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Vermont: Taxing Compost Stinks

  • Aug 13, 2013 | Gail Cole

 Vermont Compost Company: taxing compost stinks.

Humans have been sowing seeds for thousands of years. References to composting appear on clay tablets from the Akkadian Empire, 1,000 years before the birth of Moses, but few people know when the garden-friendly process became taxable. 

In Vermont Department of Taxes Sales and Use Tax Regulations, "disposable loose materials, including straw, shavings, sawdust, leaves, and shredded paper for use where livestock my lie…. are exempt from the tax as 'bedding'." However, "[p]otting soil, rocks, sand, gravel, compost, landscape mulch or similar materials for use in plant beds are not 'bedding' … and are not exempt from the tax."

That was news to Karl Hammer of Montpelier, Vermont. Mr. Hammer, president of the Vermont Compost Co., didn't realize sales of compost were taxable until the company was audited. The company is appealing a bill for more than $115 thousand dollars in back taxes, penalties and fees. That doesn't include taxes for 2012 or 2013.

Many other agricultural products in Vermont are exempt from sales tax when "sold to farmers or consumers who use them to grow food." As outlined in the Sales and Use Tax Regulations, "The exemption for fertilizers and pesticides is use-base. Fertilizers and pesticides are exempt only when used and consumed directly in the production for sale of tangible personal property on farms. The seller must collect tax unless the purchaser provides an exemption certificate."

Opponents of compost taxability, argue that taxing compost in a state where agricultural products are frequently not taxed, doesn't make sense. Especially when one considers that Vermont is one of the most liberal states in the country.

New growth

Mr. Hammer has raised such a stink about the tax on compost that lawmakers are looking into the issue. The ranking member of the state's Agriculture Committee, Legislature Representative Will Stevens (I-Shoreham) has called the law inconsistent. He pointed out that it doesn't "make policy sense tax-wise to treat compost different than a Vermont tree or a bag of fertilizer."

Legislation to exempt compost from sales tax (H. 542) was introduced by the Committee on Agriculture and Forest Products in May. To date, however, "An Act Relating to the Taxation of Soil Amendments" has not received much attention.

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photo credit: Shira Golding via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.