In July 2022, businesses in the City of Essex Junction and the Town of Essex were sent letters from the Vermont Department of Taxes requesting that they update their business location as either the City or the Town because of the new 1 percent Local Option Tax (LOT) adopted by the City.
The LOT went into effect in October 2022 and the Town and City put together information for businesses and residents to understand the new boundaries of the two separate municipalities, how to request refunds of LOT charged in error, and how to make corrections with the Vermont Tax Department. Town officials reached out to smaller Essex businesses and larger corporations to identify companies who were collecting the taxes in error. It was discovered that many retail establishments utilize point of sale systems that are programmed by national firms that rely on five and not nine-digit zip codes. The Town furthered the outreach to encourage the larger chain stores to reprogram their registers on the first day of the tax.
Over the next several months, the Town of Essex created a webpage with information about the LOT, an interactive map, and resources for requesting a refund. Efforts at the local business level helped, but in December, the Town was made aware that residents were being charged the 1% LOT for some of their online purchases, based on using the same zip code as the City.
On December 15, 2022 the town sent Craig Bolio, Vermont Tax Commissioner, a request for a list of all tax remitters in the 05452 zip code. Commissioner Bolio was not able to provide the list noting that it was confidential information, but encouraged the Town to send the tax department any contact information for businesses identified as charging the LOT in error. In a subsequent conversation, Commissioner Bolio explained all LOT taxes remitted by an 05452 business are fully credited to the City of Essex Junction. Taxes collected in error must be refunded to the customer by the business that collected it and the business must then seek reimbursement from the City of Essex Junction’s fund through the tax department.
The Town Selectboard reached out to Senator Bernie Sander’s office to research the efficiency of changing the Town’s zip code. The end result is the Town of Westford shares the 05452 zip code, so the City of Essex Junction must be the municipality to initiate the change. The Town has shared this information with City officials.
Representatives Rey Garofano, Leonora Dodge and Alyssa Black have met with the Town on this issue. At their suggestion, the Town contacted Representative Carol Ode from the House Ways and Means Committee to find out what, if any, legislation was or could be in place to remedy this during the legislative session. Representative Ode sent the inquiry to legal counsel. Citing 24 V.S.A. § 138(c) (Vermont Statutes Annotated), Abby Shepard, Esq., Legislative Counsel for the Vermont General Assembly stated, “In the case of online sales or shipped goods, the destination of the sale is where the goods will be delivered to the buyer. Sellers with an online presence typically use sales tax collection software that determines whether to collect sales tax and any corresponding LOT based on the zip code for the delivery address. The seller is expected to use the zip code + 4 digits, which is already current law, although the authority is not statutory, but rather administrative law, under the Vermont Department of Taxes’ regulations.”
On April 10, 2023 the Town of Essex Selectboard sent a letter to Commissioner Bolio, Representative Emilie Kornheiser, Chair, House Ways and Means (the committee of jurisdiction) and Representatives Garofano, Dodge and Black. The letter requested the Commissioner send a letter of strict enforcement of the nine-digit zip code regulation to all online vendors remitting taxes in 05452 and several more remedial steps. The Selectboard heard back from Commissioner Bolio on April 28, 2023 acknowledging receipt of the letter and that the department would address the issue after the legislature adjourns.
What can you do?
- If you have been charged the 1% LOT in error, seek a refund from the vendor. You can use the Town of Essex website page and information provided on the website to support your request.
- If the business is unable to provide a refund, you can request a refund directly from the Vermont Department of Taxes by completing this form: https://tax.vermont.gov/content/form-ref-620.
- Write to your representatives to make them aware of your concerns.
PEOPLE TO CONTACT
The Town of Essex will continue to support residents and businesses with resources and information on this issue. Please visit the Town of Essex LOT resource page for the most recent updates.