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ACT NO. 75

(H. 521)

Miscellaneous tax amendments

This act makes miscellaneous policy amendments to Vermont tax laws.

Sec. 1. This section requires a promoter of an event where taxable items will be sold by at least twenty-five vendors to provide a list of the participating vendors and their sales tax license numbers to the Tax Department.

Under the sales tax law, a person who sells in this state in the ordinary course of business must register with the Tax Department as a "vendor" and collect sales tax.

Often, itinerant vendors who participate in an event such as a gun show, flea market or fair, do not register with the Tax Department.

This section will give the Department notice of these events so that they can ensure that all vendors there are collecting sales tax. There is no penalty for a promoter who does not submit the list, unless that promoter is also a licensed vendor.

Sec. 2. This section increases the sales tax cap for tracked vehicles from $900 to $1100.

Tracked vehicles, such as construction, earthmoving and logging equipment, are not registered as vehicles and so, not subject to the purchase and use tax. Sales of such equipment are, however, subject to our sales and use tax, and that tax was capped for tracked vehicles at $900 in 1997, when the sales tax rate was 5%.

In 2003, the sales tax rate increased to 6%. To account for the rate change and to account for price increases since 1997, the cap is increased to $1,100.

JFO Revenue Estimate:

Sec. 2a. Requires the commissioner of taxes to study the advisability of indexing for inflation the sales tax cap on tracked vehicles.

Sec. 2b. Indexes the sales tax cap on tracked vehicles for inflation, beginning July 1, 2006.

Sec. 3. Requires the commissioner of motor vehicles to study the advisability of indexing for inflation the purchase and use tax cap on large trucks.

The purchase of a registered vehicle in Vermont is subject to the 6% purchase and use tax. When the purchase and use tax was originally enacted in 1959, it included a general cap. The cap now applies only to certain heavy trucks and farm trucks, and was last increased to $750 in 1991 when the tax rate was 5%, and to $1,100 in 2000 after the rate was increased to 6%.

Sec. 4. Creates a study by the Joint Fiscal Office and the Department of Taxes of net operating losses, with a report due by January 15, 2006.

Sec. 5. Removes the July 1, 2006, sunset on the property transfer tax exemption for VHFA-financed housing.

JFO Revenue Estimate:

Sec. 6. Prescribes the method to be used for determining the grand list value of rental affordable housing. This language was proposed by a study committee set up last year to analyze how listers should account for tax credit factors specific to government-subsidized housing. Maintains the current valuation rule for nonrental affordable housing.

Sec. 7. Extends an income tax credit for affordable housing to allow it to be used against insurance premiums tax liability.

JFO Revenue Estimate:

Sec. 8. Under current law, a person or organization who is awarded certain building rehabilitation tax credits, but who has no income tax liability, may use the credits to reduce the mortgage on the rehabilitated building.

This section provides that, for credits granted before January 1, 2005, if the entity also has no mortgage, it may transfer its tax credit to a bank for cash.

JFO Revenue Estimate:

Secs. 9, 10. [Deleted]

Sec. 11. Effective dates.

Secs. 12-17. Six housekeeping sections:

Sec. 12 strikes obsolete and duplicative language.

Sec. 13 provides that when a qualified downtown development project allows an allocation of sales tax receipts to the town, the first payment of 50% of the money shall be paid when 50% of the project is complete.

Sec. 14 changes the effective date for designated downtown sales tax allocation from July 1, 2005, to June 1, 2005.

Sec. 15 changes the reference to a Federal income tax credit, to reflect the new Federal name for the credit.

Sec. 16 repeals sections referring to credits which expired in 2001.

Sec. 17 provides that the changes in this Fourth Proposal would become effective upon passage.

Secs. 18-20. Three sections relating to the Vermont Housing Finance Agency:

Sec. 18 changes the composition of the Agency, and allows them the same per diem as paid to other state commissions.

Sec. 19 allows the agency to enter into financing agreements necessary for its operations.

Sec. 20 clarifies the legal protection that extends to the agency in the same manner as to all State employees acting on official State business.

Secs. 21-25. Five sections which conform Vermont sales tax statutes to Streamlined Sales Tax uniform definitions and rules; and preserve current law which taxes Directory Assistance charges and exempts telecommunications installation and initiation charges.

Sec. 21 conforms definition of "telecommunications" to the Streamlined definition. Adds definitions of "telecommunications nonrecurring charges" (installation and initiation fees) and of "directory assistance".

[Note: This definition of "telecommunications" includes installation and initiation services. These services will not be taxed, however, because of Secs. 24 and 25(c) of the bill.]

Sec. 22 deletes an exemption for coin-operated telecommunications services, since this exemption is contained in Sec. 23.

Sec. 23 conforms various telecommunications-related provisions to Streamlined requirements.

This section also provides that directory assistance charges will be subject to sales tax. Directory assistance charges are currently subject to sales tax, and taxation of directory assistance charges is not changed by this bill.

Sec. 24 conforms the definition of "sales price" to Streamlined requirements.

The last line of this section provides that telecommunications nonrecurring charges (installation and initiation charges) are not included in "sales price" (and so, not subject to sales tax).

Sec. 24 does not become effective until the time at which Vermont joins the Streamlined Sales Tax Agreement, because other portions of the "sales price" definition should not be changed until that time. To ensure that telecommunications nonrecurring charges are not subject to sales tax in the interim, Sec. 25 specifically exempts them from taxation.

Sec. 25 provides effective dates for the changes in this proposal of amendment.

This section also provides that telecommunications nonrecurring charges are exempt from sales tax beginning July 1, 2005. Prior to July 1, 2005, these charges are exempt under current law. On July 1, 2005, when Sec. 21 becomes effective (adding nonrecurring charges to the "telecommunications" definition), Sec. 25(c) also becomes effective (exempting nonrecurring charges from sales tax).

Requires the Tax Department, beginning in 2009, to report every two years to the Legislature on the cost of all tax exemptions, exclusions, deductions, and credits in personal and corporate income, sales and use, and meals and rooms tax returns, and on education property tax grand lists. Also requires reporting of any available tax expenditure estimates produced jointly by Tax Department and Joint Fiscal Office.

Provides for interim reporting in 2006 on the income taxes; in 2007 on income and sales taxes; and in 2008 on income, sales, meals and rooms, and education property taxes.

Effective Date: Various

Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont