Hartford looks to new sales tax to reduce property tax burden

HARTFORD — Town officials are looking to a new 1% local option sales tax that took effect as of July 1 to help reduce the burden on property taxes, while business owners have conflicting opinions about it.

“There’s no part of me that thinks this will affect people’s behavior,” Anna Guenther, owner and manager of the Filling Station in White River Junction, said in an interview at the recently reopened bar.

Kim Souza, the owner of Revolution, a White River Junction clothing boutique, voiced a similar sentiment.

“I think people will acclimate to it, and in a year from now it just won’t even be a discussion anymore,” Souza said in a telephone interview. Souza was also on the Hartford Selectboard from 2018 until March.

But Stephanie Waterman, the owner of both White River Growpro, a gardening supply shop, and The Hidden Grove, a cannabis dispensary in White River Junction, is “strongly opposed to the 1% local option sales tax,” she said in a telephone interview.

Waterman said the tax was “pushed through towns as a way to get money from cannabis businesses.” And as an owner of one of just three dispensaries in Hartford, she said the tax felt overly targeted.

“Why don’t us three just get together and give some money to the town,” she said. “All the dispensaries would’ve been happy to contribute.”

Dispensaries already collected 20% in sales taxes for the state of Vermont, but the additional 1% is the “only way for municipalities to collect tax revenues from cannabis dispensaries,” per Hartford’s town website.

Although Waterman said she thinks the new tax targets dispensaries, she expects it to hurt all small businesses, including her gardening shop.

The tax “adds to the cost of local businesses, which are already at a disadvantage,” Waterman said.

Hartford’s new tax applies to all items subject to Vermont’s sales tax, including online orders delivered to Hartford.

It does not apply to food, clothing, medicine, medical equipment or menstrual care products, which are exempt from Vermont’s sales tax.

The new 1% tax combined with Vermont’s 6% sales tax brings the total sales tax within Hartford to 7%.

The sales tax is separate from Hartford’s Meals, Rooms and Alcohol local option tax, which has been in effect since 2017.

Voters approved the new tax, 848-699, on Town Meeting Day in March, after rejecting it the previous year.

Advocates of the new tax were responding to a budget increase of 4.71% from the previous year, even after $1.3 million was cut from spending.

“I personally am convinced that a local option sales tax will be a positive for Hartford, and believe that if it is adopted, the majority of residents will look back in a couple of years and ask, ‘Why didn’t we do this sooner,’ ” Selectboard Vice Chairman Michael Hoyt wrote in a February op-ed for the Valley News.

Unlike the 2017 local option tax, the new tax does not require voter approval for expenditure. Town officials plan to use the new tax revenues to reduce property tax increases.

The added local option tax could decrease the annual tax bill on a $250,000 home by approximately $175, according to Hartford’s town website. The town estimates revenue from the tax of around $1 million for the fiscal year ending in 2026.

The only other Upper Valley town to impose such a tax, Woodstock, has gotten $63,000 more than the expected over the first year of its tax, Robert Densmore, Woodstock’s finance director, said in an email. The town also exceeded its rooms and meals tax expectation by nearly $70,000.

While, as a business owner, Guenther didn’t think Hartford’s new tax would have a strong effect, as a resident, she expressed uncertainty that the tax would impact property tax rates.

While it would of course be appreciated if the sales tax was used to support residents’ property taxes, “I don’t know if that’s true,” Guenther said. “I’ll believe it when it’s final.”

There is still an ambivalence to the LOT among officials, who accept the budget difficulties but think the town should wait for more precise alternatives.

Erik Krauss, who joined the Selectboard this March, said in an email that he didn’t agree with the board’s decision to put the tax to voters this year.

“But I do appreciate the predicament the Selectboard faced of wanting additional revenue, wanting to diversify revenue sources, and having limited options at hand,” Krauss wrote.

“What Vermont municipalities need are better tools for broadening the tax base and doing so with targeted precision.”

Lukas Dunford can be reached at ldunford@vnews.com or 603-727-3208.