Vermont Legislature SmartTranscripts:

[Senator Anne Watson]: We are live.

[Legislative Counsel (Office of Legislative Counsel)]: Great. It is Friday afternoon. The chair is not here. We're gonna walk through one mill, and we have the sponsor of that mill with us now for S two seventy four. Senator Watson, thanks for coming today.

[Senator Anne Watson]: Absolutely. Thank you for having me. It's glad to be chatting about this. So, in thinking about ways that we could be raising money for the Education Fund, this is sort of the topic of the year. This is a very small, admittedly, very small amount, that it was worth shining a light on. So there is sales tax that applies to heating fuels that are not for residential properties. Oh, I'm sorry. Right. Right. So if you're a business, then the sales tax applies. However, if you have a residential property, then there is no sales tax. You're exempt. It's a tax expenditure to reduce the cost for that heating fuel. In the possibility that we have second homes as a classification for properties or also short term rentals, if if a place is not, you know, long term rented, if it's not a homestead, then does that residence Well, I'm not sure I would call it a residence. I should probably back up from that. But is it worth the tax expenditure to subsidize that heating fuel for that property? One of the goals that I have is to not increase taxes for the average Vermonter. That is key. However, if you have a second home, then perhaps you can stand the additional sales tax to contribute to the Ed Fund. And in addition, if it's in fact a short term rental, let's say, then that is a business and should in fact have the sales tax applied to it anyway. So, that is the intent of this bill. Admittedly, it is very small as an amount of money. I'm not gonna save the unfunded through this. I did ask JFO for some numbers, and altogether, was about $7,000,000 But to be fair, the amount of tax expenditure for all exemptions from sales tax for this tax expenditure is about $56,000,000 and so it's a little more than 10% of that tax expenditure. That is the logic, and happy to turn it over to you to decide what to do. Thank you. Thank you.

[Legislative Counsel (Office of Legislative Counsel)]: I don't know who it's for. It's for getting rid of Kirby. If you have a Airbnb, build the little ABU on your house, how do you even measure that usage if you don't have a separate meter?

[Senator Anne Watson]: So, my understanding is that, and you can correct me if I'm wrong, but my understanding is that that would not, if that is a property that has a homestead declaration, then that would not be caught in this. Similarly, like if you had like a, again, correct me if I'm wrong. But if you had, say, like, a a business out of your house, you know, like, you make pickles or something. Right? Like, that is if it's still your homestead

[Senator Scott Beck]: Mhmm. Again, knocks hot. Okay. So, like, pickled asparagus, you'd be okay with this? Okay. Yes.

[Senator Anne Watson]: Great. That was my Sorry.

[Senator Scott Beck]: It's gonna be cottage industry. Just saying.

[Legislative Counsel (Office of Legislative Counsel)]: Yeah. There's a little bit more nuance detail to get into, but it really gets into the act 73 stuff, but we can go into it back up there.

[Senator Scott Beck]: Thank you.

[Legislative Counsel (Office of Legislative Counsel)]: Okay. More about the classifications. Gotcha. Because you're touching on some issues that have be worked out with classifications. Right. That could be cool.

[Senator Anne Watson]: Fair enough.

[Senator Scott Beck]: And you said 56,000,000 should be the 4,000,000?

[Senator Anne Watson]: Nope. So 50 well, 56,000,000 is the foregone tax revenue for the entire exemption from the sales tax on heating fuels for all residences.

[Senator Scott Beck]: All buildings, all sales?

[Senator Anne Watson]: Well, just for the residential exemption.

[Senator Scott Beck]: Okay.

[Senator Anne Watson]: And so of this, or of that amount, we're looking at recapturing about 7,000,000.

[Senator Scott Beck]: Great.

[Legislative Counsel (Office of Legislative Counsel)]: Does the JFNO been published on this or that?

[Senator Anne Watson]: No, that was just in an email exchange that I got, but happy to pass that off. Or you can let them speak for themselves.

[Legislative Counsel (Office of Legislative Counsel)]: Anything else for Senator Watson? No.

[Senator Scott Beck]: Nope. So would this apply to, would this exemption apply to buildings or buildings that are owned by, tax exempts? Yeah. Hospitals. Will hospitals now have to pay

[Legislative Counsel (Office of Legislative Counsel)]: the, So

[Senator Anne Watson]: looking at curvy on this one, the intent is no.

[Legislative Counsel (Office of Legislative Counsel)]: Okay.

[Senator Anne Watson]: If, if that were to happen, that would not be that is not the goal. So.

[Senator Scott Beck]: So. Thank you.

