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BILL AS INTRODUCED 2007-2008

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H.564

Introduced by Representative Otterman of Topsham

Referred to Committee on

Date:

Subject:  Taxation; sales and use tax; withdrawal from Streamlined Sales and Use Tax Agreement; repeal of exemptions; exempt any item with a sales price of $10.00 or less; lower rate from six percent to one percent; require a supermajority vote to increase rate

Statement of purpose:  This bill proposes to withdraw from the Streamlined Sales Tax Agreement, repeal most sales and use tax exemptions, including repeal of food exemption, extend the sales tax to services and groceries, exempt items priced at $10.00 or less, lower the rate from six percent to one percent, and require a supermajority vote to increase the rate.

AN ACT RELATING TO WITHDRAWAL FROM STREAMLINED AGREEMENT, REPEAL OF SALES TAX EXEMPTIONS, EXPANSION OF TAX TO SERVICES AND FOOD, REDUCTION OF RATE TO ONE PERCENT, SUPERMAJORITY VOTE TO INCREASE RATE

It is hereby enacted by the General Assembly of the State of Vermont:


Sec. 1.  WITHDRAWAL FROM STREAMLINED SALES TAX

             AGREEMENT

     The department of taxes is authorized and directed to take all actions necessary to withdraw the state of Vermont from the Streamlined Sales and Use Tax Agreement.  In accordance with Section 808 of that agreement, the withdrawal shall be effective the first day of the first calendar quarter which begins at least 60 days after notice of withdrawal.  The state shall remain liable for its share of any financial or contractual obligations incurred prior to the effective date of the state’s withdrawal, as determined under the agreement.

Sec. 2.  32 V.S.A. § 9741 is amended to read:

§ 9741.  SALES NOT COVERED

Retail sales and use of the following shall be exempt from the tax on retail sales imposed under section 9771 of this title and the use tax imposed under section 9773 of this title.

(1)  Sales not within the taxing power of this state under the Constitution of the United States.

(2)  Drugs intended for human use, durable medical equipment, mobility enhancing equipment, and prosthetic devices and supplies, including blood, blood plasma, insulin, and medical oxygen, used in treatment intended to alleviate human suffering or to correct, in whole or in part, human physical disabilities.

(3)  Agriculture feeds, seed, plants, baler twine, silage bags, agricultural wrap, sheets of plastic for bunker covers, liming materials, breeding and other livestock, semen breeding fees, baby chicks, turkey poults, agriculture chemicals other than pesticides, veterinary supplies, and bedding; and fertilizers and pesticides for use and consumption directly in the production for sale of tangible personal property on farms, including stock, dairy, poultry, fruit and truck farms, orchards, nurseries, or in greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities for sale.

(4)  Casual sales.

(5)  [Deleted.]  Sales of items with a purchase price of $10.00 or less.

(6)  [Deleted.]

(7)  Sales of motor fuels taxed or exempted under chapter 28 of Title 23, provided, however, that jet fuel shall be taxed under this chapter.

(8)  [Repealed.]

(9)  Rents for rooms taxed under chapter 225 of this title and the transactions exempted therefrom.

(10)  Sales of meals taxed or exempted under chapter 225 of this title.

(11)  [Repealed.]

(12)  Motor vehicle purchases and use taxed under chapter 219 of this title and the transactions exempted therefrom which are listed in section 8911 of this title.  Provided however, that notwithstanding section subdivision 8911(5), construction, earthmoving, logging, and motorized equipment which has not been registered as a motor vehicle is subject to tax under this chapter; and further provided that power take off and other auxiliary equipment on motor vehicles, whether attached prior to or subsequent to registration, is not exempt under this section.

(13)  Sales of food, food Food stamps, purchases made with food stamps, food products and beverages sold for human consumption off the premises where sold.

