Vermont Legislature SmartTranscripts:

[Sen. Ann Cummings (Chair)]: Goodbye. We are alive. This is Senate Finance. Okay. March 12. We're gonna continue our final march down Red Cross over. The first bill we have is two seventy four, which is an act relating to the sale to use tax exemption for fuel used in a residence for domestic use. And we haven't taken this one up for nondomestic for domestic Okay. So, anyway, we did walk through this, I believe. And Jake is here. Yeah. I think we wanted to find out my understanding is that right now residential buildings, fuel delivered to them are not charged to sales tax. If you are a commercial building, you are charged a sales tax. This would say residential buildings that are not primary residents, I gather, well, the question would be so we're looking at can you do this? You know, would this be an easy thing? Would it be in the tax department's area a good thing to do?

[Sen. Thomas Chittenden (Vice Chair)]: I don't know who's going to speak to this, it may be to to Jake. I'm just kind of curious, are there other examples that we have individual market operators having to identify the delivery of any goods or services and then determine tax will be based on that instead of common practice and and try to think. Okay.

[Sen. Ann Cummings (Chair)]: Jacob, would you like to talk? We'll be glad to hear from you. Okay.

[Jake Feldman (Vermont Department of Taxes)]: Can you hear me first?

[Sen. Ann Cummings (Chair)]: Or If you think it would be better to do somebody else first, what

[Jake Feldman (Vermont Department of Taxes)]: I mean, mine's pretty quick and simple.

[Sen. Ann Cummings (Chair)]: I thought it might be. Yeah.

[Jake Feldman (Vermont Department of Taxes)]: Okay.

[Ted (Joint Fiscal Office)]: Finance committee vests. I

[Sen. Ann Cummings (Chair)]: can make them.

[Sen. Thomas Chittenden (Vice Chair)]: I'd take one of those. Yeah.

[Sen. Ann Cummings (Chair)]: Next year. Sure. Sure. Big star. Big dollar signs.

[Jake Feldman (Vermont Department of Taxes)]: It's all getting paid for?

[Sen. Ann Cummings (Chair)]: No. Big dollar sign.

[Ted (Joint Fiscal Office)]: Oh, my payment. Big dollar signs to you.

[Sen. Ruth Hardy (Member)]: After I finish

[Jake Feldman (Vermont Department of Taxes)]: You don't do tax credit.

[Sen. Ann Cummings (Chair)]: Pending tax. I will.

[Jake Feldman (Vermont Department of Taxes)]: Not gracious, sir. Just making sure.

[Sen. Ann Cummings (Chair)]: Okay, let's see what we've got.

[Jake Feldman (Vermont Department of Taxes)]: Okay, Jake Feldman, tax department. And I got a pretty short presentation here that's also posted under my name. And I'm gonna walk you through it. So my understanding of the proposal is basically to try to hook on to the future classification that people are working on for non homestead residential, it's called. But it's basically like second homes and short term rentals. So the idea, as I understand that, is to pull back on the sales tax exemption when you deliver fuel to those dwellings. And it would take effect in the future year, or get up by 29%. So, gonna talk about a few challenges with that concept. So as we're, you know, have we flagged in this committee and elsewhere, like how do you handle mixed use properties? That's a tricky part of the classification conversation. Ways and means, as John was just up there, they're working through that. But it's even trickier here. This red, pretty red house is on Liberty Street. It's where I used to live. And I used to live in the 2nd Floor, kind of to the right above the apple tree in the Adirondack chair, next apartment. I'm glad that I had it as my long term rental at the time, but right now it's a short term rental. There are two long term rentals in the building, the Top Floor and that outer 2nd Floor apartment are long term. And then currently the owner of the property is living on the 1st Floor, so I think it's their homestead. But, when I lived there, heat was included. There were no separate heat accounts. Went down to the basement a few times, I think there was just one or two oil tanks, you know, and it was just the whole building. So, that is maybe my most important point. When the fuel dealer shows up with the fuel, and they start filling the tank, how in the world would they hold back the sales tax from the heat just going to the short term rental apartment? It's impossible. Because all the heat is coming from one tank, all the oil is coming from one tank. And even if there were four separate tanks, and there aren't, but even if there were, would they have to fill one, fill another, and then know, okay, I'm filling that third one, and this is for that short term rental apartment, so I'm gonna restart my meter and start charging sales tax. So logistically, it's just super impossible. And so there are a lot of cases like that where you could have either a building like where I used to live with mixed use, or you could have, you know, you could have a bike shop on the 1st Floor and a short term rental on the 2nd Floor and a long term rental on Top Floor. So you would need some way to handle that. I don't know what that would be.

