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State taxmen get aggressive

By Kay Bell ·
Tuesday, May 29, 2012
Posted: 2 pm ET

It's no secret that the recession hit state treasuries as much as personal bank accounts. That's why some state tax collectors are putting down the hammer.

The most notable recent case is Vermont.

A recent story by the Associated Press detailed the extent to which the Green Mountain State's tax officials are going to get every possible penny.

Dentists in the state received bills for the state's 6 percent sales tax on the value of toothbrushes and floss routinely handed out to patients. Senior citizen facilities faced a 9 percent restaurant tax on the meals served to the elderly residents who eat in their dining halls. And landscapers who overlooked a 2006 law change that subjected more lawn care material to sales taxes were hit with big bills for taxes on purchases from years ago.

Political watchers might be surprised by Vermont's actions. They have come under the tenure of a Democratic governor who swore not to enact any new taxes.

But existing taxes, that's a different matter.

Vermont has increased its tax auditor staff and set them loose on businesses. The wire service says the tax collection trend is the same in Idaho and Oklahoma.

The tally for the 12 months that ended in June was $57 million, up from about $50 million that Vermont collected five years earlier. Similar increased collection results have been reported in states following the increased collection model.

Lawmakers step in to stop taxes

But as you might suspect, not everyone is happy.

Obviously the businesspeople facing unexpected and large tax bills are freaking out. And they've complained to their lawmakers.

Thanks to a measure sponsored by one dentist's state senator brother and signed into law, dental goods handed out to patients are now exempt from Vermont's sales tax.

Similar relief has been granted to eldercare facilities since, as the home's operators and lawmakers argued, people aren't taxed on the meals they eat in their own houses. The state subsequently has stopped trying to collect such taxes.

Lawn care companies that missed the sales tax changes six years ago, however, are still facing those bills.

I don't begrudge states for trying to get all the tax money that is legally due. But Vermont was a bit too gung-ho, especially when it came to trying to declare a senior citizens home's residential dining area a restaurant.

But despite Vermont's setback on its most aggressive tax collection efforts, don't look for it or other states to back down completely.

State budget deficits are just too big, and there's just way too much potential tax money out there that is catching tax collectors' sharp eyes.

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