Sales tax revenue sets record

By Greg Elias
Observer staff

Sales tax revenue flowed into town coffers at a record rate in the final quarter of 2006, putting Williston on pace to easily meet budget projections for a key source of municipal funding.

The town received $894,374 from the tax for the three-month period ending Dec. 31, according to state figures released last week. Williston adds a 1 percent local option tax to the state’s 6 percent levy on sales.

But town officials aren’t exactly celebrating, despite the fact that the latest number is the highest quarterly total since the town enacted the tax five years ago. They are wary of the often volatile revenue source and of new rules that could alter how much Williston collects for the last half of the fiscal year ending June 30.

“The problem is the change in state law,” said Town Manager Rick McGuire. “If we didn’t have that, I could probably give you a pretty good estimate.”

McGuire was referring to rules governing what is taxed and whether an item is subject to the town’s 1 percent levy. Starting Jan. 1, new state regulations exempted some items that were formerly taxed and taxed items that had been exempt.

More significantly, the state has signed on to a national effort to standardize sales tax collections. Taxes are now based on a purchase’s destination.

Under the rules, when someone buys an item in Williston but has it shipped elsewhere, Williston cannot collect the local tax. But when an item is purchased in another town and shipped here, Williston receives its 1 percent cut.

How the new rules will affect sales tax revenue is especially important to Williston, which is one of only a handful of towns in Vermont authorized to collect a local option tax.

Sales tax revenue accounts for about 40 percent of the town’s current $6.7 million municipal budget. The tax has been a boon for homeowners, allowing the town to greatly reduce its municipal property tax rate.

The town projected it would receive $2,650,000 in sales tax revenue for the fiscal year. With the final two quarters still to go, Williston has received $1,713,481.

If the town enjoyed another quarter like the last, it would nearly meet the projection with three months still to go in the fiscal year. But figures show a steep decline in sales tax revenue each year from the fourth quarter, which includes the holiday shopping season, to the following three-month period, a slow time for most retailers.

For example, in the first quarter of 2006, the local levy brought in $275,628 less than the previous quarter. Quarter-to-quarter comparisons in previous years show similar revenue decreases.

Still, Susan Lamb, Williston’s finance director, was cautiously optimistic that the town would meet revenue projections. Williston finished each of the previous four fiscal years with a surplus of sales tax revenue. And the town collected about $1.3 million from the local option tax in last year’s final two quarters.

“We’re pretty confident we’ll reach the budget amount,” Lamb said. “But of course you never know for sure, so you have to be conservative.”