Vermont would tax internet

[CNHT]

Monday, January 1, 2007
New year, new sales taxes

Published: Monday, January 1, 2007
By Dan McLean
Free Press Staff Writer

Starting today, Vermont's treasury will begin to swell by millions of dollars a year, thanks to a series of sales tax changes designed to pave the way for taxing Internet sales.

The state won't predict how much revenue the changes -- which include taxing beer, standard software downloads and some Internet purchases at Vermont's 6 percent tax rate -- will generate.

Projections indicate Vermont will collect $7.3 million more in sales tax in the next fiscal year, according to data supplied by Sara Teachout, a fiscal analyst with the Legislative Joint Fiscal Office.

Millions of dollars in new revenue is an unintentional side effect of streamlining the tax code, said Economic Development Commissioner Mike Quinn.

"I think this is an incidental outcome of joining the group," Quinn said of Vermont's participating with other states in the streamlined sales tax project. "The concept was more to put us on a level field."

By taxing e-commerce -- one of the goals of the streamlined sales tax project -- traditional shops will shed the disadvantage of having to compete against retailers that don't charge tax, said Michael Wasser, a policy analyst at the Vermont Department of Taxes.

Clothes shoppers should be most pleased with the changes. Previously, clothes purchased in Vermont costing more than $110 were taxed. Now, regardless of cost, clothes will be tax-free.

The changes are needed to make Vermont compliant with the streamlined sales tax project, which helps participating states to simplify tax codes.

Beer sales at the market will become taxable, for example, because Vermont lawmakers had to make a decision: Tax both beer and wine, or tax neither, Wasser said. The state chose to tax beer instead of removing wine's sales tax.

Liquor sales are regulated by the state, however, and fall into a different category. They will remain untaxed. Beer, wine and liquor are already taxed at the distributor level, Wasser said. Unhappy businesses

Morgan Wolaver, president of Otter Creek Brewing Co., and Jeff Couture, IBM spokesman, represent some Vermont businesses upset with the changes.

Taxing beer is "a shortsighted tax that penalizes a large segment of consumers," particularly working-class Vermonters, said Wolaver. Before today, beer carried a 10 percent tax in bars, but none at the market.

Vermont businesses near the state's borders also will be harmed, as shoppers may travel to places like New Hampshire, where there is no sales tax, to buy beer, the Middlebury brewer said.

IBM, which employs about 6,000 people at its semiconductor plant in Essex Junction, is irked about the tax code changes that now include pre-written, or "canned," software. The tax change will cost IBM's Vermont operation as much as $100,000 a year, Couture said.

IBM wants the tax law amended -- at least for the business community.

"Vermont's economic development strategy is to recruit and grow businesses that have low environmental impact and offer good-paying jobs. These are precisely the type of firms that will need the software this application of the SST (streamlined sales tax) in Vermont will inhibit," Couture said by e-mail, using the shorthand for streamlined sales tax.

New Jersey, Couture notes, fashioned its streamlined tax law to exempt businesses from a canned software tax.

Changes possible

The Douglas administration is willing to consider changes to certain aspects of the tax law, including lowering the state sales tax.

"It's something that we're willing to look at," said Jason Gibbs, the governor's spokesman, adre changing how software is taxed. "Full implementation of the streamlined sales tax is going to take some massaging as things move forward. We're open to ideas that ultimately allow us to achieve the goals of the streamlined sales tax agreement here in Vermont."

Gibbs said the administration is prepared to "tweak the system" as implementation goes forward, including reduction of the state's sales tax to 5 percent over the course of several years. The first sales-tax reduction could be to 5.5 percent, he said.

Vermont sales taxes increased from 5 percent to 6 percent in 2003 to help reduce property tax. It was part of a package of reforms to Act 60, the state's education finance law. Vermont first implemented a sales tax, at 3 percent, in 1969.
Message to congress

The underlying hope of the streamlined sales tax project, Wasser said, is to demonstrate to the U.S. Congress that states have created simplified sales tax structures, a crucial ingredient to make "a compelling case" for a federal law that would force merchants to add state sales taxes to Internet transactions.

Vermont would reap about $25 million a year in revenue if Internet sales were to include state sales tax, Teachout said.

The streamlined sales tax agreement relies on companies volunteering to include a sales tax. So far, more than 1,000 companies have volunteered to charge state and local sales taxes. Companies volunteer in exchange for amnesty from past tax liability.

E-commerce sales taxes are based on where the product would be shipped. Vermonters who live in Burlington, Manchester, Stratton and Williston will pay 7 percent, since a 1 percent local tax exists.

"The goal is ultimately to help our local businesses be more competitive," Wasser said, calling the increase in taxes on certain products "short-term pain for long-term gain."

