The “Miscellaneous Tax” bill passed in the House this week with only 14 “no” votes. It now heads to the Senate where it will likely undergo modification. This bill addresses a variety of tax issues related to property, sales, electrical generation and rooms and meals. It also addresses several administrative and tax payer advocate issues. Based on contacts from Shelburne residents, the property tax issue is likely to be of greatest interest, the largest changes coming to those who qualify for adjustments under income sensitivity. First, the doubling of income from dividends and interest comes to an end. Second, the bill amends current law giving the tax commissioner discretion to grant extraordinary relief to homeowners who were unable to file income sensitivity on time. Third, it allows health savings accounts or HSA’s to be deducted from the income calculation. The bill also updates the rooms and meals tax so that residents living in independent living facilities are seen as living at home thus do not pay tax on meals.
One issue that drew debate was the change in taxation for Vermont Yankee. Vermont Yankee has been subject to two memoranda of understanding or MOUs under which it has made payments to the state that range from $3-8 million per year. These payments have funded the Clean Energy Development Fund or CEDF and the last payment will be made in March 2013. To replace these payments, the tax on electrical generation and property was increased to bring a projected $6 million in annual revenue to the state. This revenue will be split between CEDF, the Education Fund, and a new economic development fund for Windham County to prepare for post-VY closure. While opponents called it a tax increase, supporters saw this as generating similar amounts through a different means.
Nothing in this bill addressed cloud computing, which the Ways and Means Committee will be discussing in the coming weeks. This issue has come to the Legislature following reaction to a 2010 bulletin from the tax department stating that software accessed remotely from the cloud was not all that different from software customers downloaded or purchase in a store, thus subject to a 6% sales tax. Because this is an evolving technology, both vendors and customers have been understandably unaware of this fact.
Many in the business and tech communities have taken issue with the bulletin, claiming it was issued without legislative oversight or public input. They also take exception to tax and penalties going back four years and fear that this tax could put Vermont at a competitive disadvantage.
Proponents cite a recommendation from the Blue Ribbon Tax Commission addressing the 21st century economic shift from bricks-and-mortar retail to an Internet service economy. As the state sales tax erodes, revenue needs to be found in new areas. One-third of this revenue is used to offset increases in the education property tax.
This issue is more complex than it first appears and will be subject to continued scrutiny in the Ways and Means committee.
Please join Joan Lenes at me at Bruegger’s on Tuesday mornings from 7:30-8:30 am or by appointment: firstname.lastname@example.org or 233-7798.