Chester considering a local option tax to support new housing initiative

By Shawn Cunningham
© 2025 Telegraph Publishing LLC

At its Wednesday, Aug. 20 meeting, he Chester Select Board again broached the subject of a local option sales tax as a way to begin a town-wide conversation on generating money to spur the development of affordable housing in town.

Last January, as the board was finalizing the warning for the March Town Meeting, it discussed the creating a restricted reserve to receive funding to support the preservation and production of affordable housing in Chester. That fund would help the town’s Housing Commission with expenses related to finding and evaluating suitable housing sites and working with developers to bring projects to fruition. The fund would also be able to receive grants and government funding specifically for housing development.

There also was a lot of talk about where the money for the fund should come from. Board members agreed that a portion of the registration fees for short-term rentals should go toward creating more housing and they talked about a 1 percent addition to the state’s rooms and meals taxes. Currently a hotel or bed and breakfast stay in Vermont is taxed at 9 percent as are meals. Alcohol served on premises is taxes at 10 percent. Those taxes go to the state, but towns have an option of adding 1%, most of which goes to town coffers. 

At the same time though, members felt that there was not enough time to have a full public discussion of the pros and cons of instituting such a tax. Instead, they decided to put just the creation of the reserve fund to a public vote in March, then begin the discussion on the local option tax earlier so the board would have a sense of voters’ views before they make up the March 2026 Town Meeting warning.

Town Planner Preston Bristow told the board that about $4 million is spent on restaurant meals in Chester each year, which could generate about $40,000 in local option tax, with Chester getting about $30,000 of that and the state keeping the remainder.  Bristow said the state won’t reveal the tax numbers for rooms in Chester since the sample of hotels, inns, AirB&Bs and B&Bs is small and releasing information could reveal proprietary information. Nevertheless, with all three categories of taxation, Bristow estimates that a 1 percent option tax would produce was about $60,000 per year for the housing fund.  In Chester, the net proceeds of the town’s STR registration fees are estimated at $24,000, all of which would go into the fund.

At last Wednesday’s meeting Select Board members brought up a number of issues with the option tax.

“Can we stamp ‘Draft’ on this?” asked board chair Lee Gustafson, noting that this is just the beginning of considering the move. Others noted that the rooms tax has the smallest impact on locals while meals and alcohol will have an affect – albeit small – on Chester residents. Bristow made it clear that the purchase of alcohol in a retail setting is taxed at 6 percent and the local option tax would not increase that.

To the question of whether cannabis can be part of the local option tax, Bristow said that by state law it must be treated as retail and not subject to the added tax.

The board asked that the local option tax be included on the Wednesday, Sept. 3 agenda so members of the public can weigh in on the idea. That meeting will be held at 6:30 p.m. at Town Hall and on Zoom by clicking here. To be instituted, a local option tax would need to be approved by Chester voters at Town Meeting.