(14)  Tangible personal property which becomes an ingredient or component part of, or is consumed or destroyed or loses its identity in the manufacture of tangible personal property for sale; machinery and equipment for use or consumption directly and exclusively, except for isolated or occasional uses, in the manufacture of tangible personal property for sale, or in the manufacture of other machinery or equipment, parts, or supplies for use in the manufacturing process; and devices used to monitor manufacturing machinery and equipment or the product during the manufacturing process. Machinery and equipment used in administrative, managerial, sales, or other nonproduction activities, or used prior to the first production operation or subsequent to the initial packaging of a product, shall not be exempt from tax, unless such uses are merely isolated or occasional.  Machinery and equipment shall not include buildings and structural components thereof.  For purposes of this subdivision, it shall be rebuttably presumed that uses are not isolated or occasional if they total more than four percent of the time the machinery or equipment is operated.  For the purposes of this subsection, “manufacture” includes extraction of mineral deposits, the entire printing and book-making process, and the entire publication process.

(15)  Sales of newspapers and sales of tangible personal property which becomes an ingredient or component part of or is consumed or destroyed, or loses its identity in the manufacture of newspapers, whether sold or distributed without charge.  A publication shall not be considered a newspaper unless, on an average for the taxable year, at least ten percent of its printed material consists of news of general or community interest, community notices, editorial comment, or articles by different authors.

(16)  Materials, containers, labels, sacks, cans, boxes, drums, or bags and other packing, packaging, or shipping materials for use in packing, packaging or shipping tangible personal property by a manufacturer or distributor.

(17)  Rentals of furniture in furnished apartments or houses for residential use.

(18)  Fees and charges paid for admission to or use of federal, state or municipal recreation areas and facilities, including swimming pools.

(19)  Rentals of coin-operated washing facilities for individual, or personal use, including car washes and laundries.

(20)  Fees and charges for admission to nonprofit museums.

(21)  Sales of equipment, supplies, and building materials made directly to volunteer fire departments, volunteer ambulance companies, or volunteer rescue squads for official use by the volunteer organizations.

(22)  Funeral charges, including sales of tangible personal property such as caskets, vaults, boxes, clothing, crematory urns, and other such funeral furnishings as are necessary incidents of the funeral, but excluding the sale of flowers and other items sold as an accommodation rather than as an integral part of the funeral service or preparation therefor.

(23)  [Repealed.]

(24)  Tangible personal property purchased for use or consumption directly and exclusively, except for isolated or occasional uses, in commercial, industrial, or agricultural research or development in the experimental or laboratory sense.  It shall be rebuttably presumed that uses are not isolated or occasional if they total more than four percent of the time the machinery or equipment is operated.  Such research or development shall not be deemed to include the ordinary testing or inspection of materials or products for quality control, efficiency surveys, management studies, consumer surveys, advertising, promotions, or research in connection with literary, historical or similar projects.

(25)  Sales of agricultural machinery and equipment for use and consumption directly and exclusively, except for isolated or occasional uses, in the production for sale of tangible personal property on farms (including stock, dairy, poultry, fruit and truck farms), orchards, nurseries, or in greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities for sale.  It shall be rebuttably presumed that uses are not isolated or occasional if they total more than four percent of the time the machinery or equipment is operated.

(26)  Sales of electricity, oil, gas and other fuels used in a residence for all domestic use including heating.  The commissioner shall by rule determine that portion of the sales attributable to domestic use where fuels are used for purposes in addition to domestic use.

(27)  Sales of electricity, oil, gas and other fuels used directly and exclusively for farming purposes.

(28)  Sales of films where the films are acquired exclusively for the purpose of charging admission to see such films and where such admission is subject to the tax imposed by section 9771(4) of this title.

(29) Aircraft sold to a person which holds itself out to the general public as engaging in air commerce, for use primarily in the carriage of persons or property for compensation or hire; and parts, machinery, and equipment to be installed in any aircraft.

(30)  Railroad rolling stock, including depreciable parts, machinery and equipment to be installed as a capital asset in such rolling stock, sold for use primarily in the carriage of persons or property.  For purposes of this section, railroad rolling stock shall include locomotives, cabooses, boxcars, tank cars, flatbed cars, maintenance of way equipment and all other wheeled vehicles used on rails or tracks.

