Senate Finance has been taking a long walk through the miscellaneous tax bill, as passed by the House, which in combination with the fee bill raises $48 million dollars in new revenue.
Miscellaneous Tax Bill Draft Fiscal Note 3-17-2016
In one instance the Finance Committee is considering whether to take a rebellious shot at the US Congress and US Supreme Court. They also took a preliminary look at some provisions of the economic development bill that has not yet officially arrived in their committee.
A few pieces of the 38-page miscellaneous tax bill, H. 873, (As Passed by the House Official) are as follows:
- A new requirement for annual sworn statements by owners of property in the use value program that the agricultural land or buildings continue to meet the requirements for enrollment in that program. See Section 4.
- $100,000 dollars a year will be paid from the education fund to “educate” municipal officials who assess property values. See Section 6. The education fund already spends 3.4 million to support the appraisal process.
EF Outlook as passed HWM 2016-03
In addition, homeowners are no longer automatically entitled to an inspection when they appeal an appraisal. They are however entitled to an inspection by a hearing officer if one is requested. See Section 8. - Private short-term rentals, like AirBnB, are now subject to the rooms and meals tax by way of contracts between the Department of Taxes and the person who provides a “platform” for the short-term rental. See Section 18(a).
- An increase in the quarterly employer assessment contribution paid to the Health Care Fund for each full–time equivalent (FTE) worker without health care insurance (uncovered employee.) Rates increase with the number of uncovered employees as follows: for between four and nineteen uncovered FTE employees the contribution will be $151.12; for between 20- 99 uncovered FTE employees the contribution will be $210; for more than 100 FTE uncovered employees the contribution will be $249. See Section 26. This will increase revenue from employer assessments by $6 million dollars and raise a total of $25 million dollars.
- An increase from 0.5% to 0.75 % in the gross receipts tax on heating fuel (oil, propane, kerosene, diesel fuel,) delivered to a home or residence, as well as natural gas and coal. In addition a 0.5 % gross receipts tax on electricity is created. See Section 27. The Department of Taxes is charged with conducting a study on extending the fuel gross receipts tax to wood pellets, compressed natural gas and liquefied natural gas by next year with a report to the general assembly.
- An increase on the franchise tax on financial institutions with deposits in excess of 750 million in the last 12 months, from .00096 % of monthly deposits to .000121 %. This will raise an additional $2.1 million dollars from banks that collectively now pay about $10 million a year.
More detail on the miscellaneous tax bill is given here:
IN EVENING SESSION, HOUSE PANEL FINALIZES $48M TAX PACKAGE
A bit of comic relief came with the discussion of new tax related requirements on internet vendors. First there is a new requirement to notify individual buyers, by first class mail (as opposed to a notice included in the shipment) that they owe the Vermont sales tax. In addition large vendors (making at least $50,000 dollars a year) must send the Vermont Tax Department an annual statement showing the purchases of individual buyers.
This is hardly going to make buyers rush to pay the sales tax. Instead it’s a peevish means of asserting some control over internet vendors; it’s burdensome and there are fines for noncompliance. The real issue here is that 24 years ago, the US Supreme Court in the case of Quill v. North Dakota, 504 US 298 (1992) concluded that requiring the Quill Corporation to collect a state use tax on sales shipped into North Dakota violated the Commerce Clause of the US Constitution. Under the Commerce Clause only the federal government can regulate interstate commerce. States are prohibited from collecting “duties” that interfere with trade among states. This prohibition does not apply if the vendor has a nexus (physical presence) in the state. The Quill decision expressly stated that Congress could enact legislation to allow states to collect the state sales and use taxes. Congress has failed so far in this effort.
States have become increasingly frustrated by the expansion of the Internet sales industry. In fact, states are so frustrated that there is a movement to enact state legislation to require internet vendors to collect the tax so as to provoke a lawsuit that might cause the US Supreme Court to reverse its decision or cause Congress to enact some enabling legislation. Vermont wants to jump on this bandwagon. Buried in the miscellaneous tax bill is an attempt to revive a dormant statute requiring internet vendors to collect Vermont’s tax. See Section 22.
Our Attorney General’s office is of course opposed to Vermont thumbing its nose at the US Supreme Court. Assistant Attorney General (AAG) Bill Griffin basically testified that this is a foolish and potentially costly protest. In addition to the costs associated with defending a lawsuit, Vermont would likely lose and end up paying the vendors attorneys fees; after all the Commerce Clause hasn’t changed even if internet sales are booming. According to AAG Griffin this is a “high stakes enterprise with no upside.” When asked if a lot of states are joining in on this anyway, AAG Griffin dryly remarked, “a lot of states thought it was good idea to follow North Carolina when they fired on Ft. Sumter.” Not persuaded, the committee wants AAG Griffin to report back on whether attorneys general in other states see this as a lost cause.
On another note, the Finance Committee took a peak at H. 865 a bill that would allocate $1 million dollars from the general fund to the Department of Housing and Community Development for two pilot projects to promote affordable workforce housing. This bill will likely get rolled into a general economic development bill. As it stands now, the two pilot projects must meet very specific population density requirements of one project per municipality with a population of more than 10,000 full time residents. Projects also have specific directives about the number of units that must be owned or rented to different classes of low-income occupants (as defined in the bill.) Projects do not have to be in different counties but they must be completed within two years of the award of the grant. Preference will be given to projects with rent control agreements. We will have more on the overall economic development bill as it makes its way through the Senate.
You can weigh in on the tax bill or the economic development bill before they get farther down the road by contacting your legislators or members of Senate Finance Committee.
All Legislators - Vermont General Assembly
Best,
Barbara Crippen
Policy Coordinator
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