(The Center Square) – With it baseline 6% retail sales tax rate, Vermont placed in the second half of a recent analysis that pitted states against one another and gauged where consumers pay the most at the checkout line.
The 2023 analysis, from the Tax Foundation public policy organization, delved into each state’s specific structure for assessing retail sales taxes.
All but five states use sales taxes as a revenue generator, with nearby New Hampshire, which has no sales tax, being among the outliers.
According to the Tax Foundation analysis, 38 states across the country give local taxing authorities the ability to impose a retail sales tax of their own, on top of the state one.
In Vermont, more than a dozen cities have opted to impose a 1% sales tax, bringing the state’s overall average within the study to 6.35%.
Vermont’s ranking in the Tax Foundation analysis slid from the 2022 analysis, where the state ranked 36th, with a 6.24%.
Jared Walczak, Tax Foundation’s vice president of state projects, explained the reason behind the year-over-year ranking change in the organization’s report.
“In Vermont, voter-approved rate increases in Shelburne, Stowe, and Ruthland drove the combined rate higher,” Walczak said.
Vermont’s sales tax structure was under the microscope briefly in the 2022 legislative session.
A bill proposing the study of repealing the local option sales tax was introduced, though it ultimately was withdrawn. Organizations such as the Vermont League of Cities and Towns took aim at the proposal.
Walczak said taxing retail sales receipts is a key line item on the revenue side of the ledger for a number of states.
Speaking to nationwide averages, Walczak wrote, “Retail sales taxes are an essential part of most states’ revenue toolkits, responsible for 32% of state tax collections and 13% of local tax collections.”
In his analysis, Walczak cautioned state policymakers to hold the line on taxing retail purchases – particularly for smaller states, where residents can cross borders to take advantage of lower-cost items.
“Avoidance of sales tax is most likely to occur in areas where this is a significant difference between jurisdictions’ rates,” Walczak said. “Research indicates that consumers can and do leave high-tax areas to make major purchases in low-tax areas.”
Within New England, Maine had the lowest ranking in this year’s Tax Foundation analysis because of its 5.5% rate and lack of a local option on top of it.
Elsewhere, the Tax Foundation ranked Rhode Island 25th with its 7% rate and Massachusetts at 35th with its 6.25% rate. Neither state provides a local option.