(31)  Ferryboats, including depreciable parts, machinery and equipment to be installed as a capital asset in such ferryboat, sold to a person who holds himself or herself out to the general public as engaging in water commerce, for use primarily in the carriage of persons or property for compensation or hire.

(32)  Forty percent of the receipts from sales of mobile homes, as defined in section 2601 of Title 9 and modular housing, when they are sold as tangible personal property.

(33)  Sales of the flag of the United States to and by veterans’ organizations exempt under Section 501(c)(19) of the Internal Revenue Code.

(34)  Sales of electricity, oil, gas, and other fuels used directly or indirectly in manufacturing tangible personal property for sale.

(35)  Charges made when tangible property is transferred as part of a personal services transaction or a transfer of intangible property rights, as long as the focus of the transaction is the provision of services or the transfer of intangible property rights and not the transfer of tangible personal property; no separate charge is made for the transfer of tangible personal property; and the value of the tangible personal property transferred, including the value of services added to the tangible personal property transferred, is less than 10 percent of the total charge for the transaction.  When the focus of the transaction is the transfer of tangible personal property, all receipts from the sale are taxable, including receipts from separately stated charges for services to produce the property, unless the receipts are otherwise exempt under this chapter.

(36)  Charges by an advertising agency for the transfer of title or possession of or right to use advertising materials when the transfer is made in conjunction with the delivery of advertising services.  This exemption does not extend to charges by any business other than an advertising agency or to charges by any person for printing, imprinting, copying or reproducing advertising materials.

(37)  Charges for documents, the sole purpose of which is to record or memorialize professional services rendered, such as, but not limited to, charges for briefs, memoranda, agreements, and wills prepared by lawyers; charges for tax returns and reports produced by accountants; charges for drawings produced by architects; or charges for insurance policies.

(38)  Tax on the sale or use of a tracked vehicle shall not exceed $1,100.00 adjusted as follows:  As of July 1 of each even-numbered year, the commissioner shall adjust the most recent unrounded cap amount by the cumulative inflation index for the prior two calendar years under the consumer price index for urban consumer all items, and round that amount to the nearest ten dollars, and shall publish this rounded amount as the new cap.

(39)  Sales of building materials within any three consecutive years:

Subdivision (39)(i) extension is not available for new purchases as of

January 1, 2007 and is repealed effective January 1, 2017; see note set out below.

(i)  in excess of one million dollars in purchase value, which may be reduced to $250,000.00 in purchase value upon approval of the Vermont economic progress council pursuant to section 5930a of this title, used in the construction, renovation, or expansion of facilities which are used exclusively, except for isolated or occasional uses, for the manufacture of tangible personal property for sale, or;

(ii)  in excess of $250,000.00 in purchase value incorporated into a downtown redevelopment project as defined by rule by the commissioner of the department of housing and community affairs; provided, that the municipality is not receiving an allocation of sales tax receipts pursuant to section 9819 of this title.

(40)  [Repealed.]

(41)  Charges for wholesale transactions between telecommunications service providers where the service is a component part of a service provided to an end user.  This exemption includes, but is not limited to, network access charges and interconnection charges paid to a local exchange carrier.

(42)  [Deleted.]

(43)  Sales of scrap materials generated in the course of construction or demolition and diverted from waste disposal at the construction or demolition job site; provided that the sale is not by the generator and is by a person who received the materials from the generator with no payment.

(44)  Tangible personal property to be incorporated in a rail line in connection with the construction, maintenance, repair, improvement, or reconstruction of the rail line.

(45)  Clothing; but clothing shall not include clothing accessories or equipment, protective equipment, or sport or recreational equipment.

(46)  Tangible personal property to be incorporated into:

(A)  a net metering system as defined in 30 V.S.A. § 219a;

(B)  a home or business energy system on a premises not connected to the electric distribution system of a utility regulated under Title 30 and that otherwise meets the requirements of 30 V.S.A. § 219a(a)(3)(A), (C), (D), and (E); or

(C)  a hot water heating system that converts solar energy into thermal energy used to heat water, but limited to that property directly necessary for and used to capture, convert, or store solar energy for this purpose. 

