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 Sam Matthews.

PERSONAL TAX

Vermont’s personal income tax is 24% of a person’s Federal income tax liability. 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.

CORPORATE TAX

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 $25,000.00

$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.

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).

GASOLINE TAX

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

PURCHASE & USE TAX

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.

PROPERTY TAX

Property is assessed at the municipal local level in Vermont. Real property is listed to the April 1 owner of record. Local assessing officials, called listers in Vermont, are charged with determining the appraisal value of property.

The legislative body of the municipality (selectboard or city council) sets a tax rate or rates to raise money for highways and other necessary municipal expenses. There are also provisions for the levying of taxes in villages and fire districts.

For the purposes of education funding, all real property is classified as either homestead or nonresidential. A statewide education tax is imposed on these two classes of property at different rates. 32 V.S.A. Chapter 135. The basis for this classification is the Homestead Declaration. Any property that is not a homestead is nonresidential property.

The homestead education tax rate in each municipality depends upon the local per pupil spending. Both the homestead and nonresidential education tax rates are adjusted by the local common level of appraisal. Each town will receive notice on or about June 30 of the education rates to be levied.

For tax year 2004 (FY05), the base education tax rate for homestead property was $1.05. It was adjusted by the district spending adjustment, and by the school district’s common level of appraisal. For tax year 2004 (FY05), the base tax rate for nonresidential property was $1.54. It was adjusted by the school district’s common level of appraisal. The district spending adjustment does not affect the nonresidential rate.

FACT: In 2004, Maine was the 2nd highest tax collector in the nation, while New York ranked 1st.(3)

PROPERTY TRANSFER TAX

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.

LAND GAINS TAX

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.

STATE & LOCAL DEBT

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.(2)

CENTRAL VERMONT MUNICIPAL TAX RATES

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

Feb.2006 Central Vermont Tax Rates:

Barre City........................Yes......................Yes...................$2.8485
Barre Town.......................No.......................No.......................$1.8451
Berlin................................No......................Yes...................$2.6487
Cabot...............................No......................Yes......................$2.8357
Calais.............................No.......................No...........................$2.5579
Duxbury..........................No........................No....................$2.3212
East Montpelier...............No........................No....................$1.9068
Fayston...........................Yes.......................No....................$1.6618
Marshfield.......................No........................No....................$1.8686
Middlesex.......................No........................No....................$1.9731
Moretown.......................No........................No....................$1.8375
Montpelier......................No........................Yes...................$2.8234

Northfield........................No........................No...................$2.0351
Orange...........................Yes........................No...................$1.8284
Plainfield.........................No.........................No...................$2.0054
Roxbury.........................Yes........................Yes..................$2.139
Waitsfield.......................No..........................No..................$2.5909
Warren...........................Yes...........................No................$2.448
Washington.....................No.........................No...................$1.8685
Waterbury.......................No........................No....................$2.0405
Williamstown..................No.........................Yes...................$1.8287
Woodbury.......................No........................No....................$2.40
Worcester........................No.......................No.....................$2.0897

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. 17, a Governing Magazine supplimental publication.

3 http://www.taxfoundation.org/statelocal04.html-2004

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