Vermont Sales Tax Rates and Essential Compliance Rules

Understanding Vermont sales tax is essential for both consumers and businesses operating in the state. With a base rate of 6% on goods and certain services, it’s crucial to be aware of the nuances of tax compliance.

From job printing services to other key exceptions, knowing where and how to apply the sales tax can save businesses from costly mistakes.

In this guide, we’ll break down Vermont’s sales tax rates, highlight essential exceptions, and explore how smart technology can help you stay compliant.

What Is the Sales Tax Rate in Vermont?

Vermont’s sales tax rate is set at 6% for most goods and tangible personal property. This rate applies to various products, including clothing, electronics, and home goods.

However, certain goods and services are either exempt from the tax or subject to different rates.

For example, food for human consumption is generally exempt from Vermont sales tax, but prepared foods (like takeout) are taxable. Understanding these nuances is key to ensuring proper compliance.

Vermont Sales and Use Tax Overview

As a business owner in Vermont, you are responsible for collecting state sales tax on taxable goods and services and remitting it to the Vermont Department of Taxes. The Vermont Department of Taxes oversees the state’s administration of sales and use tax.

Key Features of Vermont Sales Tax

• Sales Tax: Charged on the retail sales of tangible personal property unless exempted by law.
• Use Tax: Imposed on the buyer at the same rate as the sales tax. It is collected on the consumption, use, or storage of goods in Vermont if sales tax was not paid on the purchase of the goods.
• Local Option Tax: Certain municipalities are authorized to assess a 1.0% local option sales tax in addition to the 6%.

Taxable and Exempt Items

Taxable goods and services in Vermont include:

• Most physical goods (such as clothing, electronics, and furniture)
• Certain services (like job printing, interior design services, and taxable repairs)

Sales tax exemption in Vermont applies to items like:

• Clothing
• Over-the-counter drugs
• Feminine hygiene products
• Medical equipment and supplies
• Food, food products, and beverages

For more detailed information on sales tax exemption in Vermont and specific conditions, it’s recommended to consult the Vermont Department of Taxes’ official resources. Understanding these tax obligations is crucial to ensure compliance and avoid any penalties.

When Do Businesses Need to Collect Sales Tax in Vermont?

Businesses must collect sales tax in Vermont if they have a physical or economic nexus within the state.

1. Vermont Physical Nexus

Businesses with a physical presence in Vermont, such as a store, warehouse, or employees, must collect and remit sales tax on sales shipped to Vermont.

2. Vermont Economic Nexus

Remote sellers and marketplace facilitators with sales of at least $100,000 or 200 individual transactions in the preceding 12-month period must collect and remit Vermont sales tax. All sales, whether taxable or exempt, are included when determining if the threshold has been met.

Once the threshold is exceeded, registration and collection must begin on the first day of the following calendar month, but there is a 30-day window to conduct the threshold analysis.

Failure to Collect Vermont Sales Tax

Failure to collect Vermont sales tax can lead to serious consequences for businesses. You could face interest and penalties if you fail to collect the appropriate sales tax from your customers and remit it to the Vermont Department of Taxes.

Late Filing and Payment Penalties

• Interest: Interest on unpaid tax accrues starting from the due date of the tax payment and continues to accumulate monthly for each month or part of the month the tax remains unpaid.
• Penalties: Penalties will accrue each month if you fail to file a return or remit taxes by the due date. The penalty rate for failure to file or pay tax is typically 5% per month.
• Failure to Pay Tax: The penalty for failure to pay individual, estate, trust, or C-Corporation income tax is 1% per month.
• Business Entity and Nonresident Taxes: The penalty for business entity income tax or estimated payments on behalf of nonresidents is 5% per month.
• Late Filing: If a return is filed more than 60 days after the original due date, a $50 late filing penalty applies, even if no tax is owed unless an extension has been filed.
• Civil Penalty: The maximum civil penalty for non-payment can be 25% of the unpaid tax due.
• Fraudulent Penalties: If the failure to collect tax is fraudulent or intended to evade tax, the penalty can be as high as 100% of the unpaid tax.

Failure to collect and remit Vermont sales tax can result in significant financial consequences for your business, so staying compliant and avoiding these penalties is crucial. For detailed information on penalties, consult this resource.

Vermont Sales Tax for Out-of-State and Amazon FBA Program Sellers

Out-of-state businesses selling to Vermont residents must comply with the Vermont economic nexus rules.

If you participate in the Amazon FBA (Fulfillment by Amazon) program, you may have inventory stored in Vermont, creating a physical nexus and obligating you to collect sales tax. Having a physical presence in Vermont makes a sales tax nexus, meaning your business must collect sales tax in Vermont.

Even if you do not store inventory in Vermont, if you exceed $100,000 in gross annual sales delivered to Vermont, or if you have over 200 separate sales transactions delivered to Vermont customers, you must register and collect sales tax.

