The Ultimate Business Guide to Sales Tax in Vermont

Vermont, known for its scenic Green Mountains and charming small towns, values simplicity, even in its tax system. Understanding what is sales tax in Vermont is as easy as enjoying a crisp autumn day or a locally made maple syrup. This guide breaks down everything you need to know about Vermont’s sales tax, from determining the right sales tax rates to understanding exemptions and filing processes. By the end of this comprehensive guide, you’ll be equipped to handle Vermont’s sales tax with confidence and ease.  

Sales Tax Nexus in Vermont

When a business creates either a physical or economic nexus, it is required to collect sales tax in Vermont.

 

Physical Nexus

A physical nexus means having a significant physical presence or engaging in enough activities within a state to require the collection and payment of sales tax. The factors that determine a physical nexus in Vermont include:  

1. Physical Location: This includes having an office, a place for distribution, sales, or showcasing products, a warehouse or storage facility, or any other place where you conduct business.
2. Inventory in the State: This covers situations where you store your products within the state, even if it’s done through a third-party fulfillment center or 3PL (like Amazon FBA) or an online marketplace.
3. Employees, independent contractors, agents, or other representatives operating on your behalf.
4. Affiliate Nexus or Click-through Nexus: If a remote seller has a referral agreement with a Vermont resident and made over $10,000 in taxable sales in Vermont last year, they must collect and remit Vermont Sales Tax.

Economic Nexus

States have established regulations to collect sales tax from out-of-state sellers who meet certain revenue and/or transaction thresholds. This rule is known as economic nexus.

Beginning July 1, 2018, the threshold for economic nexus in Vermont is $100,000 in gross revenue or 200 transactions in the prior four calendar quarters.

While the nexus criteria mentioned above generally apply to most businesses, additional methods exist for establishing economic sales tax nexus. To access a comprehensive list of these rules, please refer to the governing laws for economic sales tax nexus requirements in Vermont.

 

Vermont Sales Tax on Goods and Services

One of the first things you need to know is whether the goods you’re selling or services you’re offering are taxable in Vermont.

Tangible Products

Almost all goods are taxable in Vermont, including:

• Cosmetics
• Electronics
• Furniture
• Jewelry
• Home Goods
• Groceries – Food, food products, and beverages are exempt from Vermont sales tax, except for soft drinks.
• Personal Hygiene – Personal hygiene products, including soaps, shampoo, toothpaste, and sunscreen, are taxable in Vermont

The goods that are exempt from sales tax are:

• Clothing – Most clothing and footwear are exempt from Vermont sales tax, but tax applies to clothing accessories and equipment.
• Diapers – Diapers are exempt from Vermont sales tax as they are classified as clothing.
• Feminine Hygiene Products – Menstrual care products are exempt from Vermont sales tax.
• Prescription Medications
• Medical Devices
• Agricultural Supplies – Agricultural machinery and equipment are exempt from Vermont sales tax if used at least 75% of the time for producing agricultural or horticultural commodities for sale.

 

Services

In Vermont, the majority of service-based transactions, such as professional services, advertising, and employment services, are not subject to sales tax.

However, there are specific situations where certain services are taxable. For instance, taxable services are:

• Telecommunications
• Public utility services
• Manufacturing, Processing, Assembling, or Refining – Manufacturers are exempt from sales tax on materials and equipment used in production, but retail sales of tangible goods are taxable.
• Directory assistance
• Guide services that include access fees – Guide services are not taxable if fees do not include payments to landowners.  

 

Software as a Service (SaaS)/Digital Products

SaaS is taxable in the state of Vermont. 

Digital products (i.e., ebooks, downloadable video content, mobile apps) are also taxable. 

 

Shipping/Handling

Shipping and handling charges in the state of Vermont are taxable when the goods being delivered are taxable. Conversely, if the item is tax-exempt, the associated delivery charges are also exempt. For shipments containing taxable and tax-exempt items, sales tax applies only to the portion of the delivery cost attributable to the taxable items.   

Sales Tax Permits and Licenses in Vermont

Now that you’ve got a handle on when sales tax nexus applies and which products are taxable in Vermont, the next important step is getting your Vermont Seller’s Permit, also known as a sales tax permit.

 

Seller’s Permit

A common area of confusion for many new business owners is understanding the need for a Sales and Use Tax Permit, also known as a seller’s permit. You can register for a Vermont sales tax permit online at the Vermont Department of Tax or follow our detailed step-by-step guide for assistance. Ensure you have specific information on hand when registering for a seller’s permit, including, but not limited to:

• Business Identification Information (name, address, phone number, email address)
• Business Entity Structure (sole proprietorship, partnership, corporation, LLC, etc.)
• Federal Employer Identification Number (EIN or FEIN)
• Owner/Partner/Officer Information
• Business Activity Details (description of products or services sold, sales volume, date of the first sale or the expected date to start dates)
• NAICS code

Registration fee There is no fee to register for a sales tax permit.

Renewal In Vermont, you don’t have to renew your sales tax permit.