[Sen. Thomas Chittenden (Vice Chair)]: You have more so I'm thinking of like a track service or internet service. Is there any other example where we require companies to determine the tax status of a parcel that they serve in their service? I'm just wondering if this is completely out of step with anything else we do.

[Jake Feldman (Vermont Department of Taxes)]: So not that I know of, not tax status. I mean, this is like a offshoot of what we do now for fuel. For fuel now, if you deliver it to a residential property, it's exempt. And if you deliver it to a commercial property, it's taxed.

[Sen. Ann Cummings (Chair)]: What do we do now with the downtown? Our shop is on the 1st Floor and there's a bunch of apartments on the 2nd And 3rd Floor. I assume those have separate tanks or they're paying the commercial sales tax. But they were rentals, so they're all commercial, right? That

[Jake Feldman (Vermont Department of Taxes)]: it's been a few weeks since I looked I at think in that case it's based on primary use of the building. I can't remember exactly how the

[Sen. Ann Cummings (Chair)]: The only other time we do something with kerosene and farm equipment or something's died and something isn't died. Based on its use, and I thought it was kerosene, but is it kerosene? And diesel. Pardon? And diesel. And diesel. Yep. So it's died so that whoever's pumping it knows what it is or what it where it's supposed to be going. Yep. And sometimes those apartments, especially the smaller short term rental ones, may be heated with a gas heater, may be heated with an electric space heater on the wall. You wouldn't know unless everyone had to register and the dealer had to keep accounts

[Jake Feldman (Vermont Department of Taxes)]: up. Right, and I think it would apply to electricity and gas too, as I remember. So importantly, the idea that each parcel in the grand list is going have a single classification in the future is not accurate. There's going to be lots of mixed cases. We also, the tax department have a couple affordability concerns. Many short term rentals and year round camps are owned by Vermont residents. A lot of Vermont residents short term rentals that are above the garage or whatever and they use it to help pay their taxes. Next one's kind of a big one that we're dealing with on the second homes tax, but in Vermont about 5,000 resident homeowners who are usually lower income don't file their homestead declarations. And the reason that's true is because in Vermont it's connected to your, you you do it at the same time as income taxes, and if you're not required to file income taxes you may just lose sight of this attestation. In other jurisdictions you, it's not connected to income taxes, it's not with the state, it's usually with your county, and that's who you tell your homestead, because the county is doing taxes. But in Vermont you have this funny triangle where Feiler So Feiler talks to tax department in Montpelier, tax department talks to town, and then town does classifications, and so you have a very weird triangle. But a lot of people just don't file home to declaration.

[Sen. Ann Cummings (Chair)]: A lot of people don't file income.

[Jake Feldman (Vermont Department of Taxes)]: And a lot people aren't required to file for taxes. If you're lower income you don't even have to. So that would be a bit of a problem because you've like this house here, they'd be getting oil delivery and paying subject to sales tax.

[Sen. Ann Cummings (Chair)]: It depends on double vitamin tank or a single vitamin. It looks like the tank's outside. They're doing kerosene.

[Sen. Thomas Chittenden (Vice Chair)]: Oh, okay. It could fuel

[Sen. Ann Cummings (Chair)]: Alright. It could be fuel oil. It could be, but everyone upsold is kerosene. Something that doesn't freeze is quickly outside.