For any questions or to ensure compliance, it’s advisable to consult with a tax expert who can provide guidance on your specific situation.

Registering for a Vermont Seller’s Permit

Here’s how to register for a seller’s permit in Vermont:

1. Determine if you need a permit: If you have a physical or economic nexus in Vermont, you must register for a seller’s permit. Vermont economic nexus is triggered if you have sales of at least $100,000 or 200 or more separate transactions delivered to Vermont customers.
2. Gather required information: Before starting the registration process, collect all necessary information, including:
   • Business name, address, and contact information.
   • Federal Employer Identification Number (EIN).
   • Business entity structure (e.g., sole proprietorship, LLC, corporation).
   • Name, address, and Social Security Number (SSN) of owners, partners, or officers.
   • Business activity details, including the date and state of incorporation and Vermont nexus start date.
   • Estimated quarterly sales tax liability in Vermont.
   • North American Industry Classification System (NAICS) code.
3. Online Registration: The best way to register is through the Vermont Department of Taxes website.
   • Go to myVTax and click “Sign Up”.
   • Under “For Businesses and Corporations”, click “Click here if you are a business taxpayer who would like to register your tax accounts or add myVTax access for accounts already registered with the Department”.
   • Select the option that best describes your situation.
   • Vermont strongly encourages merchants to register online.
4. Registration by mail or fax: Though Vermont encourages online registration, you can also register via form BR-400. The fax number is 802-828-5787.
5. Await approval: The Department of Vermont will email you if your registration is approved, under review, or has been denied.
6. Receive your permit: If approved, you’ll receive an email with a username and a link to access myVTax to manage your sales tax account. You’ll also receive a paper copy of your Sales Tax Permit and a letter that includes your Letter ID and Taxpayer ID in 7 to 14 business days at the mailing address provided during registration.
7. Display your permit: If your business has a physical location in Vermont, the Seller’s Permit must be visibly displayed at all times.

Fees: Applying for a Vermont sales tax permit is free.

Renewal: Vermont does not require you to renew your sales tax permit.

Turnaround Time: It takes 24-48 hours from applying. Wait for an email from the Department of Revenue with your sales tax permit account information.

How to Collect Sales Tax in Vermont

To collect sales tax in Vermont:

1. Determine if you have nexus: Ensure you have a physical presence or meet the economic threshold of more than $100,000 in gross annual sales delivered to Vermont, or over 200 separate sales transactions delivered to Vermont customers.
2. Register for a Vermont seller’s permit: Register through the myVTax portal on the Vermont Department of Taxes website.
3. Collect sales tax: Include sales tax in the total price displayed to your customer; most point-of-sale (POS) systems can automatically calculate and add it. Vermont’s sales tax rate is 6%, but certain municipalities may also assess a 1% local option sales tax.
4. File sales tax returns: File periodic sales tax returns, even if you have no sales to report. Returns can be submitted manually on paper or electronically through Vermont’s myVTax online portal.
5. Pay sales tax: Pay the sales tax owed through the myVTax portal. You can pay via Electronic Funds Transfer (EFT), credit card, or debit card. Sales Tax for the month must be paid by the 25th day of the following month.

Need help managing your sales tax? Let Commenda assist with automating your tax calculations, filing, and ensuring compliance.

Tax-Exempt Customers

Some customers are exempt from paying sales tax under Vermont law. Examples include:

• Government agencies
• Some nonprofit organizations
• Merchants purchasing goods for resale

Sellers must collect a valid exemption or resale certificate from buyers to validate each exempt transaction. Organizations that qualify for sales tax exemption in Vermont must register with the Vermont Department of Taxes before making sales or purchases.

Filing Sales Tax Returns in Vermont

Here’s information on filing sales tax returns in Vermont:

Filing Frequency

Filing Steps

1. Collect all necessary sales data, including total sales in the state, the amount of sales tax collected, and the location of each sale.
2. File sales tax returns, reporting taxable sales and the sales tax due. Even sellers with no tax due must file $0 returns at the completion of each assigned reporting period.
3. Submit returns manually on paper or electronically through Vermont’s myVTax online portal.

The state of Vermont recommends that businesses file and pay their sales taxes online through myVTax. Some companies — including those with multiple locations, those with a tax liability exceeding $100,000 in the previous calendar year, and those with sales subject to local option tax are required to file electronically.

Paper returns are acceptable for businesses with a single location that cannot file and pay electronically. Form SUT-451 can be accessed and downloaded online.

Also read: State Sales Tax Filing: Due Date and Process

How to Pay Your Vermont Sales Tax

Filing in myVTax also enables online payment of taxes due.