(47)  Sales of new personal computers and included software packages, for use exclusively in the Vermont business and directly in the activities defined in section 5930k of this title, if purchased by a high-tech business as approved by the Vermont economic progress council.

Sec. 3.  32 V.S.A. § 9743 is amended to read:

§ 9743.  ORGANIZATIONS NOT COVERED

Any sale, service, or amusement charged by or to any of the following or any use by any of the following are not subject to the sales and use taxes imposed under this chapter:

(1)  The state of Vermont, or any of its agencies, instrumentalities, public authorities, public corporations (including a public corporation created pursuant to agreement or compact with another state) or political subdivisions when it is the purchaser, user or consumer, or when it is a vendor of services or property of a kind not ordinarily sold by private persons, or when it charges for admission to any amusement; except that a performance jointly produced or presented by it and another person shall not be exempt from amusement tax unless it meets the joint production requirements imposed on a qualified organization under subdivision (3)(B) of this section.

(2)  The United States of America, any of its agencies and instrumentalities, insofar as it is immune from taxation when it is the purchaser, user, or consumer, or when it sells services or property of a kind not ordinarily sold by private persons.

(3)  Organizations which qualify for exempt status under the provisions of section 501(c)(3) of the United States Internal Revenue Code and agricultural organizations, qualified for exempt status under section 501(c)(5), when presenting agricultural fairs, field days, or festivals, as amended, shall be exempt as follows:

(A)  The organization first shall have obtained a certificate from the commissioner stating that it is entitled to the exemption.  The commissioner shall issue a certificate to any organization which has received federal certification of 501(c)(3) status and may issue a certificate to any other qualified organization.

(B)  Amusement charges by, and sales to or uses by such organizations shall be exempt from the tax under this chapter; except performances jointly produced or presented by a qualified organization and another person shall not be exempt from amusement tax under this section unless the organization bears the entire risk of loss of the production; the other person does not share in the profits of, and is not a party to any contracts with the performers related to, the production; and the organization is solely responsible for collection of all receipts and payment of all expenses associated with the production and accounts for the receipts and expenses on its books and records.

(C)  Sales other than amusement charges by qualified 501(c)(3) organizations shall be exempt if the organization’s gross sales of tangible personal property and services which would be subject to tax under this chapter but for this subdivision, in the prior year, did not exceed $20,000.00.

(D)  Sales of fresh cut flowers only, by a qualified 501(c)(3) organization, during a single annual sales event not to exceed seven days, shall be exempt.

(4)  Sales of building materials and supplies to be used in the construction, reconstruction, alteration, remodeling or repair of:  (A) any building structure, or other public works owned by or held in trust for the benefit of any governmental body or agency mentioned in subdivisions (1) and (2) of this section and used exclusively for public purposes; (B) any building or structure owned by or held in trust for the benefit of any organization described in subdivision (3) and used exclusively for the purposes upon which its exempt status is based; and (C) any building or structure owned by a “development corporation” as defined in section 202(4) of Title 10 and any “local development corporation” as defined in section 222(4) of Title 10, and used exclusively for the purposes authorized in chapter 11A of Title 10; provided, however, that the governmental body or agency, the organization, or the development corporation has first obtained a certificate from the commissioner stating that it is entitled to the exemption and the vendor keeps a record of the sales price of each separate sale, the name of the purchaser, the date of each separate sale, and the number of the certificate. In this subdivision, the words “building materials and supplies” shall include all materials and supplies consumed, employed or expended in the construction, reconstruction, alteration, remodeling, or repair of any building, structure, or other public work as well as the materials and supplies physically incorporated therein.

