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Vermont follows through on improving use tax compliance


 Vermont has launched a campaign to increase individual use tax compliance.

Vermont is intent on increasing individual use tax compliance. In June, the legislature enacted House Bill 516, requiring taxpayers to report use tax on their individual income tax returns as of Jan. 1, 2017. The measure also tasks the Vermont Department of Taxes with educating Vermont taxpayers about use tax.

The department has taken the new requirements to heart. Front and center on its website is: “Paying use tax is easy! Don’t know when to pay use tax? Confused about filing? We can help!” Taxpayers in need of further information are directed to Use Tax FAQs, which are extremely informative. They explain how to determine if use tax owed, how to calculate the amount owed, and more.

Of note: The state only collects a 6 percent state use tax. Taxpayers living in an area with a 1 percent local option don’t owe a corresponding 1 percent local option use tax. Also, taxpayers who pay another state’s sales tax on an item used or stored in Vermont only owe the difference between the two rates. Regrettably, paying tax at a higher rate in another state does not merit any sort of refund.

“Dear Taxpayer”

The department is also sending taxpayers educational letters, dubbed “Dear Taxpayer” letters by one Vermont paper.

Use tax is poorly understood, despite having been in effect “since Vermont established a sales tax in 1969.” Therefore, the letter explains that it’s due “when a seller does not charge the buyer Vermont Sales Tax on an item that is taxable in Vermont. Taxable items sold over the internet, by mail, by phone, or bought out-of-state and used in Vermont generally qualify.” The last point is particularly poignant in Vermont, which neighbors New Hampshire, one of five states with no sales tax.

The letter also explains another policy change: As of July 1, 2017, non-collecting vendors (typically out-of-state sellers lacking a physical presence in Vermont) who made at least $100,000 in Vermont sales in the previous calendar year are required to inform Vermont customers of their use tax obligations. The sellers must also share with the Department of Taxes a copy of the use tax notices they sent to customers. These notices contain taxpayer information, which the department may use to enforce use tax compliance.

Take it personally

What may also come as a surprise to the taxpayers of Vermont is the fact that the letters they’ll receive from the department are personalized. They “illustrate an individual’s history of paying use tax, as well as provide information that allows an individual to determine if use tax was owed in the last three years.”

Tax Commissioner Kaj Samsom realizes letters from the Department of Taxes can be “intimidating” but thinks the pros outweigh the cons. “We think increasing awareness of this tax is important.”

Fortunately, the state is offering a grace period to taxpayers who owe use tax. Individuals who file and pay before Oct. 31, 2017, won’t be charged interest or penalties on use tax owed. Additional information.

Use tax compliance is essential for both businesses and individuals in all states. Learn how tax automation software can help.


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.