The Waitsfield Select Board advanced an article for the March Town Meeting ballot on whether the town should adopt a 1% local option tax on rooms, meals, alcohol, retail, and online sales at a public hearing this week.
At the January 19 meeting the board explained that under state law, municipalities may adopt a 1% local option tax (LOT) in addition to existing state taxes on those categories. Towns retain 75% of the revenue, while the state keeps 25% to fund payments in lieu of taxes (PILOT) programs. Select board members presented a slide deck outlining how the tax would work and why they believe it should go before voters.
Select board chair Brian Shupe said the proposal could raise an estimated $600,000 annually for Waitsfield – roughly one-quarter of the town’s municipal budget.
“So, one of the important things about it, this is particular to the sales tax, is a sales tax is typically and rightfully considered a pretty regressive tax,” Shupe said. He added that Vermont has attempted to mitigate that impact through exemptions. “A local option tax doesn't apply to groceries. It doesn't apply to prescription and over the counter medications and medical projects, gasoline, residential heating and electricity and municipal utilities like the water system, most business-to -business purchases, kind of wholesale.”
Select board member Larissa Ursprung suggested the exempted items could be considered discretionary purchases, while board member Fred Messer said that despite state carveouts, the tax would still affect purchases many residents consider essential.
“Those are items that you need to maintain your home, everything,” Messer said, referring to hardware stores and lumber yards. “I don't know if that's discretionary.”
Board member David Babbott Klein said that the planning district analysis estimates the average cost of the tax to Waitsfield households at about $186 per year. By comparison, he said, raising the same $600,000 through property taxes would cost the owner of a $300,000 home about $450 annually.
“Even if estimates are wildly off in terms of what Waitsfield residents will pay, it still would be less expensive than raising property taxes that much,” Babbott said.
Shupe emphasized that voters would decide which categories to tax, noting that the choice must be made upfront but can be changed later by a subsequent town vote. He said many communities begin with rooms and meals, then add alcohol and retail sales.
Board members also pointed to planning district estimates showing that about 82% of the tax – give or take several percentage points – would be paid by visitors and nonresidents.
Shupe said the tax is increasingly common across Vermont, citing communities including Stowe, Waterbury, Montpelier, South Burlington, Burlington, Winooski, Williston, Middlebury, and Rutland, as well as several smaller towns.
Public comment was mixed.
“It seems like a no-brainer to me,” said Doug Bergstein, who asked what the arguments against the tax might be.
George Schenk, a Warren resident who owns American Flatbread and the Lareau Farm in Waitsfield, said he was sympathetic to the town’s need for additional revenue but raised concerns about equity, particularly for hospitality businesses.
“The restaurant business and hospitality already pays a 50% sales tax premium,” Schenk said, noting that meals are taxed at 9% and alcohol at 10%, compared with the 6% general sales tax. He questioned whether the original rationale – that dining out is a luxury still applies.
Schenk argued that sales taxes are collected from businesses rather than directly from visitors. “For every $100 we bring in, we have to deliver $109 of value,” he said, adding that margins in hospitality and brick-and-mortar retail are already strained.
“The brick and mortar stores are really struggling with this phenomena of competition from internet sales and the hospitality industry has never, has not, so far, at least, recovered from changes that happened with COVID,” he said.
Josh Turka, a Waitsfield resident and owner of the Fifth Quarter in Waitsfield, said he shared many of Schenk’s concerns but supported the proposal as a way to stabilize property taxes.
“One contrast that I would point out … is the property tax burden, and the aim for this to alleviate it,” Turka said. He described the challenges of attracting and retaining workers who cannot afford to live in town and must commute long distances.
“If we just see a continued increase in property taxes, it's going to mean that our workers have to move further and further away,” he said. “This feels like a no brainer in terms of a much better option, if not ideal.”
Town resident Robin Morris framed the proposal as tax relief for residents, citing planning district figures. “On a $450,000 property, you're going to save $600 a year in taxes … and you're going to spend $186 on the LOT,” he said. “That's a three-to-one relationship.”
Messer, however, said he opposed the tax on philosophical grounds.
“I am opposed to it on philosophical reasons,” Messer said. “Vermont is the third heaviest taxed state in the nation. We have a decrease in population.”
He described friends and family leaving the state due to affordability concerns. “We can't tax ourselves into prosperity,” Messer said. “It's the less affluent persons in town that are getting hit the most … and I can't vote for something that's going to increase that.”
If approved by voters, the tax would take effect July 1. The tax could be repealed if 10% of voters petition for a revote.
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