§ 138. Local option taxes

(a) Local option taxes are authorized under this section for the purpose of affording municipalities an alternative method of raising municipal revenues to facilitate the transition and reduce the dislocations in those municipalities that may be caused by reforms to the method of financing public education under the Equal Educational Opportunity Act of 1997. Accordingly:

(1) the local option taxes authorized under this section may be imposed by a municipality;

(2) a municipality opting to impose a local option tax may do so prior to July 1, 1998 to be effective beginning January 1, 1999, and anytime after December 1, 1998 a local option tax shall be effective beginning on the next tax quarter following 90 days’ notice to the Department of Taxes of the imposition; and

(3) a local option tax may only be adopted by a municipality in which:

(A) the education property tax rate in 1997 was less than $1.10 per $100.00 of equalized education property value; or

(B) the equalized grand list value of personal property, business machinery, inventory, and equipment is at least ten percent of the equalized education grand list as reported in the 1998 Annual Report of the Division of Property Valuation and Review; or

(C) the combined education tax rate of the municipality will increase by 20 percent or more in fiscal year 1999 or in fiscal year 2000 over the rate of the combined education property tax in the previous fiscal year.

(b) If the legislative body of a municipality by a majority vote recommends, the voters of a municipality may, at an annual or special meeting warned for that purpose, by a majority vote of those present and voting, assess any or all of the following:

(1) a one percent sales tax;

(2) a one percent meals and alcoholic beverages tax;

(3) a one percent rooms tax.

(c)(1) Any tax imposed under the authority of this section shall be collected and administered by the Department of Taxes, in accordance with State law governing such State tax or taxes and subdivision (2) of this subsection; provided, however, that a sales tax imposed under this section shall be collected on each sale that is subject to the Vermont sales tax using a destination basis for taxation. Except with respect to taxes collected on the sale of aviation jet fuel, a per-return fee of $5.96 shall be assessed, 70 percent of which shall be borne by the municipality, and 30 percent of which shall be borne by the State to be paid from the PILOT Special Fund. Notwithstanding 32 V.S.A. § 603 or any other provision of law or municipal charter to the contrary, revenue from the fee shall be used to compensate the Department for the costs of administering and collecting the local option tax and of administering the State appraisal and litigation program established in 32 V.S.A. § 5413. The fee shall be subject to the provisions of 32 V.S.A. § 605.

(2) Notwithstanding any other law or municipal charter to the contrary, if the Commissioner determines that local option tax was collected on a transaction in a municipality not authorized to impose local option tax under this section, the Commissioner shall either refund the erroneously collected tax pursuant to 32 Vt. Stat. Ann. chapter 233 or 225 or, if the purchaser cannot reasonably be determined, deposit the erroneously collected tax as required for State sales and use tax pursuant to 16 V.S.A. § 4025(a)(6) or State meals and rooms tax pursuant to 10 V.S.A. § 1388(a)(4), 16 V.S.A. § 4025(a)(4), and 32 V.S.A. § 435(b)(7).

(d)(1) Except as provided in subsection (c) of this section and subdivision (2) of this subsection with respect to taxes collected on the sale of aviation jet fuel, of the taxes collected under this section, 70 percent of the taxes shall be paid on a quarterly basis to the municipality in which they were collected, after reduction for the costs of administration and collection under subsection (c) of this section. Revenues received by a municipality may be expended for municipal services only, and not for education expenditures. Any remaining revenue shall be deposited into the PILOT Special Fund established by 32 V.S.A. § 3709.

(2)(A) Of the taxes collected under this section on the sale of aviation jet fuel, on a quarterly basis, 70 percent of the taxes shall be paid to the municipality in which they were collected, and 30 percent shall be deposited in the Transportation Fund.

(B) All revenues referenced in subdivision (A) of this subdivision (2) shall be used exclusively for aviation purposes consistent with 49 U.S.C. § 47133 and Federal Aviation Administration regulations and policies.

(e) As used in this section, “municipality” means a city, town, or incorporated village.

(f) Nothing in this section shall affect the validity of any existing provision of law or municipal charter authorizing a municipality to impose a tax similar to the local option taxes authorized in this section.

(g) If the legislative body of a municipality by a majority vote recommends or by petition of ten percent of the voters of a municipality recommends, the voters of a municipality may at an annual or special meeting warned for that purpose by a majority vote of those present and voting rescind any or all of the local option taxes assessed under subsection (b) of this section. (Added 1997, No. 60, § 88; amended 1997, No. 71 (Adj. Sess.), § 61, eff. March 11, 1998; 1999, No. 49, § 87, eff. June 2, 1999; 2001, No. 144 (Adj. Sess.), § 25; 2003, No. 66, § 53b, see effective date note set out below; 2003, No. 68, §§ 66, 68, eff. June 18, 2003; 2003, No. 152 (Adj. Sess.), § 15; 2005, No. 215 (Adj. Sess.), §§ 286, 293b, 293c; 2009, No. 160 (Adj. Sess.), § 8; 2011, No. 128 (Adj. Sess.), § 37; 2011, No. 143 (Adj. Sess.), § 48, eff. May 15, 2012; 2017, No. 158 (Adj. Sess.), § 36, eff. Jan. 1, 2019; 2023, No. 72, § 6, eff. June 19, 2023; 2023, No. 78, § E.111.3, eff. July 1, 2023.)