WeVote
Log In

Bill

Bill

H 766

An act relating to a local option tax on gasoline and diesel sales

2025-2026 Regular Session Introduced by Mollie Burke and 2 co-sponsors

Local option taxes, including a new 1 cent per gallon gasoline and diesel tax, would let Vermont municipalities raise revenue primarily for municipal services starting Jan 1, 2027.

Read first time and referred to the Committee on Transportation
0
WeVote Research Nonpartisan
Bill Summary · H 766

Overview

H.766, introduced in the Vermont House for the 2025-2026 session, proposes authorizing local option taxes for municipalities to raise revenue, including a new tax on gasoline and diesel fuel sales. The bill sets the framework for how municipalities could implement these taxes, how revenues are collected and distributed, and associated administrative rules. The effective date is January 1, 2027, if enacted.

Main purpose and intent

  • Create a local option tax authority to provide municipalities with an additional method of raising revenue for municipal services.
  • Specifically authorize a per-gallon tax on gasoline and diesel fuels, in addition to other local option taxes (sales, meals and alcoholic beverages, rooms).
  • Clarify administration, revenue use limitations (municipal services only; education expenditures not allowed), and coordination with state programs and funds.

Key provisions and changes

  • Local option authorization (b): A municipality's legislative body, by a majority vote, may place on the ballot a local option tax package including:

    • (1) 1% sales tax
    • (2) 1% meals and alcoholic beverages tax
    • (3) 1% rooms tax
    • (4) 1 cent per gallon gasoline motor fuel tax on sales or deliveries by a distributor
    • (5) 1 cent per gallon diesel fuel tax on sales or deliveries by a distributor

  • Administration and collection (c):

    • State-administered taxes (sales, meals, rooms) would be collected under existing state laws; per-transaction gasoline and diesel taxes would be collected by the Department of Motor Vehicles (DMV) under state rules.
    • A per-return administration fee of $5.96 is imposed (with 75% borne by the municipality and 25% by the State, paid from the PILOT Special Fund) to cover admin costs for the local option tax and related state appraisal/litigation programs. Aviation jet fuel is an exception to the fee structure.
    • If a municipality collects a local option tax where not authorized, the state must refund or properly allocate the erroneously collected tax.

  • Revenue sharing and use (d):

    • For most local option taxes, 75% of net revenues are paid quarterly to the municipality after administrative deductions; the remainder goes to the PILOT Special Fund (for non-education uses).
    • Jet fuel taxes: 70% to the municipality and 30% to the Transportation Fund; jet fuel revenues must be used for aviation-related purposes consistent with federal aviation rules.

  • Use restrictions (d(1)):

    • Revenues retained by municipalities may be used for municipal services only; they cannot be used for education expenditures.
    • Any remaining revenue after municipal use goes to the PILOT Special Fund.

  • Definitions (e, i):

    • “Municipality” includes cities, towns, or incorporated villages.
    • Defines terms such as gasoline motor fuel, diesel fuel, and distributor.

  • Local option authorization limits (h):

    • The Department of Taxes may limit the number of municipalities that can enact a local option tax to five per calendar year.
    • The first five notices per year are certified and may proceed; after five certifications, the department may delay or reject further notices in that year if added certifications would unduly burden administration.
    • For jet-fuel-related options, the Department collaborates with the Department of Motor Vehicles.

  • Voter and repeal mechanics (g):

    • Local option taxes can be rescinded by a majority vote of those present and voting at a warned meeting, upon either legislative recommendation or petition by 10% of voters.

  • Effective date (Sec. 2):

    • The act would take effect January 1, 2027.

Who would be affected

  • Citizens in participating municipalities (cities, towns, villages) who purchase goods and services subject to local option taxes (sales, meals, rooms) and those who purchase gasoline or diesel fuels within those municipalities.
  • Municipal governments implementing the local option taxes, and the Vermont Department of Taxes and Department of Motor Vehicles responsible for administration and collection.
  • The PILOT Special Fund and the State’s education and aviation-related programs via indirect fiscal effects.

Procedural and timeline aspects

  • Initiation: Municipalities must have local legislative approval and voter approval to impose the tax package.
  • Certification: The Commissioner of Taxes certifies up to five notices per calendar year to proceed with local option taxes.
  • Collection and administration: State agencies administer different components (sales/meals/rooms via Department of Taxes; per-gallon vehicle fuels via DMV). A per-return administrative fee is collected to cover costs.
  • Use of revenues: Municipalities use net revenues for municipal services; excess goes to the PILOT Special Fund.
  • Vote changes: Taxes can be rescinded by local vote at a warned meeting.
  • Effective date: January 1, 2027, if enacted.

Potential impact considerations

  • Grants municipalities an additional revenue tool, potentially easing reliance on property taxes or other state funding.
  • Revenue would be earmarked for municipal services, not education, which could influence local budgeting priorities.
  • The five-municipality-per-year limit aims to manage administrative burden on the state tax system.
  • Jet fuel revenues are dedicated predominantly to aviation purposes and transportation funding, aligning with aviation regulations.

If you’d like, I can provide a concise pros/cons brief or a comparison with existing local option tax authorities in Vermont.

Compiled from official sources — confirm details with the bill’s official record.

Sign in to ask a question.