Whether your business is based in Vermont or you simply make sales of tangible personal property to customers in the state on a regular basis, it’s important for you to know what the state’s sales tax laws are and how they apply to you. This includes understanding the applicable tax rates at various locations throughout the state, knowing which rate applies to any given sale, and understanding what the requirements are for triggering a nexus condition in Vermont.
The state sales tax rate in Vermont is 6%, and local jurisdictions have the option of adding another 1% in the form of a Local Option tax. This means that the applicable tax rate for purchases in Vermont will be either 6% or 7% depending on your location or the final destination of the product.
Vermont law stipulates that the tax rate in effect for any given sale is the one at the location where the purchaser takes possession of the product. That means if you have a physical store, you will charge the rate for the municipality you’re located in to all of your customers, regardless of the part of the state they live in.
However, if you’re shipping goods, either from within Vermont or from out-of-state, to customers in Vermont, the appropriate tax rate to charge will be that of the destination of the goods. It’s important to note that shipping and handling charges are taxable in Vermont as well, as long as the item being shipped is taxable.
There are a few additional tax rates in Vermont for specific types of items. These include a 9% tax on prepared food, restaurant meals, and lodging, and a 10% tax on alcoholic beverages.
Any business with a physical place of business in Vermont is considered to have a nexus, or significant presence, in the state for sales tax purposes. However, even if you don’t have an actual storefront or office, you may still be considered to have a significant enough relationship with the state to be required to collect and remit sales tax.
Some other situations or relationships that can trigger nexus include:
This is not an exclusive list of the conditions that can create a nexus for your company in Vermont, and some combination of other factors may result in a nexus as well. Vermont also has a click-through nexus law that requires any remote seller who has agreements with Vermont residents to refer customers through any means, and that relationship results in at least $10,000 in total sales in the previous year, to register to collect and remit sales tax to the state.
In Vermont, all sales of tangible personal property are subject to sales tax unless the purchaser has specifically obtained an exemption certificate from the state. These exemptions certificates are given to certain types of organizations, as well as for specific types of goods, including but not limited to:
This is not an exhaustive list, and there are forms on the website of the Vermont Department of Taxes to apply for each particular type of certificate.
Other items are specifically tax exempt, and these include:
Digital products are specifically taxed in Vermont, along with canned software, regardless of whether it’s delivered on tangible media or via download. Custom software is exempt from sales tax, however, and that’s also true of the customization of canned software. The vast majority of services are not taxed in Vermont, with notable exceptions being telecommunications services and certain utilities.
Before you begin making taxable sales in Vermont, you’ll have to register with the state for a permit to collect and remit sales tax. Registration is free, and it can be done online or by downloading a form from the state website and mailing it in.
Vermont is a full member of the Streamlined Sales and Use Tax Agreement (SSUTA), and so you can register through that website as well. Registering with the SSUTA requires that you register with all member states simultaneously, and so this option may or may not make sense for you depending on your situation.
You are encouraged to file and pay online as well, although it’s still possible to complete this process through the mail. If your tax liability for the year is more than $100,000, though, you must file and pay online.
The state will assign you a filing frequency based on your estimated annual tax liability. Typically, if your annual liability is less than $500, you will file quarterly, and if your liability is anticipated to be greater than that, you will file monthly. For those with very small annual tax liability, there is also an annual filing option.
Returns and payments are due on the 25th of the month following the close of the period in question. The one exception to this is that monthly returns for January sales being filed in February are due on the 23rd. Returns for annual filers are due on January 25th of the following year. If the due date falls on a weekend or a holiday, returns and payments are due by the next business day.
|January – March (Q1)||April 25|
|April – June (Q2)||July 25|
|July – September (Q3)||October 25|
|October – December (Q4)||January 25|
A penalty of 5% of the total tax due will be assessed per month for any late payments. A 5% per month penalty will also be charged for a failure to file a return, with a maximum possible penalty of 25% of the total tax due.
Although the regulations surrounding what’s taxable in Vermont are relatively straightforward, it can still be difficult to stay on top of all aspects of recording, collecting, filing and remitting taxes on your qualifying sales to Vermont customers. That’s especially true if you’re selling in multiple states at once, as the laws of each state all have their own quirks and intricacies. Fortunately, the set of tools provided by TaxTools software can make this entire process much easier and more efficient for you.
TaxTools will monitor the regulations in each state for you, making sure you’re up to date on any changes that may impact your business. It can also produce a variety of reports, file your returns for you, and ensure you’re collecting at the right rate on each individual sale. It will integrate smoothly with whatever ecommerce platform you use, and best of all, it gives you peace of mind that you’re staying compliant with all state sales tax regulations so you’re free to focus on building your business.
So if you’re ready to learn more about how TaxTools can help streamline your business operations, click here to sign up for a free trial today.