Feedback Needed | Opportunity to Address Issues with Vermont’s Machinery and Equipment Sales Tax Exemption

In reviewing the tax related proposals in the Administration’s budget proposal before the House Ways and Means Committee earlier this week, the Tax Department included a proposal to reform the criteria for applying Vermont’s sales tax exemption for manufacturing machinery and equipment.

Currently Vermont’s statute (32 VSA §9741(14)) exempts from sales tax “machinery and equipment for use or consumption directly and exclusively, except for isolated or occasional uses, in the manufacture of tangible personal property for sale, or in the manufacture of other machinery or equipment, parts, or supplies for use in the manufacturing process”.  However, unrelated “isolated or occasional uses” is presumed to disqualify machinery and equipment if they make up more than 4% of use.  This is far more limiting than other states and has prompted a number of disputes between the Tax Department and Vermont manufacturers.  The statute also has a more limited scope of when the manufacturing process begins and ends than other states.  The result is that Vermont is at a competitive disadvantage in the tax treatment of machinery and equipment for manufacturers and thereby investment in Vermont based production.

AIV has worked over the years to reform this provision, and we hope that this proposal will be an opportunity to make greater progress.  Further updates will be provided as more details become available.  We would strongly encourage companies with interest in or experience with this issue to contact us at to learn more and share their experiences confidentially, and to discuss any interest in participating in working toward reforms.