[Jake Feldman (Vermont Department of Taxes)]: So on the property tax side it's a problem, but maybe they might notice it because their property taxes are going up so much, but we need to figure out how to to head that off on a property tax guide. On the sales tax on the fuel, I'm not sure they would notice the 60%, but it's a problem. Part of the bill is the tax department publishing a list of non homestead residential properties. We think that that's problematic for a few reasons. It could present privacy and security issues to put that out. The way we track addresses in the grant list is a bit funny. We have the address of the owner for billing purposes, and we have something that's called E911 address at the end of the grand list, but that may not be the same as what fuel dealers have on their records. So even if we did publish a list, it could be a huge pain in the butt to try to match over their own account records. And then finally, the use of a property can and does definitely change through a year and there's never a point in time when you can get an accurate snapshot of it. So it's hard to bill somebody for a year based on a use that you think is the use, but it's all changing. And if you try to use the use from the prior year, that presents a whole bunch of different issues because the use could have changed since then. So yeah, that's our main feedback from the So

[Sen. Ann Cummings (Chair)]: it would be difficult at Difficult at that. Yes. Okay.

[Jake Feldman (Vermont Department of Taxes)]: But not impossible.

[Sen. Ann Cummings (Chair)]: Do we have any questions for Jake at this point? Okay. Now we're gonna have Ted come up and maybe we'll make enough money so it'll be worth doing Shazam with that guest. We can always be bought.

[Jake Feldman (Vermont Department of Taxes)]: It's a big number, Chad.

[Ted (Joint Fiscal Office)]: Time for our joint fiscal office. First of all, sadly, unvested. I am jealous. So maybe we'll get info and invest this up.

[Jake Feldman (Vermont Department of Taxes)]: In future years.

[Ted (Joint Fiscal Office)]: We'll see.

[Sen. Ann Cummings (Chair)]: In the budget.

[Ted (Joint Fiscal Office)]: The second piece is that I do not have great news for you on the potentially, it makes enough money to make it money upfront. So just for some inside ball on how we thought about estimating this, in putting in a plug for JFO's biennial tax expenditure report, there is an estimate for the foregone sales tax revenue that results from the sales tax exemption on residential use of heating fuels, and that includes thermal sources and electricity. So within that universe, the tax expenditure report put an estimate on everything delivered to residences at 55,950,000.00 in fiscal year twenty six. And so from there, we'd start from the estimate and say, okay, we wanna identify which percentage of that estimate would be delivered to second homes. That's as Jake gave you a lot of reasons why that's challenging where we start to run into problems. There is quite a few compliance issues, and so I'm hesitant to even say what our look would deliver in a perfect world because I'm not sure that perfect world is really attainable. I will say that if you apply some pretty substantial ramp ups in terms of compliance, the amount of revenue I would see annually is less than $5,000,000. And that's considered you know, that's that's even applying what the economists use for their ramp up of the cloud software as a service kind

[Jake Feldman (Vermont Department of Taxes)]: of ramp up, which was

[Ted (Joint Fiscal Office)]: identifying the market, but we weren't sure how folks were going to and that's a pretty straightforward compliance tax administration, and this is much different from that. So saying that I'm happy in a JFO perspective to say that maybe the juice is not quite worth the squeeze.

[Sen. Ruth Hardy (Member)]: Okay. Wait, you said 5,000,000?

[Ted (Joint Fiscal Office)]: Less than absolutely less.

[Sen. Ann Cummings (Chair)]: And that doesn't take out any administrative costs.

[Sen. Ruth Hardy (Member)]: I don't know, 5 million's real money. I thought you were going say like 250,000. 5,000,000 is real money. I mean, I would be careful on the juice squeeze thing. Depends on what it's yielding.

[Ted (Joint Fiscal Office)]: Is, I will This say

[Sen. Ruth Hardy (Member)]: year, $5,000,000 is a lot of money.

[Ted (Joint Fiscal Office)]: Yes. So this, I will say yes. Maybe maybe being a bit too glib. But that is applying an adjustment to the overall number for a tax type that has far fewer compliance issues. So I would say that's kind of some thinking about that as the upper bounds. Number could be quite a bit lower than that depending on how administration goes, whether you're able to correctly identify true second homes, whether fuel dealers just say it's not really worth it for us to apply this consistently, yeah, it's just hard to know. I wanted to provide a frame of reference that I think if you were to consider through implementation issues and starting to solve some of these problems, we would be able to come up with a better estimate for you all, but wanted to provide a sense of magnitude.

