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As Vermont moves toward a recreational cannabis market, municipalities will need to regulate a wide range of issues: the location of establishments relative to other uses such as schools; the number and density of permitted establishments; smoking and secondhand smoke in public places; objectionable odors; neighborhood complaints; facility security and hours of operation; prevention efforts aimed at youth; and enforcement of applicable local ordinances and bylaws.

Last month, the House Government Operations Committee voted S.54, the cannabis regulation bill, out of committee with:

  1. authority for a municipality to assess a two percent local option sales tax on the retail sale of cannabis and cannabis products that are sold in the municipality; and
  2. a requirement that before a cannabis retailer may operate within a municipality, the municipality must permit the operation of the retailer by majority vote of those present and voting by Australian ballot at a subsequent annual or special meeting warned for that purpose.

VLCT strongly supports both provisions. The House Government Operations language provides a much-needed revenue source to municipalities that host retail establishments and supports local governments’ authority to choose whether or not to host those establishments.

The House Ways and Means Committee eliminated the two percent local option tax. The committee’s language would extend the local option sales tax to cannabis sales in the fifteen towns that currently assess a local option sales tax. Most additional municipalities seeking a local option cannabis sales tax would need to secure permission from the legislature via a charter provision to assess a local option tax on retail sales of all taxable products in the municipality.

The Ways and Means Committee adopted language that would require a newly created State Cannabis Board (with no local representation) to recommend licensing fees, including local fees, to the legislature by next January, and thereafter to collect fees and civil penalties for deposit into a Cannabis Regulation Fund. After deducting the costs of administration and collection, the board would pay local fees on a quarterly basis to the municipality in which the fees were collected.

Generally, if a governmental entity issues a license for an activity, a fee is assessed to cover program costs. The ability to charge a fee for permits or licenses is no substitute for a local tax. 

We strongly urge you to vote to support the two-percent local option cannabis sales tax in S.54 in the version voted out of the House Government Operations Committee.

Following are some examples of municipal taxing authority in other states, as cited by the National Conference of State Legislatures and Tax Policy Center.

Colorado

  • Local governments receive 10% of the state retail tax of 15%
  • Local governments can levy a local option retail tax up to 8% or a cultivator tax

Illinois

  • Local governments general sales tax applies (between 0% and 4.75%)
  • Local governments can levy a cannabis sales tax up to 3.75%
  • Local governments receive 8% of state tax revenues to fund public safety and training initiatives

Massachusetts

  • Local governments can levy a local option excise tax up to 3% on retail sales
  • Local government may assess local impact fees to cannabis establishments
  • State revenues fund public safety and municipal police training initiatives

Oregon

  • Local governments receive 20% (10% city/town, 10% county) of the state 17% retail sales tax
  • Local governments can levy a local option excise tax up to 3%