[Legislative Counsel (Office of Legislative Counsel)]: Thank you. Senator Watson. I I think to your question, Senator Beck, about to explain how this would be contingent upon

[Senator Scott Beck]: the new classification going into effect. Oh, okay. The

[Legislative Counsel (Office of Legislative Counsel)]: the Kirby Gulick said council to answer Senator Beck's question, the This change would not affect the taxability when it comes to hospitals. Okay. That probably I would need to dive in to see which self tax exemptions exist that would apply in that situation. But it it wouldn't it wouldn't be this. Okay. So as senator Watson said, there is a sales tax extension number 26. We have over 40. We have a sales tax exemption for electricity, oil, gas, and other fuels used in a residence for all domestic use. So sometimes this exemption is, instead of residential use, is called the domestic use exemption, but including heating, but not including fuel sold at retail, propane tanks that you buy at a gas station do not count here. With pellets, though, they do. Probably this. So that's the exemption that exists. And currently, the retailer, when they go to make a sale, they look, is this a residence? If so, we won't collect sales tax. If it is not, they do it's it would so the obstacle in shrinking this exemption, which is basically what this bill does, it it shrinks the exemption down so that it applies to fewer properties, fewer taxpayers. And the question the administrative question of workaround here was, how will the plaintiffs be able to identify? And that's part of why senator Watson wanted to tie it to the changes made under act 73 where where the state is going through the process now of trying to identify what's called non homestead residential, aka for the most part, second homes and short term rental properties for purposes of education paths. So this version of this idea does attempt to piggyback on that, and the main question in line is helping retailers actually identify. So when I say retailers, this goes for electricity sales. This goes for often fuel dealers who make deliveries, fuel deliveries, and Senator Watson was concerned about how will they be able to identify this, do the right tax treatment, and then how much burden is it on the retailers? So to work around that, what this bill does is it defines residents for purposes of the exemption to be tied to the non homestead residential classification, which means that the effective date is 07/01/2029 because it's waiting for that system to come online. This, of course, assumes that act 73 is not apparently repealed. So we'll have to go back to the drawing board on this bill if if it's qualifications under act 73 don't take place. That said, the bill assumes that that hap that's gonna happen before 07/01/2029, and and to to help the retailers, what this does is it has the commissioner of taxes every July 1 publish a list of addresses for the properties that are classified as self homestead residential for that year, and then the businesses that are in charge of collecting tax can rely on that list when determining whether a transaction objects to sales tax or not. You know, just to make sure your eyes are wide open, I mean, things things are complicated. In the example that Senator Mattos brought up, there's there's properties that under this new system will have a short term rental and a homestead on the same parcel. And so it will be up to the commissioner in publishing this list, well, for that parcel, what did they put down? So there's some still some things that would have to be to be worked out in that area. And it could be some changes that we can make to statute. It could be something that's that's the commissioner does circulations, but those are questions that have to be sorted out. And those are also questions that have to be sorted out by the general assembly in fleshing out act 73 in general. This session, I wouldn't be surprised if you cease some legislation from, say, housewives and means about fleshing out more details with the classifications within act 73 and resolving issues like, let's say you a home you have a you own a duplex. One side's your homestead. The other side, you also use as your homestead, but it is technically a different dwelling unit. We have not completely solved that yet in act 73. That's up for interpretation still. The tax department put out its report on the classifications, and they suggested in that situation that you would treat both sides as a homestead, and we make sure the law is clear about that. You wouldn't even tax at that property as a second home just because it's a different that report. Yes. Just because it's a Well, even so there's many scenarios like that that need take to place and things have to be resolved. So we're gonna so part of the answers to solving those things aren't gonna be solved by this bill. It's gonna be solved by future work on on the classifications under act 73.

[Senator Scott Beck]: Wait. Are you done? Just I'm done. I have a question on the draft

[Legislative Counsel (Office of Legislative Counsel)]: too.

[Senator Scott Beck]: Yep. And I'm sure it's me missing something, but I I it there seems to be this disconnect. You have the paragraph b that says what a residence means.

[Legislative Counsel (Office of Legislative Counsel)]: Mhmm.

[Senator Scott Beck]: And then the paragraph c about the commissioner publishing the list. But

[Senator Anne Watson]: up

[Senator Scott Beck]: in paragraph a Mhmm. The existing law,

[Senator Anne Watson]: is it

[Senator Scott Beck]: that this the paragraph a is laying out the exemption, the tax exemption. So used in a I think part of the confusion, honey, is because we have residential in both, and this came up in ways and means, the nonhomestead residential and homestead residential because the nonhomestead still had the word residential in it. And it's it so what the definition of what a

[Legislative Counsel (Office of Legislative Counsel)]: yeah.

[Senator Scott Beck]: It's it's it's it's correct. It's vague.

[Legislative Counsel (Office of Legislative Counsel)]: We are using residential in different ways. Yeah. The way it's drafted those the the leading language here is, like, sales of the types of fuels used in our residence. And then and then that's where the the definition of residence below comes in.

[Senator Scott Beck]: That's the residence you're defining, that residence on Line 14.

[Legislative Counsel (Office of Legislative Counsel)]: As used. Yeah. As used in this subdivision 26, residence means any residential property that was not included on the most recent list published, and then that list for a lot of the specific incidency. So the the pieces do fit together, but I do understand how it could be very confusing the way residents and residential is being thrown around here a lot. But I Yeah.

