Sears said. "It has a benefit to everybody, and it is a local option."

Should legislation allowing a local option sales tax expansion succeed, local voters would have to approve it by a majority vote for such a tax to be enacted in Bennington.

Whether you think it’s good for your property taxes or bad for business, you get to decide.

~Michelle Karas


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