Using Sales Tax Automation Tools

Sales tax automation tools like Commenda can simplify your Vermont sales tax calculation and filing, allowing you to stay compliant without the hassle. With built-in features for reporting, remittance, and expert accounting support, Commenda takes the complexity out of sales tax management.

Commenda is trusted by over 250+ businesses across borders to handle their sales tax needs. Whether you’re a small business or a large enterprise, Commenda ensures your Vermont sales tax obligations are met accurately and efficiently, giving you more time to focus on growing your business.

Click here to see how Commenda can streamline your sales tax process while you focus on what matters most — expanding your business.

Don’t let sales tax complexities slow down your business. Let Commenda handle your sales tax needs so you can focus on growth. Schedule a free call with our sales tax experts today!

Using Sales Tax Automation Tools

Sales tax automation tools like Commenda can simplify your Vermont sales tax calculation and filing, allowing you to stay compliant without the hassle. With built-in features for reporting, remittance, and expert accounting support, Commenda takes the complexity out of sales tax management.

Commenda is trusted by over 250+ businesses across borders to handle their sales tax needs. Whether you’re a small business or a large enterprise, Commenda ensures your Vermont sales tax obligations are met accurately and efficiently, giving you more time to focus on growing your business.

Click here to see how Commenda can streamline your sales tax process while you focus on what matters most — expanding your business.

Vermont Sales Tax Compliance Checklist

Here is a Vermont sales tax compliance checklist:

1. Nexus Evaluation: Determine if you have a nexus in Vermont, either through physical presence or by exceeding $100,000 in sales or 200 transactions annually.
2. Seller’s Permit: If nexus exists, register with the Vermont Department of Taxes to obtain a seller’s permit.
3. Tax Collection: Collect the correct sales tax (6% state, plus any applicable 1% local option tax) on all taxable sales of goods and services.
4. Exemption Certificates: Collect and maintain valid exemption certificates (Form S-3) from eligible buyers like resellers and exempt organizations.
5. Regular Filing: File sales tax returns regularly (monthly, quarterly, or annually), even if you have no sales to report (a “zero return”).
6. Timely Payments: Pay the owed sales tax through the myVTax portal by the assigned due date (typically the 25th of the month following the reporting period).

How Should I Prepare for Vermont Sales Tax Audits and Appeals?

An audit examines a taxpayer’s records to ensure taxes are correctly reported. Here’s how to prepare for a Vermont sales tax audit and what to expect during the process:

Understanding the Audit Process

• Expect Notification: Audits start with a notice from the Vermont Department of Taxes.
• Scope Awareness: Auditors examine sales records, receipts, and tax returns. Common areas include expenses, exempt sales, and use tax.
• Engage a Professional: Get a tax professional to help with the audit.
• Gather & Organize: Collect sales records, invoices, exemption certificates, tax returns, bank statements, etc.
• Use Tax Review: Ensure you’ve paid use tax on applicable purchases where sales tax wasn’t charged.

Steps to Prepare for an Audit

1. Contact a Professional: Get a state and local tax professional involved to prepare for the audit.
2. Gather Records: Prepare to provide access to sales and financial records, invoices, receipts, bills of lading, resale and exemption certificates, tax returns from audited periods, accounting system data, bank statements, and deposit info. Also, have corporate federal and Vermont tax returns and related supporting work papers.
3. Review Returns: Provide copies of filed sales and use tax returns, along with supporting work papers. Ensure you have all exemption certificates for non-taxed sales.
4. Assess Use Tax Liability: Ensure you adequately pay use tax on applicable purchases. If a business buys an item online without paying use tax, the business is still obligated to remit the tax to Vermont.
5. Organize Documents: Prepare a chart of accounts and a general ledger in electronic media format. Also, have cash receipts and disbursement records available.
6. Consider Key Questions: If you receive a sales tax audit notice, businesses need to consider whether you have sales tax audit experience and thoroughly understand your sales and use tax areas of exposure.

During the Audit

• Auditor Contact: Expect initial contact and an entrance conference.
• Record Examination: The auditor will review your records and compare them to your returns.
• Address Issues: Discuss discrepancies with the auditor, but legal interpretations may require an appeal.

After the Audit – Understand and Defend Your Business Rights

The auditor will produce an audit report with corresponding work papers to support the Vermont sales and use tax assessment. Have a sales tax professional present during this meeting.

Also read: Sales Tax Audits: Common Triggers, Risks, and How to Prepare

Vermont Sales Tax Rates by City

Vermont has a base state sales tax rate of 6%. Local municipalities can add a local option tax of 1%, making the total sales tax rate between 6% and 7%.

It is crucial to use an address-based solution, rather than relying on zip codes or cities, to determine the correct sales tax rates, due to different cities potentially having different local district rates.

Don’t let sales tax complexities slow down your business. Let Commenda handle your sales tax needs so you can focus on growth. Schedule a free call with our sales tax experts today!

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