[Sen. Ann Cummings (Chair)]: I think At least the second homes are going to take significant hit. We've made more than $5,000,000 when the second homes tax comes in. It might be better to wait until we see how that goes and iron out the bugs, because I'm thinking, what about people that go to Florida and rent their homes out for three and a half months to legislators? That's a long term rental. The pool. So and maybe that's their second home, and they're only here five months and twenty nine days. Yeah. So and they're in Florida for six well, it's in two days or one day, but it's rented for three of those months. May find more of those situations as we go forward. So it might be prudent to wait, committee. Gonna have to fisher cut bait around here. Anyone that would like to move forward with this bill in the next two days, raise your hand at this.

[Sen. Ruth Hardy (Member)]: I would say that we what you just said about waiting until we work through some of it, but it does potentially have potential. I mean, there's $5,000,000, nothing. But it sounds like we don't have the information yet.

[Sen. Scott Beck (Member)]: I just want to be clear, we're talking about 5,000,000 would be going for the education fund.

[Ted (Joint Fiscal Office)]: It would be, and I would, I should potentially pump the break. That is not a JFO estimate. I am saying right. So I think the number is probably less than that. It is not clear

[Jake Feldman (Vermont Department of Taxes)]: Right.

[Ted (Joint Fiscal Office)]: What that number is. We JFO does not have Probably the last one.

[Jake Feldman (Vermont Department of Taxes)]: Than that. But it's

[Sen. Scott Beck (Member)]: sales tax. Yes. The education fund, it's $5,000,000 less than

[Jake Feldman (Vermont Department of Taxes)]: it just gets retailed. It. I do.

[Sen. Ann Cummings (Chair)]: Okay. I am not giving any news to ask. So I'm gonna call this one put up that side of the board. The ones in the middle are the ones that are still working on. We are supposed to be getting a list prior to Tuesday of bills that we think are headed our way next week so we can start scheduling. But I'm gonna put this on, from the little I had a chance, to two eighty two. And This is an act relating to increasing taxes on hires and not earnest and creating the school construction, a special spot, and it's not here yet. So maybe we will stand in peace.

[Sen. Ruth Hardy (Member)]: Are we gonna talk about the I think both Senator Chittenden. Yeah. I'm gonna yes. Yeah. Was gonna let Patrick

[Sen. Ann Cummings (Chair)]: crunch some numbers from our last meeting. Okay. So I'm gonna have him go. Okay. And then I'm gonna take both sets of amendments and we're gonna be doing a lot of straw holding.

[Sen. Ruth Hardy (Member)]: The one that I just, I think Charlotte just got it and you're copied on it, but it does have one thing that I was still trying to tweak and work out so it was a special. We'll see. I can talk about that when I Is that her do live with us or not? She's just on Zoom.

[Sen. Ann Cummings (Chair)]: She is on Zoom. We had this problem this morning. We don't see her, all of a sudden voice would come out of the clouds.

[Sen. Ruth Hardy (Member)]: I'm here.

[Sen. Ann Cummings (Chair)]: You know, can't meet you. So, ah, there she is. Okay. But that's a photo. So you're gonna have to scoop in live if you want to raise your hand. No.

[Sen. Ruth Hardy (Member)]: You don't wanna see me right now, but if I must, I will.

[Sen. Ann Cummings (Chair)]: We've we've seen a couple people today that are pretty sick looking.

[Jake Feldman (Vermont Department of Taxes)]: Poor Martine.

[Ted (Joint Fiscal Office)]: Oh, that was a

[Sen. Ann Cummings (Chair)]: bad one. Jill Mazza Alston. It's not looking well this morning. She was zooming in.

[Sen. Ruth Hardy (Member)]: Are we still live?

[Sen. Ann Cummings (Chair)]: We are still live. We're waiting for Patrick. Okay.

[Jake Feldman (Vermont Department of Taxes)]: Is he coming? Great.

[Sen. Ann Cummings (Chair)]: But we could go offline five minutes.

[Jake Feldman (Vermont Department of Taxes)]: Would you like

[Sen. Ann Cummings (Chair)]: to