[Senator Anne Watson]: Because, I mean, when somebody's in

[Senator Scott Beck]: Vermont living in their second home for, you know, their ski vacation, that's their residence, and they might go in and buy fuel and say, well, this is for my residence. And so then would the the vendor have to look on the list and be like, oh, no. I'm sorry, mister Keaton. That's not a residence.

[Legislative Counsel (Office of Legislative Counsel)]: I was thinking about this in terms of fuel deliveries Mhmm. In larger amounts or or sales electricity, you know, straight in. Yeah. Like, I wasn't thinking about anyone going out and purchasing, although

[Senator Scott Beck]: I know. This just happened. I went to my local hardware store and bought those little fire starter sticks Uh-huh. Last month. And the guy said to me, oh, these are tax exempt because you're using that the starter fire in your home or, know, in your stove. And I was like, well, how do you know? So and I think there is this presumption in

[Legislative Counsel (Office of Legislative Counsel)]: here. That's a good point. Here. That's a good point.

[Senator Scott Beck]: And cases where people are buying in a True.

[Legislative Counsel (Office of Legislative Counsel)]: And the the wood pellets. Yeah. The wood pellets are very clearly exempt when you buy them at the store, period. Mhmm. And this does throw that into question. So Yeah. If these these true, it would certainly not hurt for us to clean Yeah. Clean that stuff up with the term.

[Senator Scott Beck]: And I think that that came up in ways and means anyway, that that confusion with those two terms. I think to add I think Jake said it, getting rid of the

[Legislative Counsel (Office of Legislative Counsel)]: I think the ways and means had gone over.

[Senator Scott Beck]: Not this bill, but when they were going over the report, I think Jake mentioned the confusion by saying there's homestead residents and nonhomestead residents and saying residents in both cases is confusing.

[Legislative Counsel (Office of Legislative Counsel)]: Yeah. The the report suggests that I think it's the it's the non homestead, nonresidential. The report suggests maybe change that to commercial.

[Senator Scott Beck]: Oh, right. Yeah. I know there's something about the terms in there.

[Legislative Counsel (Office of Legislative Counsel)]: But Yeah. Like like and have mixed feelings about that too. Like, I I understand the the issue that exists, but, you know, commercial apartments that like, part of this philosophically, like, a large apartment building, is it commercial or is it residential? Like,

[Senator Anne Watson]: both Depends on who

[Legislative Counsel (Office of Legislative Counsel)]: we Right. So there's not a way to be Live there

[Senator Scott Beck]: or own it. But

[Legislative Counsel (Office of Legislative Counsel)]: yeah. Yeah. Yeah. Anyway. Thanks. Could certainly draft this, and I would like, I hopefully am succeeding in flagging for review that There's certainly room here to flesh out more things, especially in making it easier for a retailer to understand.

[Senator Scott Beck]: And connecting to PAC 73.

[Legislative Counsel (Office of Legislative Counsel)]: I think, I mean, the biggest link to ACT would the commissioner publishing this list of properties that are back 73 nonhomes and residential properties for them to rely on and to be banned. And I think I mentioned this, you know, in this case, they would be held harmless if they're relying on that list, and it turns out that there was an error or a problem with the list. So it kinda errors on the side of protecting the businesses from getting Dinged. From getting dinged for something for relying on state's info. Right? Even even though the end result was tax treatment wasn't done exactly correctly.

[Senator Scott Beck]: Would you suggest that it's bad if warm to pass legislation for 2029 on something that is still very much up in the air being accidentally three in classifications of the different tax purposes?

[Legislative Counsel (Office of Legislative Counsel)]: I mean, accident e three does that all suck.

[Senator Scott Beck]: Right? Yeah. The whole act did that, like, 20,000,000 times. Regional

[Legislative Counsel (Office of Legislative Counsel)]: assessment districts are January. You know, there's reasons for that because it'll be set up Some sometimes with these big, you know, these big things that take years to set up, that's just how it has to go. And then this to rely on it. You could I mean, since we're on that topic Additionally. You you we I could draft this in a way where senator Watson's idea happens effective next year. It's just that you don't have the accidently through classifications to rely on. It would it would a version a version drafted like that, which I did do a version of as well, It would just mean that the tax department and the fuel dealers, know, they're just gonna have to figure it out. And and sometimes legislations passed out of here that's like that, where it's like administrative issues just need to be sorted out. This one's trying to get ahead of that and and create a mechanism to to make the tax supplies easier for taxpayers, make it easier for the businesses. Whether it's whether businesses would agree that it succeeds at doing that, you should ask them. Your question's at 03:37 on a Friday? Great. So thank you.

[Senator Scott Beck]: Stop that one. I'm sick. Yeah. No. No. There's certain bills probably ought to be introduced on Tuesdays. Yeah.

[Legislative Counsel (Office of Legislative Counsel)]: I think I've been coming to hear Clint's quite a bit. Yeah. I think you guys said you're What's the bills that you reported. Okay. I don't think any bill moves so far.

[Senator Scott Beck]: Anything else we wanna talk about, or can we go offline? Have to say no. Motion to judge.