The Senate Finance Committee Thursday revisited legislation passed by the House last year, H.437, that includes an important provision clarifying and expanding Vermont’s sales tax exemption for manufacturing machinery and equipment. This has been a long-standing priority for AIV. Although the Committee only had a preliminary review of H.437 this week, it is hoped that it will take up this provision as the legislative session continues.
Although we do not support all provisions in H.437, AIV will continue to engage with the Committee to move forward with this key provision, and manufacturers are strongly encouraged to review the proposed changes, watch for updates and alerts, and to contact us at email@example.com to learn more and discuss opportunities to get involved. To help understand how the proposed changes might affect your business, you can review Section 4 of H.437, starting on page 3 of the bill, by clicking here.
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 those uses make up more than 4% of overall 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.