The House Ways and Means Committee has revived work on corporate and sales tax reforms that would benefit Vermont manufacturers. Earlier this year, AIV outlined changes to the apportionment of corporate taxable income as well as expansion and clarification of the sales tax exemption for machinery and equipment that we have long advocated for and which the Committee was considering (see related post here).
Most recently, the Committee yesterday and today discussed adding these corporate income tax provisions to S.53, unrelated tax legislation that has passed the Senate and is shaping up to be a vehicle for a variety of substantive tax proposals. Previously, the corporate tax provisions had been introduced in H.189, which is still in Committee, and the sales tax exemption has been introduced and passed by the House in H.437, which is currently in the Senate Rules Committee.
Enactment of these changes would significantly benefit manufacturers in Vermont. However, the Committee is also considering other provisions that would increase certain taxes – in part to address other policy priorities and in part to offset potential revenue losses related to the corporate income and the machinery and equipment changes. The most significant tax increases on the table would be applying the sales tax to cloud software products in S.53 and adding a new property transfer tax surcharge in H.437.
AIV will be working to support the ultimate enactment of these fundamental improvements to corporate income tax and sales tax exemptions. However, we will also be working to eliminate or mitigate offsetting tax increases.
This will be a complex and potentially fast changing legislative debate and process, and employers interested in updates and opportunities to engage with legislators are strongly urged to contact us at email@example.com. Given the fluidity of where things stand as of this writing, we expect to follow up early next week with additional updates and action alerts.