Sales tax on services would net $497 million, state report says

Could push state budget to $10 billion, without cuts in other spending and revenue

by Guy Page

A six percent sales tax on services provided by Vermont businesses would raise $497 million, according to the Fiscal Facts 2026 report released February 26 by the Joint Fiscal Office of the Vermont Legislature.

The actual figure would be higher, because projected tax figures for several professions were unavailable. The JFO study compiled revenue totals for the state’s service sector, applied a six percent tax, and arrived at the almost half-billion dollar figure. The existing sales and use tax creates $651 million in revenue.

The Fiscal Facts report does not offer a recommendation, in either direction, on the sales tax on service. It says that the State of Vermont can add revenue in three ways: raise the rate on an existing tax (or fee), expand the base of an existing tax, or create a new tax. It then uses two pages to describe how much cash would be raised, per service profession, from a sales tax on services.

Currently in the Vermont Legislature, there is no active discussion of creating, raising or expanding a sales tax on services. The state’s proposed 2027 budget at present is projected at $9.4 billion. If the Legislature seized on the JFO report to enact a broadbased sales tax on services, and other revenue remained more or less constant, the state’s next budget could hit $10,000,000,000 – its first-ever 11 figure budget. The 2013 state budget was $1.4 billion.

Vermont sales tax applies to retail sales of tangible personal property and any enumerated charges, unless an exemption applies, according to a 2023 report prepared for the Legislature. However, Some services are already taxed. Examples include: 

• Public utility services, including gas and electricity, but excluding water and transportation 
• Phone / telecommunications services, but excluding coin-operated telephone service, paging service, private communications service, or value-added non-voice data service
• Cable TV, online streaming 
• Rentals, including ski equipment, car rentals 
• Admissions to entertainment events, including: athletic events, exhibitions, dramatic and musical performances, motion pictures, golf courses, and ski areas; access to any game or gaming or amusement machine, apparatus, or device; but excluding video game, pinball, musical, vocal, or visual entertainment machines that are operated by coin, token, or bills
• Photo or textile printing and finishing 

Sales Tax on Services would raise $497.4 million: 2/26/26 Joint Fiscal Office “Fiscal Facts” report
Professional, scientific, and technical services			$$ Millions
Legal services			19.7
Accounting, tax preparation, and payroll services			12.9
Architectural, engineering, and related services			28.5
Computer systems design and related services			43.6
Management, scientific, and consulting services			26.9
Advertising and related services			4.5
Photographic services			0.4
Veterinary services			11.7
Administrative and support services
Office administrative services			78.8
Employment services			11.5
Business support services			1.7
Travel Arrangement and Reservation Services			7.3
Security Guards and Patrol Services			2
Services to buildings and dwellings			30.7
Waste collection			10.7
Finance, Insurance and Real Estate, Health Care
Office of real estate agents and brokers			16.2
Real estate property managers			9.3
Office of real estate appraisers			0.6
Offices of physicians			61.9
Offices of dentists			22.1
Offices of other health practitioners			15.2
Offices of chiropractors			1.7
Offices of optometrists			3.4
Offices of mental health specialists			2
Offices of specialty therapists			5.7
Offices of podiatrists N/A
Outpatient Care Centers			35.9
Other Services
Motor vehicle repair and maintenance			24.1
Personal/household goods repair an maintenance			1.1
Personal care services			4.2
Death care services			1.8
Dry cleaning and laundry services			1.3
Total			$497.40