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Will Vermont Phase Out State Sales Tax?

  • Mar 23, 2015 | Gail Cole

 Montpelier, Vermont.

Lawmakers in Vermont are considering legislation that seeks to phase out the state sales and use tax, increase local option taxes, increase the payroll tax, and phase out and repeal corporate tax rates.

Sales and use tax

Under House Bill 439, the state sales and use tax rate would drop as follows:

  • 4% between January 1, 2016 and December 31, 2016.
  • 2% between January 1, 2017 and December 31, 2017.
  • 0% effective January 1, 2018.

Local option taxes

The measure would also allow municipalities, with voter approval, to increase the following taxes by 1%, to 2%:

  • Local sales tax
  • Meals and alcohol beverages tax
  • Rooms tax

The local option tax rate increases could take effect beginning January 1, 2016.

Payroll tax

Payroll tax rates would increase as follows under HB 439:

  • 1.33% effective January 1, 2016 (July 1, 2016 for school, municipal or state employees)
  • 2.27% effective January 1, 2017
  • 3.4% effective January 1, 2018

Corporate tax

HB 439 seeks to phase out and ultimately repeal the corporate tax as follows:

  • Effective January 1, 2016, rates would be
    • 4% lowest bracket
    • 7% middle bracket
    • 7% highest bracket
  • Effective January 1, 2017, rates would be
    • 2% lowest bracket
    • 3% middle bracket
    • 8% highest bracket
  • Effective January 1, 2018, the corporate tax would be repealed.


Vermont lawmakers are striving to close a $94 million gap between state spending and tax revenues and create fiscal sustainability in 2016 and beyond. HB 439 has been referred to the Committee on Ways and Means.

Stay on top of sales tax changes in Vermont and other states. Learn more.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.