Tax Incentives

Personal Income Tax

Corporate Tax

General Sales Tax

Meals & Rooms Tax

Diesel Tax

Gasoline Tax

Purchase & Use Tax

Estate & Gift Tax

Property Tax

Property Transfer Tax

Land Gains Tax

State & Local Debt

Municipal Tax Rates

State & Local Taxes & Incentives

TAX INCENTIVES

Vermont's tax incentive program offers incentives based on quality jobs. These tax incentives are available based on whether or not the proposed economic development meets a strong "but for" condition, and whether a cost/benefit model analysis points to a positive net fiscal effect on Vermont's tax revenue. The cost benefit model and other functions of the program will be mainly coordinated by the Vermont Economic Progress Council (VEPC), and the nine directors appointed by the Governor. Each year, the council must report to the Legislature on the incentives approved during the previous year.

The Downtown Development Act is also an incentive to help benefit Vermont's downtowns. Communities may apply for designaion by demonstrating that there is a strong local support for downtown revitalization from both the public and private sectors, with the necessary leadership and funding to maintain a comprehensive and long-term effort. The Downtown Development Board has 45 days to approve or deny a completed application for designation. Incentives for Downtown Development include: rehabilitation of certified historic or older buildings, sprinkler system rebates, reallocation of sales tax on construction materials, downtown transportation, related capitol improvement fund, planning grant for qualifying for designation and other state and federal incentives.

If you would like more information, please contact CVEDC's Richard Angney.

PERSONAL TAX

Vermont’s personal income tax is 24% of a person’s Federal income tax liability, as of Jan. 1, 2000. S corporation, partnership and limited liability company income attributable to Vermont passes through to the shareholder, partner and member, respectively, and is taxed at the individual level.

Vermont has a corporate net income tax. The rates are shown below. They apply to taxable income allocated or apportioned to Vermont.

$0 to 10,000 = 7%

$10,0001-25,000 = $700 plus 8.10% of the excess
over $10,000

$25,001-250,000 =$1,915 plus 9.2% of the excess
over

$250,001 and over =$22,615 plus 9.75% of the
excess over $250,000

Corporations, S corporations, partnerships and limited liability companies are subject to a minimum tax of $250. Small farm corporations are subject to a $75 minimum tax.

FACT: States bordering Vermont have significantly higher corporate tax rates. New Hampshire ranks 10th in the nation, while New York ranks 2nd and Massachusetts ranks 6th. Vermont ranks much lower at 28th(1).

GENERAL SALES TAX

Vermont’s general sales tax rate is 6%. The tax is imposed on sales of tangible personal property and amusement charges. There are 44 exemptions, including: food, medicines, machinery and equipment used in manufacturing, fuel and electricity used in residences, and fuels used at manufacturing sites of tangible personal property for sale. Tax is also imposed at a rate of 4.36% on telecommunications services with an exemption for the first $20.00 of residential local exchange service.

FACT: Vermont, Massachusetts, and New Hampshire rank 43rd, 44th and 46th in the nation per capita, respectively, for sales tax revenue collected, while New York ranks 8th in the nation(2). Therefore, there is no significant general sales tax advantage when comparing Vermont to bordering states.

MEALS & ROOMS TAX

The meals and rooms tax rate is 9%. The tax on sale of alcoholic beverages is 10%.

DIESEL FUEL TAX

 

The tax is 16 cents per gallon, plus 1 cent per gallon (for petroleum clean-up fund). For diesel vehicles 10,000 lbs. and over, the tax is 25 cents per gallon, plus 1 cent per gallon (for petroleum clean-up fund).

19 cents per gallon, plus 1 cent per gallon license fee (for petroleum clean-up fund).

Vermont’s purchase & use tax is 6% of the net taxable cost.

ESTATE & GIFT TAX

Vermont’s estate tax is equal to the maximum Federal credit for state death taxes paid. Thus, there is effectively no Vermont estate tax. Vermont receives a portion of the Federal estate tax. There is no Vermont gift tax.

• The General Assembly has extensively rewritten the law of funding for education in Vermont. This legislation (Act 60) will implemented over the next four years. Some of the key features of the new finance system are:
  
• A state block grant of $5,000 per "equalized" student;
  
• A state property tax of $1.10 on the state equalized grand list (total taxable property under the Act);
  
• A "local share" state property tax with an "equalized yield" formula to cover the above block grant spending;
  
• State funding to make education property tax bills "income sensitive" for taxes paid on homesteads of families with modified adjusted gross income tax of less than $75,000.00;
  
• Municipal taxes and education taxes on non-residential property will continue to be assessed and paid to the towns.
  
  FACT: New Hampshire is the 2nd highest property tax collector in the nation, while New York ranks 4th. Vermont ranks even lower.(3)

There is a tax of one and one-quarter percent (.0125) of the value of real property, which is to be paid by the purchaser of the property. However, on the first $100,000. of the value as a principal residence, the rate is one half of one percent. This lower rate may also apply to transfers of certain farm and forest lands enrolled in the State’s use value appraisal programs.

There is a land gains tax on the gains from sale or exchanges of land (not buildings or structures), if the land has been held by the seller for less than six years and the land is not part of the first ten acres beneath or contiguous to the seller’s principal residence. Land purchased to build a principal residence may be exempt if certain conditions are met and includes timber rights, which are purchased and sold within six years provided that the underlying land is also sold within six years.

According to a 1995 U.S. Census Bureau report, as reported in Governing magazine’s suppliment "State & Local Sourcebook 1999", Vermont ranks 25th in the nation, while New York ranks 2nd, New Hampshire ranks 7th and Massachusetts ranks 5th. Thus, Vermont is less likely to raise taxes to reduce debt than bordering states.(4)

Following is a list of current municipal tax rates for all towns represented by C.V.E.D.C.

 

Equipment & Machinery Inventory Tax: Tax: Tax Rate:

 

Barre City.......................Yes......................Yes...................$2.93
Barre Town.....................No.......................No....................$2.32
Berlin...............................No......................Yes....................$2.10
Cabot..............................No......................Yes....................$2.65
Calais..............................No.......................No.....................$2.43
Duxbury..........................No........................No....................$2.19
East Montpelier...............No........................No....................$2.52
Fayston...........................Yes.......................No....................$1.72
Marshfield.......................No........................No....................$2.19
Middlesex.......................No........................No....................$2.23
Moretown.......................No........................No....................$2.03
Montpelier......................No........................Yes...................$3.02
Northfield........................No........................No...................$2.49
Orange...........................Yes........................No...................$2.03
Plainfield.........................No.........................No...................$2.34
Roxbury.........................Yes........................Yes..................$2.01
Waitsfield.......................No..........................No..................$2.04
Warren...........................Yes...........................No................$1.89
Washington.....................No.........................No...................$2.27
Waterbury.......................No........................No....................$1.82
Williamstown..................No.........................Yes...................$2.32
Woodbury.......................No........................No....................$1.87
Worcester........................No.......................No.....................$2.56

All information supplied by the Vermont Dept. of Taxes, except where noted:

1"State & Local Sourcebook 1999", pg. 13, a Governing Magazine supplimental publication.
2"State & Local Sourcebook 1999", pg. 14, a Governing Magazine supplimental publication.
3"State & Local Sourcebook 1999", pg. 15, a Governing Magazine supplimental publication.
4"State & Local Sourcebook 1999", pg. 17, a Governing Magazine supplimental publication.

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