WHITE RIVER JUNCTION, Vt. (AP) – Merchants are preparing for an increase in the state sales tax, which they fear will send more shoppers across the border to tax-free New Hampshire.

The sales tax will increase from 5 percent to 6 percent on Oct. 1, and that already has many retailers in close proximity to the border worried.

Jim Harrison, the president of the Vermont Grocers’ Association, said most store owners along the Connecticut River are “very disappointed” with the increase.

“It’s very difficult to be competing with New Hampshire when they don’t have a sales tax and we do,” Harrison said.

Clothing purchases under $110 in Vermont will continue to be exempted from the sales tax, as is most food. But other staples, ranging from paper towels to batteries, are subject to the sales tax.

And at least one longtime Vermont merchant says the latest increase may push his store across the river to West Lebanon, N.H.

“It’s always been a problem and now it will be more of a problem,” said Jeremy Dickson, a co-owner of Professional Camera Ltd., which has been in White River Junction since 1979.

Vermont first instituted a sales tax in 1969, when the rate was 3 percent. It was raised by one percentage point in 1982 and again in 1991. The latest increase was part of a package of reforms to Act 60, Vermont’s education finance law.

Lawmakers said the higher sales tax, which is expected to generate up to $43 million a year in new revenue, is intended to reduce property taxes on Vermont homeowners.

But stores fear that many customers will do their shopping across the river. Some like Marty Bendiksen of Quechee say they already drive across the border regularly to pay lower prices.

“We do as much shopping as we can in New Hampshire,” said Bendiksen while making a stop recently at the Wal-Mart in West Lebanon, N.H. “What can you say? Six percent is kind of heavy.”

Still, some like Skip Metayer, co-owner of the Farm-Way store in Bradford, are clamping down and seeing what happens after the rate hike.

“There’s not much we can do about it,” Metayer said. “We’re not too happy about it.”

AP-ES-09-22-03 1217EDT