Vermont Legislature SmartTranscripts:

[Senator Richard Westman (Chair)]: This is Senate Transportation. We are back live. We're here with the deputy commissioner of taxes. And I think we're looking for a report on local option taxes, what's going on around the state. If you could help us and add some background material to that. We've been talking a little bit about local option taxes in here, and and we just heard from one community that is using that and

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: far

[Senator Richard Westman (Chair)]: and away the bulk of everything that they would do with their local option tax would go to municipal roads, which is the biggest expense for most communities. If you could give us a little update all of this, it would be quite helpful. Sure.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: Yeah. Absolutely. My name is Rebecca Samero, deputy commissioner of the Vermont Department of Taxes. Yeah. And I was thinking I could just give a little, like, overview of how how local option taxes work broadly, and then happy to and I can also flag communities that we've heard from. I I know that was a question of the committee that that might be considering them for this year, and then just happy to answer any questions as they come up. So, you know, big picture, tax department administers local option taxes for communities that elect to enact them. It is collected along with other state level tax types, which is, you know, part of the, you know, and logic of the administration. So sales tax or meals and rooms tax. Meals and rooms tax also includes the tax tax on alcoholic beverages served at, like, a restaurant or bar, for example. So you can you know, a town can elect to apply a 1% tax to any of those bases. You can't separate meals and alcohol. Like, those have to be both included together. But otherwise, you could just do rooms, just do sales, just do meals and alcohol, or you

[Senator Richard Westman (Chair)]: could do all of them. So

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: it's pretty straightforward for businesses in the state to comply with because these businesses are already filing, most often monthly, a sales tax return with the department or a meals and room tax return for the department. And the the return form, you know, has a a place where you take those total sales that you're reporting for the whole month and break them out into, you know, which local option tax community those sales occurred in. For a brick and mortar establishment that's, you know, firmly planted in one jurisdiction, this is pretty straightforward. You know, if it's a meals and rooms tax in Montpelier and you're a restaurant in Montpelier, then all of your sales are attributed to Montpelier. Gets a little more dynamic if someone does deliveries across jurisdictional lines. So then these are all destination based taxes, which means taxes due at the point where the consumer kinda takes possession of the thing. So, like, a a delivery into another jurisdiction would be, you know, about where where the item's getting delivered to, where that person takes possession, or, like, a pizza shop delivering, you know, from Montpelier into Barrie. It would be about whatever the jurisdiction is in Barrie that would dictate whether that's taxable or not. So, you know, that adds a little more nuance for a business who does deliveries. And then, of course, we have, you know, national companies, ecommerce vendors who are making sales all across Vermont. It's a very rich tax return. You know, lots of sales reported on every local option tax line. So yeah. So it's, like, you know, it's on businesses to rep report and remit accurately, but the tax department is absolutely especially in, know, you the first couple months after enacting a local option tax, you know, keeping a close eye on things, making sure everything makes sense. You know, if there's a new local option tax town, like, conspicuously absent on a big multi you know, national vendor's return, we'll notice that and reach out to the vendor and say, hey. Did you did you notice that there's new local option tax? We emailed you a bunch about it. And I'll get into those steps, by the way, what the department does when a new town comes online. So most of the time, communities are voting on enacting local option taxes on town meeting day. That's not a rule, but that's often when it happens. And so the department requires a ninety day notice before we can, you know, make that local option tax active. So these ninety days include allows us time to update our tax system, like, the the guts to make sure that we're expecting, you know, sales and revenues and collections to be happening from that local option town. We update the forms to, you know, make sure there's a line for the new local option tax town. We have publicly available rate and boundary files, which are these files that are used by major ecommerce retailers or a third party vendor that supports those retailers to know, you know, which which addresses to assign a local tax to. So that all has to happen. We have a also have a local option tax rate finder tool on our website that's really handy for, you know, myriad issues one might have in, like, just wanting to understand which jurisdiction things are in, but it's very helpful for local option taxes. And with that, well, you can look up an address. You can look up a municipality by name. You can even look up a PO Box number.

[Senator Richard Westman (Chair)]: Go ahead. So talking about PO Box.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: Yeah. Yes. New new feature. We this is, like, you know, part of what I love about working at tax. We had a a vendor, you know, reach out to us who's like, I'm lost. They often send things to PO Boxes, and I have no idea, you know, if I'm, you know, collecting local option tax correctly. I really wanna be doing things right, which is, like, my favorite kind of call to get. And so we worked closely with the Vermont Center for Geographical Information, BCGI, you know, about that concern, and they updated our tool really, really quickly. Like, where

[Patrick "Pat" Brennan (Member)]: the post office it is, or is it where their physical address?

