Vermont sales and use tax guide

Sales tax is a tax imposed on certain retail sales and taxable transactions. Vermont’s general sales tax rate is 6%. The tax generally applies to retail sales of tangible personal property, as well as certain specifically taxable services and transactions. Some Vermont municipalities impose a 1% local option sales tax in addition to the 6% state sales tax. Whether the local option tax applies depends on the location and destination of the sale. Currently, combined sales tax rates in Vermont range from 6% to 7%, depending on the location of the sale.

As a business owner selling taxable goods or services, you act as an agent of the state of Vermont by collecting tax from purchasers and passing it along to the appropriate tax authority. Sales and use tax in Vermont is administered by the Vermont Department of Taxes.

Any sales tax collected from customers belongs to the state of Vermont, not you. It’s your responsibility to manage the taxes you collect to remain in compliance with state and local laws. Failure to do so can lead to penalties and interest charges.

When you need to collect Vermont sales tax

Vermont generally imposes a 6% sales tax on retail sales of tangible personal property, along with certain specifically taxable services and transactions. Sellers are responsible for collecting sales tax from customers and filing returns and remitting the tax to the Vermont Department of Taxes.

To help you determine whether you need to collect sales tax in Vermont, start by answering these three questions:

1. Do you have nexus in Vermont?
2. Are you selling taxable goods or services to Vermont residents?
3. Are your buyers required to pay sales tax?

If the answer to all three questions is yes, you’re required to register with the state tax authority, collect the correct amount of sales tax per sale, file returns, and remit to the state.

Failure to collect Vermont sales tax

If you are required to collect Vermont sales tax but fail to collect and remit the tax, you may be liable for the tax due, along with applicable penalties and interest.

Businesses should configure their point-of-sale or ecommerce systems to collect the correct Vermont sales tax when a taxable transaction occurs. If a seller fails to collect the tax, the seller may still be responsible for remitting the tax to the Vermont Department of Taxes, even if the tax was not collected from the customer.

A business generally must have sales tax nexus with Vermont before the state can require it to register, collect, and remit Vermont sales tax. Nexus refers to a sufficient connection between a business and Vermont that creates state tax obligations. Nexus can be established through physical presence or, for certain remote sellers, through economic activity in the state.

Nexus triggers

Sales tax nexus in all states used to be limited to physical presence: A state could require a business to register and collect and remit sales tax only if it had a physical presence in the state, such as employees or an office, retail store, or warehouse.

In June 2018, the Supreme Court of the United States overruled the physical presence rule with its decision in South Dakota v. Wayfair, Inc. States are now free to tax businesses based on their economic and virtual connections to the state, or economic nexus.

While physical presence can trigger a sales tax collection obligation in Vermont, an out-of-state seller does not need a physical presence to establish nexus. Vermont’s economic nexus rules generally require certain remote sellers to collect and remit sales tax when their sales into the state reach at least $100,000 or 200 individual transactions during the applicable 12-month period.

Out-of-state sellers

Out-of-state sellers with no physical presence in a state may establish sales tax nexus in the following ways:

Affiliate nexus: Having ties to businesses or affiliates in Vermont. This includes, but isn’t limited to, the design and development of tangible personal property (goods) sold by the remote retailer, or solicitation of sales of goods on behalf of the retailer.

Click-through nexus: Having an agreement to reward a person(s) in the state for directly or indirectly referring potential purchasers of goods through an internet link, website, or otherwise, provided such referrals led to $10,000 or more in cumulative gross receipts from sales in Vermont during the previous year.

Economic nexus: Having a certain amount of economic activity in the state. For sales made on and after July 1, 2018, a remote seller must register with the state then collect and remit Vermont sales tax if the remote seller meets either of the following criteria (the economic thresholds) for sales in the state during the preceding 12 months:

• Gross revenue from sales exceed $100,000
• 200 or more separate transactions

Inventory in the state: Storing inventory or other tangible personal property in Vermont can create physical presence and sales tax nexus. Businesses using third-party fulfillment services should determine whether their inventory or other property is located in Vermont.

Marketplace sales: Vermont requires marketplace facilitators to collect and remit sales tax on retail sales made by marketplace sellers through their marketplaces. Marketplace sellers generally remain responsible for collecting and remitting tax on taxable Vermont sales that are not made through a marketplace. A marketplace seller that accepts a marketplace facilitator’s certification that the facilitator will collect and remit the tax may exclude those marketplace sales from its own vendor obligations.

Trade shows: Making taxable sales at a trade show, convention, or other event in Vermont may create sales tax collection and registration obligations. Businesses should determine whether their activities at the event establish nexus and whether Vermont sales tax must be collected on sales made at or resulting from the event.

If you have sales tax nexus in Vermont, you’re required to register with the Department of Taxes and to charge, collect, and remit the appropriate tax to the state.

For more information, see the Vermont Department of Taxes – Marketplace Facilitators webpage.