 

Resale Certificate

A resale certificate is a document that allows businesses to buy products without paying sales tax on them as long as they plan to resell those items to customers, who will then pay the tax. As a seller, you can also accept resale certificates from others looking to buy for resale.

In Vermont, sellers use resale certificates to buy goods from their suppliers that they intend to resell. The issuance of the certificates is always done in good faith that the seller would report tax on the final sale of the items.

You can fill out the Vermont Sales Tax Exemption Certificate  provided by Vermont after you receive your sales tax permit. You can also fill out the Streamlined Sales and Use Tax Certificate of Exemption if you would like to get sales tax exemption for multiple states simultaneously. If you don’t want the hassle of registering, sign up for our all-inclusive service that includes sales tax registration.

 

Streamlined Sales Tax (SST)

The Streamlined Sales Tax (SST) is an initiative to simplify and standardize sales tax regulations across multiple states. Vermont is a party to this program, meaning it follows the uniform rules and definitions established by SST.

Check with the Vermont Revenue Services for the most current information on Vermont’s participation in the Streamlined Sales Tax initiative.

 

Calculating and Collecting Sales Tax in Vermont

Sales Tax Computation

In Vermont, sales tax isn’t just one simple rate; it’s a combination of state and local taxes. To figure out the total sales tax for your calculation, you’ll need to add up the rates for the state, county, and city (if applicable) where your transaction occurs. Here’s an example. Suppose an out-of-state seller satisfies the economic nexus criteria in Vermont and sells to a customer in Burlington, VT, with a ZIP code of 05401. In that case, the seller has to charge the customer a total sales tax, which can be broken down as follows:

Origin-based vs. Destination-Based

When making in-state sales, it is important to determine if you are located in an origin-based state or destination-based state to figure out what rate to charge for sales tax.

Vermont is a destination-based state, meaning sales tax is determined based on the buyer’s location. That means for a Vermont-based seller, sales tax is generally based on the location of the buyer when selling within the state.

For out-of-state or remote sellers, the sales tax rate is always determined by the buyer’s location. For instance, if you’re selling a product from Mississippi to a customer in South Burlington, Vermont, where you have nexus, you’d apply South Burlington’s sales tax rate to that sale.

To make life easier, consider using sales tax software or consulting a tax professional, like TaxHero, to ensure accurate tax calculations and collections. Understanding these tax rules helps you stay compliant, whether you’re in-state or out-of-state.

 

Filing and Remitting Sales Tax Returns in Vermont

The next step after collection is filing and remitting your Vermont sales tax returns. Filing and remittance can vary in frequency, typically monthly, quarterly, or annually.

• Monthly Filing: Businesses must file monthly returns if their sales and use tax liability exceeds $2,500 for the immediately preceding calendar year. 
• Quarterly Filing: Businesses whose sales and use tax liability for the preceding calendar year was more than $500 but less than $2,500 must file quarterly returns.
• Annual Filing: Businesses with a sales and use tax liability of $500 or less for the preceding calendar year must file one annual payment on or before January 25 of the following year.

It’s crucial to keep accurate records of your sales and tax collections and adhere to the filing schedule set by the state to remain compliant with Vermont’s sales tax regulations.

Due Dates

In Vermont, the due date falls on the 25th day of the following month. For instance, sales tax collected in January is due by February 25th for monthly filers.

However, if this day is a holiday, weekend, or in the rare occurrence of a natural disaster, the deadline is typically extended to the next business day. For instance, if you’re a monthly filer and filing sales tax for the month of April, and the May 25th deadline falls on a holiday or weekend, you’ll have until May 26th, the following business day, to submit.  

Filing Sales Tax Returns

To file your sales tax return for Vermont, a few options are available:

1. Pay online through the myVTax portal.
2. You can mail your payment to the Vermont Department of Taxes at PO Box 1779, Montpelier, VT 05601-1779.
3. File with TaxHero – Let TaxHero take care of it so you don’t have to worry about missing a payment or return.

Timely Filing Discount

Some states offer a discount to businesses for collecting, filing, and remitting sales tax on time as an incentive to process sales taxes promptly. However, Vermont does not offer a discount.

 

Sales Tax Holiday

Currently, for 2024-2025, there are no planned sales tax holidays in Vermont.

 

Vermont Sales Tax Penalties

Like in most states, sales tax is a big part of how Vermont generates revenue. Thus, maintaining compliance with sales tax regulations is of utmost importance. Failure to do so can lead to consequences and sales tax penalties. Therefore, it is crucial always to ensure you are up-to-date in filing, collecting, and remitting sales tax to the state.

Here are the specific penalties for non-compliance with sales tax regulations in Vermont:

• Late Filing Penalty: A 5% penalty per month applies if you fail to file a tax return.
• 60-Day Late Penalty: If your return is more than 60 days late, you’ll be charged a $50 penalty, even if you don’t owe any tax (unless you filed an extension).
• Maximum Civil Penalty: The penalty for unpaid taxes can go up to 25% of the amount due.
• Fraudulent or Willful Evasion: If you intentionally avoid paying taxes, the penalty is 100% of the unpaid tax.