(5)  Organizations which qualify for exempt status under the provisions of section 501(c)(4)-(13) and (19), and political organizations as defined in section 527(e), of the United States Internal Revenue Code, as the same may be amended or redesignated, other than organizations which qualify for exempt status under the provisions of section 501(c)(4) of the United States Internal Revenue Code whose bylaws provide for the contribution of their net income to organizations which qualify for exempt status under the provisions of section 501(c)(3) of the United States Internal Revenue Code, shall not be exempt from taxation of the sale or use of tangible personal property as defined in section 9701 of this title, but shall be exempt from the sales and use tax upon amusement charges as defined in section 9701, in the case of not more than four special events (not including usual or continuing activities of the organization) held in any calendar year, and which, in the aggregate, are not held on more than four days in such year, and which are open to the general public.  In case the organization holds more than four such special events a year, or such events are held on more than four days in a year, the organization may elect the events or the days to which the exemption provided by this subsection shall apply, by giving prior notice to the commissioner.  This subdivision shall not apply to agricultural organizations governed by subdivision (3) of this section.

Sec. 4.  32 V.S.A. § 9701(4), (13), and (15) are amended, and (45) is added to read:

(4)(A)  Sales price: means the total amount of consideration, including cash, credit, property, and services, for which personal property or services are sold, leased, or rented, valued in money, whether received in money or otherwise, without deduction for the following:

(i)  The seller’s cost of the property sold;

(ii)  The cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller, all taxes imposed on the seller, and any other expenses of the seller;

(iii)  Charges by the seller for any services necessary to complete the sale, other than installation charges;

(iv)  Delivery charges;

and including consideration received by the seller from third parties if:

(I)  The seller actually receives consideration from a party other than the purchaser and the consideration is directly related to a price reduction or discount on the sale;

(II)  The seller has an obligation to pass the price reduction or discount through to the purchaser;

(III)  The amount of the consideration attributable to the sale is fixed and determinable by the seller at the time of the sale of the item to the purchaser; and

(IV)  One of the following criteria is met:  (aa) The purchaser presents a coupon, certificate, or other documentation to the seller to claim a price reduction or discount where the coupon, certificate, or documentation is authorized, distributed, or granted by a third party with the understanding that the third party will reimburse any seller to whom the coupon, certificate, or documentation is presented; (bb) The purchaser identifies himself or herself to the seller as a member of a group or organization entitled to a price reduction or discount (a “preferred customer” card that is available to any patron does not constitute membership in such a group); or (cc) The price reduction or discount is identified as a third party price reduction or discount on the invoice received by the purchaser or on a coupon, certificate, or other documentation presented by the purchaser.

(B)  Sales price shall not include:

(i)  Discounts, including cash, term, or coupons that are not reimbursed by a third party that are allowed by a seller and taken by a purchaser on a sale;

(ii)  Interest, financing, and carrying charges from credit extended on the sale of personal property or services, if the amount is separately stated on the invoice, bill of sale, or similar document given to the purchaser;

(iii)  Any taxes legally imposed directly on the consumer that are separately stated on the invoice, bill of sale, or similar document given to the purchaser;

(iv)  Installation charges;

(v)  Credit for any trade-in; and

(vi)  Telecommunications nonrecurring charges.

(13)  Use: means the exercise of any right or power over tangible personal property by the purchaser thereof and includes, but is not limited to, the receiving, storage or any keeping or retention for any length of time, withdrawal from storage, any installation, any affixation to real or personal property, or any consumption of that property, or the use of a service in this state.

(15)  Property and services the use of which is subject to tax: include all property and services sold to a person within the state, whether or not the sale is made within the state, the use of which property or service is subject to tax under section 9773 of this title or will become subject to tax when such property is received by or comes into the possession or control of such person within the state or when the service is used within the state.