Noncollecting seller use tax obligations

Certain noncollecting vendors that make taxable sales to Vermont purchasers must provide the purchaser with the notice required under Vermont law for each applicable transaction. Some vendors must also provide qualifying Vermont purchasers with an annual purchase summary showing the purchaser’s taxable purchases during the preceding calendar year, as required by Vermont law. Other noncollecting vendors that meet Vermont’s statutory reporting threshold must also provide the Vermont Department of Taxes with an annual report containing information about purchasers who are required to receive an annual purchase summary.

For more information, see Reporting Requirements for Noncollecting Vendors.

Trailing nexus

Sales tax nexus can linger even after a retailer ceases the activities that caused it to be “engaged in business” in the state. This is known as trailing nexus. Vermont does not have an explicitly defined trailing nexus policy.

Stored inventory

If you sell taxable goods to Vermont residents and have inventory stored in the state, you likely have nexus and an obligation to collect and remit tax. To begin to understand your unique nexus obligations, check out our free economic nexus tool or consult with a trusted tax advisor.

Sourcing sales tax in Vermont: which rate to collect

In some states, sales tax rates, rules, and regulations are based on the location of the seller and the origin of the sale (origin-based sourcing). In others, sales tax is based on the location of the buyer and the destination of the sale (destination-based sourcing).

Vermont is a destination-based state. This means you’re responsible for applying the sales tax rate determined by the ship-to address on all taxable sales.

After determining you have sales tax nexus in Vermont, you need to register with the proper state authority and collect, file, and remit sales tax to the state. We get a lot of questions about this and recognize it may be the most difficult hurdle for businesses to overcome. Avalara Licensing can help you obtain your Vermont business license and sales tax registration.

How to register for a Vermont seller’s permit

You can register for a Vermont seller’s permit online through the Department of Taxes. To apply, you’ll need to provide the Department of Taxes with certain information about your business, including but not limited to:

• Business name, address, and contact information
• Federal EIN number
• Date business activities began or will begin
• Projected monthly sales
• Projected monthly taxable sales
• Products to be sold

Cost of registering for a Vermont seller’s permit

There is currently no cost to register for a sales and use tax license in Vermont.

Acquiring a registered business

When you acquire an existing business, you cannot use or transfer the seller’s Vermont sales tax license. Vermont sales tax licenses are non-assignable and non-transferable, so a new owner or entity that is required to collect Vermont sales tax must obtain its own license. Businesses should also update their Vermont tax-account information when ownership or other account information changes.

Streamlined Sales Tax (SST)

The Streamlined Sales and Use Tax Agreement (SSUTA), or Streamlined Sales Tax (SST), is an effort by multiple states to simplify the administration and cost of sales and use tax for remote sellers. Remote sellers can register in multiple states at the same time through the Streamlined Sales Tax Registration System (SSTRS).

Vermont is a full member of the SST.

Once you’ve successfully registered to collect Vermont sales tax, you’ll need to apply the correct rate to all taxable sales, remit sales tax, file timely returns with the Vermont Department of Taxes, and keep excellent records. Here’s what you need to know to keep everything organized and in check.

How you collect Vermont sales tax is influenced by how you sell your goods:

Brick-and-mortar store: Have a physical store? Brick-and-mortar point-of-sale solutions allow users to set the sales tax rate associated with the store location. New tax groups can then be created to allow for specific product tax rules.

Hosted store: Hosted store solutions like Shopify and Squarespace offer integrated sales tax rate determination and collection. Hosted stores offer sellers a dashboard environment where Vermont sales tax collection can be manage

Marketplace: Marketplace facilitators such as Amazon and Etsy may be responsible for collecting and remitting Vermont sales tax on sales made through their marketplaces. Vermont law generally places the collection responsibility for facilitated marketplace sales on the marketplace facilitator, while marketplace sellers remain responsible for taxable Vermont sales that are not made through a marketplace. Sellers should review their marketplace provider’s tax-collection certification and their own Vermont obligations.

Mobile point of sale: Mobile POS systems can help calculate and collect sales tax based on the location of a transaction. Because Vermont uses destination-based sourcing, sellers should ensure their systems are configured to account for where the customer takes possession of the goods or where the goods are delivered.

Vermont sales tax collection can be automated to make your life much easier. Avalara AvaTax seamlessly integrates with the business systems you already use to deliver sales and use tax calculations in real time.

Tax-exempt goods

Some goods are exempt from sales tax under Vermont law. Examples include some agriculture supplies, prescription drugs, and medical supplies.

We recommend businesses review the laws and rules put forth by the Vermont Department of Taxes to stay up to date on which goods are taxable and which are exempt, and under what conditions.

Some customers are exempt from paying sales tax under Vermont law. Examples include government agencies, some nonprofit organizations, and merchants purchasing goods for resale.

Sellers should obtain a valid exemption or resale certificate when applicable to document an exempt transaction. Vermont requires sellers to maintain appropriate documentation supporting exempt sales, and the Department of Taxes provides specific exemption certificates for resale purchases, qualifying exempt organizations, government purchasers, and other exempt transactions.