Contact Dan McLean at 651-4877 or dmclean@bfp.burlingtonfreepress.com

[aries]

another reason to get the hell out of vermont

once a great state
proud of its agriculture and uniqueness
now a cesspool
destroyed by liberals who dont understand that half the state is "poor" by their own definition.

[Lloyd Danforth]

Do I hear 'Internet Cafe'on the east side of very bridge across the CT river?

[maineiac]

Maybe I'd lose, but I bet that every state legislature is rife with bills proposing new taxes.

There is a clearly defined historical pattern: government is never satisfied with the level of taxation. The parasites only ever want more and more.

This is the reality of governments.

[KBCraig]

How the heck does VT propose to force online vendors in other states (or countries!) to collect VT sales tax?

[CNHT]

Do I hear 'Internet Cafe'on the east side of very bridge across the CT river?

WOW Lloyd good idea! Or maybe a shipping point, as in, here is my address to be shipped TO, and can't be TAXED because it's in NH...
I mean if they can use bogus/each others addresses to vote, why not to accept packages?

[CNHT]

Maybe I'd lose, but I bet that every state legislature is rife with bills proposing new taxes.

There is a clearly defined historical pattern: government is never satisfied with the level of taxation. The parasites only ever want more and more.

This is the reality of governments.

Hehe, well, just read the thread about Maine.

In our case, the Democrats have been 'waiting a lifetime' to quote Ray Buckley for this opportunity to take control and have their way with NH!

[Rosie the Riveter]

Vermont businesses near the state's borders also will be harmed, as shoppers may travel to places like New Hampshire, where there is no sales tax, to buy beer, the Middlebury brewer said.

More $$$ for us  I love the internet cafe with mailboxes idea.

[error]

How the heck does VT propose to force online vendors in other states (or countries!) to collect VT sales tax?

Extortion.

The streamlined sales tax agreement relies on companies volunteering to include a sales tax. So far, more than 1,000 companies have volunteered to charge state and local sales taxes. Companies volunteer in exchange for amnesty from past tax liability.

[CNHT]

How the heck does VT propose to force online vendors in other states (or countries!) to collect VT sales tax?

Extortion.

The streamlined sales tax agreement relies on companies volunteering to include a sales tax. So far, more than 1,000 companies have volunteered to charge state and local sales taxes. Companies volunteer in exchange for amnesty from past tax liability.

Yep that's about what it looks like. The organized mafia...a good description of government wouldn't you say?

[KBCraig]

Do I hear 'Internet Cafe'on the east side of very bridge across the CT river?

WOW Lloyd good idea! Or maybe a shipping point, as in, here is my address to be shipped TO, and can't be TAXED because it's in NH...

Some companies in the above-mentioned "tax agreement" assess sales tax based on the billing zip code for the card used to pay.

[error]

Some companies in the above-mentioned "tax agreement" assess sales tax based on the billing zip code for the card used to pay.

And most credit card issuers will let you have multiple addresses on your account. Ask them if you can put an "alternate shipping address" on your account.

[eques]

This is already a law in most states with a sales tax... it's generally called a "use tax."  If you've purchased something out of state at a reduced or zero tax rate, you're "supposed" to report it and pay the tax on it in your state of residence.

I don't know what exemptions there are nor how the law has changed since I heard about it, but I know that Michigan had a spot on their state tax return for it as well as New Jersey, and there didn't seem to be any specific exemptions.

I, of course, didn't bother reporting my out of state purchases.

In any case, I would imagine that similar laws are already on the books, but I can't imagine that many people actually comply with "use tax" laws because, c'mon, who's going to pay more tax?  (I can't wait to see that question get answered.  )

One of the major things that woke me up and impelled me to move from New Jersey was the institution of many broad-based taxes.  Just about every tax that existed went up, and new taxes were being created left and right.  I have a friend back in NJ who tells me about yet another tax that gov. Corzine has implemented/wants to implement--and this is all in the name of "balancing the budget."

More like "lining your and your friends' pockets," governor.

[burnthebeautiful]

How the heck does VT propose to force online vendors in other states (or countries!) to collect VT sales tax?

Customers pay the tax to the post office/UPS when picking it up.

[Spencer]

My favorite parts of the article:

"The goal is ultimately to help our local businesses be more competitive," Wasser said, calling the increase in taxes on certain products "short-term pain for long-term gain."

Leave it to a government tax policy analyst to argue that raising prices by government fiat will make businesses "more competitive."

The underlying hope of the streamlined sales tax project, Wasser said, is to demonstrate to the U.S. Congress that states have created simplified sales tax structures, a crucial ingredient to make "a compelling case" for a federal law that would force merchants to add state sales taxes to Internet transactions.

What was that I heard about Vermont's independent streak?!?  They want to help federalize state sales tax collection?  That sound you hear is the air rapidly escaping from the Second Vermont Republic.