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Staff explains difference between excise and sales taxes; Streamline concerns noted
Summary
Committee discussed structural differences between excise and sales taxes, the potential Streamline sales-tax implications of labeling a sales-like charge an excise, and the existing cannabis excise tax as an example.
Committee staff sketched the legal and practical differences between sales taxes and excise taxes and warned against labeling a sales-like broad-based charge as an excise in a way that could conflict with Streamline Sales Tax governing principles.
Kirby summarized the typical distinctions: excise taxes are often targeted at specific goods, activities or entities and can be levied on distributors or by volume; sales taxes are broad-based consumption taxes paid by purchasers. "Sales tax is paid by the purchaser," Kirby said, contrasting it with some excise structures.
Members asked whether calling a levy an excise could violate Streamline rules. Kirby said Streamline generally disfavors states creating what looks like a second sales tax under a different name. "If we had something that looks a lot like a sales tax and we started calling it an excise ... Streamline is saying, no. You actually have 2 sales tax rates. That's what you're really doing. And they would have a problem with that," Kirby said.
A member referenced the cannabis excise tax. Kirby noted Vermont treats marijuana tax as an excise on a specific product and that sales tax can apply in addition. "The cannabis excise tax ... is an additional tax," Kirby said.
No formal action or proposed legislation resulted from the discussion; staff framed the remarks as background for future policymaking.