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: It's so the tax is due, you know, where where the consumer takes possession of the item. So it would be at their PO box. And so that actually needed, you know, more more coding and mapping into our tool, which we now have that that function, which is really nice. Yeah. It was that was learning for me. Didn't realize how messy PO box No. Patients are in this whole system. Wendy is

[Senator Wendy Harrison (Clerk)]: So just to follow-up on that. So I've seen concern about ZIP codes because ZIP codes and towns don't match as you know really well. Yes. So does your system not need ZIP codes?

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: It's like, that is, exactly the reason why we need such an advanced tool to answer a question as simple as, where am I

[Senator Wendy Harrison (Clerk)]: in Okay. Space. So, like

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: you know, you think that looking at, like, a envelope that has a town name on it would kinda be pretty definitive, but that's USPS is not is not that definitive. They I have, like, some interesting visuals that I could send the committee actually. But, you know, they will assign a town name, an official town name based on a five digit area code, which as, you know, all of us know often connect there can be there's no rhyme or reason that those correspond with the municipal jurisdiction. So, you know, like, there's areas of Middlesex and Worcester and East Montpelier that all you USPS would have no problem just calling that all Montpelier. I live in Berlin. You know, I often have to, like, force, you know, something to be an address to default to Berlin instead of Montpelier. And that's just how the US Postal Service operates. So it's really important that that companies and, you know, companies are well aware of this. Like, the big ecommerce vendors vendors are actually geolocating the address, full address of their of folks they're sending things to and finding out what tax jurisdiction that lies within. And that's why we have these, you know, big rate and boundary files that are held by in our case, they're held by the Streamline Sales Tax Alliance, which is like a a national kinda uniformity organization that tries to, you know, help states maintain, like, kind of uniform sales tax standards. So companies that operate across many states, you know, have some, you know, basis for, you know, operations. Not like you have to reinvent the wheel in every state. So they really helpfully host these files that, you know, a a third party a third party business most often, you know, will, like, turn those into a tool that a big company will use in their, you know, shopping cart when you're checking out to make sure the right tax is applied. So that's another thing we update in that that ninety days. We also do a lot of correspondence with towns and businesses within towns. So we write every business in a new local option tax municipality just to, like, make sure they're aware of what you know, is happening in their town. We also rate every business in any adjacent municipality. This is both to get, you know, folks who might make deliveries into that municipality and also just so they can, like, keep an eye out, make sure their, you know, tax accounts have the right town name in them with this with you know, in our department, we don't want anyone, you know, inaccurately, erroneously collecting tax that are on jurisdiction. So that goes really well. It often, you know, spurts a bunch of questions, our, you know, staff works closely with businesses to make sure they can, you know, have have all their systems up to date to administer it when the task comes online ninety days later. And, recently, this is now two or three years ago, the legislature removed the requirement for towns to bring their charter changes, you know, here to the state house to get approved. Like, a a town just has to vote to enact a local option tactic. At the same time there, the legislature gave the department the authority to kind of, like, titrate how many local option taxes we let come online at once. We haven't used that yet. We haven't limited anyone yet. I think we had come online last year, and that worked okay. But we really appreciate I'm sorry.

[Senator Richard Westman (Chair)]: But just to be clear, it's to vote local option taxes that are are and follow the statute the way it is. Exactly. If you're a community that's expanding or putting a local option tax in a charter, it still has to come to the legislature. Right.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: Yeah. So we have no. Our our, like, nice streamlined system is 1% on one of those, you know, three tax bases or all of them. If you're, you know, trying to venture outside of that standard, then that's gonna take review by the general assembly. Absolutely. And we would, you know, love to weigh in on those situations too.

[Patrick "Pat" Brennan (Member)]: So even the 1%, if they put it in their charter,

[Senator Richard Westman (Chair)]: they have to come in.

[Patrick "Pat" Brennan (Member)]: There's a charter Right. Evening. It's a Well, I I But that was that's what we put her.

[Senator Richard Westman (Chair)]: So if you're going to get to this, a picture of how many towns are doing that, how many towns right now are and and if you have other things to talk about, how many towns are considering the 1% this year, like, example, Morristown. And do you track the number of communities that are there's at least one that we know of that is trying to go from one to 2% in a charter? Do you track all of that stuff?

