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The Vermont Supreme Court confirmed what has long been accepted practice for collectors of delinquent taxes ñ the town may lawfully collect at the tax sale interest and penalties on a delinquent tax account, and retain any ìoverpaymentî for the duration of the redemption period. Ran-Mar, Inc, et. al v. Town of Berlin, et. al, 2006 VT 117 (Nov. 17, 2006).

Disgruntled taxpayers whose properties were sold at tax sale sought an accounting for the proceeds of the sales, and for relinquishment by the Town of the amounts paid to the Town in excess of the total taxes, interest, penalties, and costs. The Town refused and the taxpayers sued to set aside the tax sales and for release of the ìoverpayment.î The Superior Court upheld the Townís actions, and the taxpayers appealed.

The Supreme Court ruled that the interest discussed in 32 V.S.A. ß5136 is properly collected in a tax sale (or any of the other statutorily permitted collection methods). The ìpenaltiesî collected at the sale were, in truth, the tax collectorís 8% fee authorized by statute 32 V.S.A. ßß1674, 5258), and the taxpayer was properly notified of those costs.

Finally, the Court confirmed that the town is permitted to retain the ìoverpaymentsî until the end of the one-year redemption period. Doing so is not a ìtakingî of the taxpayerís property ñ the taxpayer has no right to those proceeds during the redemption period. Since there is no transfer of the property during the redemption period, the taxpayer continues to be entitled to possess and use the sold property. When the redemption period ends, there is a conveyance of the property and the taxpayer is entitled to receive the ìoverpayment.î If the property is redeemed, the overpayment is returned to the tax sale buyer.

In a concurring opinion, Justice Dooley suggested that the Town can, and perhaps should, return the ìoverpaymentî to the taxpayer, on the justification that the taxpayer may be otherwise facing financial difficulties, and the availability of the overpayment may assist in preserving the taxpayerís business.