(45)  Personal services means all activities engaged in for other persons for a consideration which involve the performance of a service, including professional services, as distinguished from the sale of property or amusement; and includes ancillary services performed by employees of the person providing the service and any documents which represent, record, or memorialize the services rendered; but shall not include the following services:

(A)  health care and social assistance services; educational services; agricultural, logging, forestry, fishing, and hunting services; publishing, broadcasting, and motion picture production services; transportation services; sightseeing and guide services; warehousing and storage services; support services for transportation, including arrangement of passenger or freight carriage, but excluding repair services; utility services, including water system services; securities and other financial investment services; financial services provided by an institution subject to tax under Title 8; insurance carrier, broker, or agent services; real estate broker or agent services; motion picture rentals to a commercially operated theater primarily engaged in the exhibition of motion pictures; actuarial services; child care services; scientific research and development; death care services; executor services performed by the child, parent, or sibling of the deceased; and advertising services;

(B)  services performed by an employee for his or her employer, or services provided by one member of a controlled group of business entities to another member of the controlled group as determined by the commissioner; and

(C)  services which are otherwise subject to the sales and use tax under this chapter, including amusements and telecommunications services.

Sec. 5.  32 V.S.A. § 9771 is amended to read:

§ 9771.  IMPOSITION OF SALES TAX

Except as otherwise provided in this chapter, there is imposed a tax on retail sales in this state.  The tax shall be paid at the rate of six one percent of the sales price charged for the following:

                                                       * * *         

(8)  Personal services sold at retail.

Sec. 6.  32 V.S.A. § 9772 is amended to read:

§ 9772.  AMOUNT OF TAX TO BE COLLECTED

(a)  For the purpose of adding and collecting the tax imposed by this chapter, or an amount equal as nearly as possible or practicable to the average equivalent thereof, to be reimbursed to the vendor by the purchaser, the vendor shall use either the calculation in subdivision (1) of this subsection or the formula in subdivision (2).  The tax required to be remitted shall be the rate specified in section 9771 of this title multiplied by the total sales price of all the taxable transactions; provided, however, the tax required to be remitted shall be no more than the amount required to be collected.

(1)  The the total sales price of the transaction multiplied by the rate specified in section 9771 of this title carried to the third decimal place and rounded up to the nearest whole cent if the third decimal point is greater than four and rounded down to the nearest whole cent if the third decimal point is four or less.  The tax may be computed on either the total invoice amount or on each taxable item.  The vendor shall be entitled to retain any amount lawfully collected by the person in excess of the tax imposed by the person in excess of the tax imposed by this chapter.

   Amount of Sale                                        Amount of Tax

     $0.01-0.10                                                  No Tax

       0.11-0.16                                                       $.01

       0.17-0.33                                                         .02

       0.34-0.50                                                         .03

       0.51-0.66                                                         .04

       0.67-0.83                                                         .05

       0.84-1.00                                                         .06

(2)  In addition to a tax of $0.06 on each full dollar, a tax shall be collected on each part of a dollar in excess of a full dollar in accordance with the following formula:

    $ 0.01-0.16                                                     $ .01

       0.17-0.33                                                        .02

       0.34-0.50                                                        .03

       0.51-0.66                                                        .04

       0.67-0.83                                                        .05

       0.84-0.99                                                        .06

(b)  The commissioner may adopt transition rules that comply with any applicable multistate agreement in the event of a rate change.

Sec. 7.  32 V.S.A. § 9773 is amended to read:

§ 9773.  IMPOSITION OF COMPENSATING USE TAX

Unless property or service has already been or will be subject to the sales tax under this chapter, there is imposed on every person a use tax at the rate of six one percent for the use within this state, except as otherwise exempted under this chapter:

* * *


Sec. 8.  32 V.S.A. § 9773a is added to read:

§ 9773a.  SUPERMAJORITY VOTE REQUIRED TO INCREASE SALES AND

                USE TAX RATE

     The sales and use tax rates under sections 9771 and 9773 of this title shall not be increased except by action of at least two-thirds of the elected members of the house and two-thirds of the elected members of the senate.

Sec. 9.  EFFECTIVE DATE

     This act shall take effect January 1, 2009, and shall apply to sales and uses on and after January 1, 2009; except that this section shall take effect upon passage.  No successor version to 32 V.S.A. § 9741(29) (airplane parts exemption) shall be enacted under No. 81 of the Acts of 2007, and Secs. 7 and 7a of that act are repealed.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us