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: Yeah. And we're, you know, we're tracking that just for our own, you know, kind of, like, awareness and preparedness. It's not, you know, responsibility we have until something becomes, you know, enacted. But, yes, we do we get a lot of, you know, a lot of engagement with municipalities as part of the services we provide to help them estimate local option tax revenue that might come from different, you know, styles of enactment and also, you know, just answer myriad questions about what the process is like, you know, when they'll get payment, etcetera, about the fee. So I'll just I can get

[Senator Richard Westman (Chair)]: to those lists. Absolutely. I just wanted to finish what you were Sure.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: You're good. Yeah. I'm just it's still important just to know that, you know, these so the tax department has if we have more than five local option taxes that all come online, you know, say, after a town meeting day, we have the authority to kind of, like, slow the implementation of those beyond five. As I mentioned, we haven't done that yet, but it does feel like especially, you know, with with the growing popularity, I think it's a really important allowance for us just to make sure we can, like, roll things out really nicely and accurately and, you know, not have a much chaos of, you know, not not having the time to get our our doc in a row. And it's not like the tech department would say, like, no. You can't have a local option tax. We might just need to say, like, okay. We'll need an additional thirty days for, like, this crunch and then, like, another thirty days for, you know, like, this debt. Again, we haven't had to do that yet. But that's in there. So, like, looking forward, we have seven towns that have reached out to us to indicate, like, that there will be a local option tax vote in 2026 town meeting day. We have another seven towns that have reached out to say that they are strongly considering a local option tax vote in 2026. And then in addition to those, we've had 14 towns that have reached out just with data requests. You know? Like, help me help me, like, understand our meals and room stacks data. What could this mean for us? Those kind of things.

[Senator Richard Westman (Chair)]: So Those seven towns within the present present statute requirement. Right. Yeah. These are all these are all folks, yeah, considering kind of like the generic local option tax. So STOW has is having a vote in March on going from one to two. Are they in the seven? Mm-mm.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: No. No. Yeah. They already have their, you know, normal local Do you

[Senator Richard Westman (Chair)]: do already have any indication about how many is still the only community that's going from one to two? That's the

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: only one that come across my desk, you know, which is just, like, awareness raising for me that they were doing that. You know? Well, you know, certainly interested in what the legislative appetite is for that. And, you know, if there if that is something you all wanna hear about, I would love to come in a little more prepared after talking to my team about what complexity that, you know, introduces for us. But, you know, I can speak high level that, you know, the more the more deviations we have from a standard, you know, set of administrative, you know, protocols and procedures, definitely, like, far more complex for us and, you know, kind of robs away from the efficiency of having this, you know, tidy local option tax that, you know, nicely falls follows our tax forms and, you know, kind of remittance structure that businesses are already doing. It's a it's an additional lift for us, but mostly, it's like a a big lift for the businesses in those communities to now have, you know, a a new nuance to navigate. Is Burlington is outside of that? Yeah. So there are a there are a couple of local option taxes in municipality, Burlington and Rutland, that are administered totally outside of the tax department. This is a, you know, it's a municipal tax on a tax base that is not the same as our state trust taxes. So, you know, Burlington's, for example, you know, it's a kind of like an amalgamation of some things that are covered under the state sales tax and under the state meals and rooms tax that's subject to their kind of self enforced local option tax. So we don't do anything for Burlington, you know, to support them administering that tax. It's not you know, it doesn't flow nicely off of one of our tax returns. We do actually, you know, engage with them sometimes when there are taxpayers that have questions, which I think comes up a lot of, like, oh, I'm not sure, like, if this is taxable under Burlington's tax or the state tax or, you know, how those two intersect because it's not

[Senator Richard Westman (Chair)]: like a clean overlay of tax bases. I know that creates some confusion for businesses there. I think at some point, you know, further view of what the activity and the questions are, and knowing that STOW is out there, if STOW is successful, you know, anything around that and and the complexities it would create, I think we're we're very interested in hearing about that.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: Yeah. And I wanna, you know, I wanna be clear. Like, I know that there are proposals in this building around increasing and, you know, like, allowing an option for all pounds to vote in at 2%. And that, you know, if there's something that we can, you know, kind of, like, plan fully adapt into our local option tax structure, that would be, you know, much different than having, you know, kind of it feels like a bit of a slippery slope allowing little nuances for one town at a time based off of this, you know, foundational local option tax structure that we administer at the tax department. You know, I'm much you know, if towns wanna do something independently that doesn't involve our, you know, administrative machine, then that's totally fine. But, you know, adding a lot of, you know, opportunities for nuance just creates mess. So so yeah. I would prefer it to be a coordinated policy that, you know, Old Town could take advantage

[Senator Richard Westman (Chair)]: the question. In Burlington, because they raise everything separately, they don't contribute to the pilot fund? Well, they have a I'm

[Patrick "Pat" Brennan (Member)]: not sure. Have enough option back as well if they're on that side. Yeah.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: Let me open up. Let me see what they they do they you're right. They do do some some of the state run as well. So Burlington, yeah, has a 1% local option tax on sales. So that is, you know, through tax department administration. Those revenue splits go naturally. And then the yeah. City of Burlington and city of Rutland administer and collect their own local meals, entertainment, lodging, or alcoholic beverage taxes. So it's kind of like a crafted tax base that's homegrown and specific.

