‘It's Just Been a Nightmare:' Vt. Store Owner Sounds Off on New Soda Tax

Some small business owners in Vermont are voicing their displeasure with a new state sales tax on soft drinks. The 6 percent sales and use tax was implemented July 1.

"It's just been a nightmare," said Pam Trag, the owner of Quality Market in Barre and Hardwick Village Market in Hardwick. "It's very confusing."

Trag said she had to go through all her products and, using information from ingredient labels, determine which items should be taxed and which should not.

"Tonic water is sweetened with corn syrup; it's therefore taxable," Trag said, pointing to a bottle as an example. "[But] seltzer water does not have any sweeteners added to it, so this product is not taxable."

Nonalcoholic drinks with either natural or artificial sweeteners are taxed, under the new law. Ones containing milk or soy are not, nor are drinks with more than half vegetable or fruit juice. Beverage powders are not considered soft drinks, and are exempt, according to the Vermont Department of Taxes.

Bottled water is exempt from sales tax if the drink is unsweetened. If that bottled water or another beverage were purchased through a vending machine, it then becomes subject to rooms and meals tax, not the new sales and use tax.

Complicating matters for business owners like Pam Trag is a federal law that requires they forgive the tax for shoppers who are in the Supplemental Nutrition Assistance Program; benefits formerly called food stamps.

"It's introduced an enormous amount of bookkeeping and accounting," Pam Trag said of SNAP purchases. "Because from an audit perspective, I have to document sales for which I should have collected tax but didn't because it's forgiven for customers with EBT food stamps."

Mary Peterson, Vermont's tax commissioner, acknowledged that human error means through the implementation of the new tax, it is possible some customers have been mischarged. She said a new outreach department has been hard at work helping retailers iron out the kinks in rolling out the new tax system.

"We are fielding some questions, but I think we've been able to minimize those as much as possible," Peterson said.

Peterson said when the Vermont Legislature approved the new charge on soft drinks, it expected to raise more than $7 million in annual revenues to help fill the state's budget gap. She noted a different idea, to charge an excise tax on sugar-sweetened beverages to combat costly health conditions like obesity, did not pass as proposed.

Peterson also said that Vermont’s implementation of the soft drink tax has been aided by a partnership with other states that use common definitions of what beverages are covered under the tax rules. She said she suspects larger grocery store chains have found it easier to implement the Vermont tax changes, because they likely have more sophisticated computer inventory systems than most mom-and-pop businesses.

For more information from the Vermont Department of Taxes on which beverages are impacted by the new tax, click here.

"It hasn't been as smooth as it could have been," said Jim Harrison of the Vermont Retail & Grocers Association, describing the roll-out of the soft drink tax.

Harrison told necn the short turnaround between the end of the legislative session in May and the new tax’s July 1 start date, right before a holiday weekend, caught some small store owners off guard.

"There were some bumps in the road," Harrison said. "Please be patient with your retailers, and we'll get through it. This is something brand-new for Vermont. Store owners are trying to get educated as best they can, and instruct their cashiers to make sure the taxes are being collected correctly."

As for Pam Trag, she said a few customers have complained about the new tax. She’s telling them to call their lawmakers.

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