[Senator Richard Westman (Chair)]: And that that they collect themselves, they don't remit anything.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: I can't imagine they would, but, again, like, that's not not anything I'm aware of.

[Senator Richard Westman (Chair)]: We're just, like, trying to create a picture for every Sure.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: No. I think that'd a good question for Burlington. It's not not anything that operates with the tax department.

[Senator Wendy Harrison (Clerk)]: So, thank you. So the sales tax, that's statewide, or

[Senator Richard Westman (Chair)]: there is a statewide sales So,

[Senator Wendy Harrison (Clerk)]: you get the we we receive sales tax from internet sales. So every town likely is already part of that. Every town probably receiving, the town isn't receiving the taxes but people in that town are probably ordering things.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: Right, yeah, there's probably purchases in every town that generates sales tax for the state, absolutely.

[Senator Wendy Harrison (Clerk)]: Right, so then could towns get information from you easily on what that amount is so that they could know what their revenue would be if they did a local option tax? I'm nodding because that's a really good question.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: Not because the answer is yes, just to be clear. So we do actually so for, like, major national, like, ecommerce vendors, for example, they file one monthly return with the state that captures all the all the sales activity for the month across the whole state. So that means that unless a town already has a local options tax, which would requires that vendor to say, and this is how many sales were made in this local option tax town, we don't have any information about what happens in other towns. So, like Yes. If there's a you know, any any town that doesn't have a local option tax, the sales are just kind of counted in this one big aggregate number for the state. There's no, you know, like, geolocating sales unless the town already has a local option tax. So, you know, if it's a preexisting local option tax, we can absolutely say, you know, this is how many sales were generated in your community, you know, from from the local local option tax returns themselves. If you don't have a local option tax, then we don't have any data granularity for you.

[Senator Wendy Harrison (Clerk)]: Okay. So could the vendor provide that?

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: You know what mean? Like, one could certainly ask a ecommerce vendor, you know, if they if they have data to break it out like that. I assume that's possible. It's not something that they are required to share with the tax department for any purposes. Okay.

[Senator Wendy Harrison (Clerk)]: So we could alright. Well, that's something to talk about. Thank you.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: Yeah. Really good question. It's something it's a question I get from municipalities often.

[Patrick "Pat" Brennan (Member)]: Go ahead. Think I know the answer to this, but does a town when they apply as a charter and they have conditions on that local option tax, you don't get involved in that. You just care about the 75% that's sent to

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: you. By conditions you mean like, you know, we're going to raise revenue from this and spend Well, it on

[Patrick "Pat" Brennan (Member)]: yeah, that or yeah. Like in Colchester, we can't spend that local option tax unless it goes to a vote.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: Mhmm. Right. Yeah. Well, we're kind of our our engagement is, you know, sending revenues quarterly to the municipalities, and then from there

[Patrick "Pat" Brennan (Member)]: That's it.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: They're on their own. Yeah. Okay. Yeah. But you're deeply Good answer. Yeah.

[Senator Richard Westman (Chair)]: Any other questions? If you could do some more research, it probably won't be the last time that we were talking about this.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: No. Absolutely. And when you are you thinking about, like,

[Senator Richard Westman (Chair)]: the specific situation of, like, the STO example of what it would what it would mean to have 2% local option tax in a sea of otherwise 1%. Mhmm. Yeah. Yeah. That and and, you know, if in the 14 other towns that have requested data, are these expansions, you know, what are we looking at?

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: And Oh, yeah. I can if you want, I can prepare I can, like, break out that list and send it to the committee in, like, a nice format you guys can review, like, who has what already and what what they're adding to their vows. Absolutely. Mhmm. Yeah. I don't have that broken out so neatly right here, but happy to. Awesome. Well, thanks for the opportune also.

[Senator Richard Westman (Chair)]: And usually, if they vote on this in a March timeframe, is it calendar year? Is it when the institute is there any regulation on calendar type regulations that happen?

[Senator Wendy Harrison (Clerk)]: Yeah. And actually, I didn't say this earlier.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: It's so we require a ninety day warning, but then the local option tax will commence commence the first quarter after that ninety days. So for town meeting day vote, I think those are all July 1 implementations. Okay. If I'm doing my math right.

[Senator Richard Westman (Chair)]: Yeah. And if that would give you ninety days to be able to do Right. The July. So Right. They're all July 1. Yeah.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: So quarter start dates is important for our system and, you know, just like rolling out the the tax return edits and things like that. Make sure we keep catch everyone on this

[Senator Richard Westman (Chair)]: cycle. Perfect. Great.

[Rebecca Samero, Deputy Commissioner, Vermont Department of Taxes]: Thank you. Thank you.

[Senator Richard Westman (Chair)]: Thank you. So and I think at this point, it looks like lunch. And if you could