Misplacing a sales tax exemption/resale certificate

Vermont sales tax exemption and resale certificates are worth far more than the paper they’re written on. If you’re audited and cannot validate an exempt transaction, the Vermont Department of Taxes may hold you responsible for the uncollected sales tax. In some cases, late fees and interest will be applied and can result in large, unexpected bills.

Sales tax holidays

Sales tax holidays, or tax-free weekends, exempt specific products from sales and use tax for a limited period, usually a weekend or a week. Approximately 20 states offer sales tax holidays every year.

Vermont does not currently have a regularly scheduled sales tax holiday.

You’re registered with the Vermont Department of Taxes and you’ve begun collecting sales tax. Remember, those tax dollars don’t belong to you. As an agent of the state of Vermont, your role is that of intermediary to transfer tax dollars from consumers to the tax authorities.

How to file

Once you’ve collected sales tax, you’re required to remit it to the Vermont Department of Taxes by a certain date. The Vermont Department of Taxes will then distribute it appropriately.

Filing a Vermont sales tax return is a two-step process comprised of submitting the required sales data (filing a return) and remitting the collected tax dollars (if any) to the Department of Taxes. The return requires you to report your total sales, nontaxable sales, taxable sales, and applicable state and use tax. If local option tax applies, you’ll also report the applicable local option tax by municipality.

Online filing is generally recommended and it’s required for businesses remitting sales and use tax for multiple locations or businesses that remit more than $100,000 in annual sales and use tax in the state. Paper returns are acceptable for businesses with a single location that cannot file and pay electronically. See the Vermont Department of Taxes – File and Pay By Mail webpage.

Filing frequency

The Vermont Department of Taxes will assign you a filing frequency. Typically, this is determined by the size or sales volume of your business, with larger businesses filing more frequently. Smaller businesses may request monthly filing, rather than annual or quarterly filing. See the filing due dates section for more information.

Vermont sales tax returns and payments must be remitted at the same time; both have the same due date.

Online filing

You may file directly with the Department of Taxes by visiting their site and entering your transaction data manually. This is a free service, but preparing Vermont sales tax returns can be time-consuming — especially for larger sellers.

Using a third party to file returns

To save time and avoid costly errors, many businesses outsource their sales and use tax filing to an accountant, bookkeeper, or sales tax automation software like Avalara AvaTax. This is a normal business practice that can save business owners time and help them steer clear of costly mistakes due to inexperience and a lack of deep knowledge about Vermont sales tax code.

Filing when there are no sales

Once you have a Vermont seller’s permit, you’re required to file returns at the completion of each assigned collection period regardless of whether any sales tax was collected. When no sales tax was collected, you must file a “zero return.”

Failure to submit a zero return can result in penalties and interest charges.

Closing a business

When a business closes or otherwise cancels its Vermont sales and use tax account, it generally must file a final sales and use tax return. Vermont law specifically requires taxpayers who cancel their sales and use tax account to file a final return in certain circumstances, including annual filers, who must file within 60 days after cancellation.

If a business is sold or ownership is otherwise transferred and the seller is ending its Vermont sales and use tax account, the seller generally must file a final return.

Timely filing discount

Many states encourage the timely or early filing of sales and use tax returns with a timely filing discount.

The Vermont Department of Taxes does not offer sales tax filers a discount.

It’s important to know the due dates associated with the filing frequency assigned to your business by the Vermont Department of Taxes. This way you’ll be prepared and can plan accordingly. Failure to file by the assigned date can lead to late fines and interest charges.

For monthly filers, returns are generally due by the 25th day of the month following the reporting period, except that February’s deadline is the 23rd. Quarterly filers generally have the same 25th-day deadline in the month following the quarter, while annual returns are due January 25. Due dates falling on a weekend or holiday are adjusted to the following business day. Below, we’ve grouped Vermont sales tax filing due dates by filing frequency for your convenience.

Filing a Vermont sales tax return late may result in a late filing penalty as well as interest on any outstanding tax due. For more information, refer to our section on penalties and interest.

In the event a Vermont sales tax filing deadline was missed due to circumstances beyond your control (e.g., weather, accident), the Department of Taxes may grant you an extension. However, you may be asked to provide evidence supporting your claim.

Hopefully you don’t need to worry about this section because you’re filing and remitting Vermont sales tax on time and without incident. However, in the real world, mistakes happen.

If you miss a sales tax filing deadline, follow the saying, “better late than never,” and file your return as soon as possible. Failure to file returns and remit collected tax on time may result in penalties and interest charges, and the longer you wait to file, the greater the penalty and the greater the interest.

If you’re acquiring a business, you should determine whether the seller has outstanding Vermont sales and use tax liabilities and comply with Vermont’s bulk-transfer notification requirements. In qualifying bulk transfers of business assets, the purchaser may become liable for certain taxes, interest, and penalties owed by the seller. Vermont generally requires the transferee to notify the Commissioner at least 10 days before taking possession of the transferred assets or making payment, whichever occurs earlier. Failing to provide the required notice can result in personal liability for the seller’s outstanding state tax claim

If you’re collecting sales tax from Vermont residents, you’ll need to consider how to handle taxes on shipping and handling charges.

Taxable and exempt shipping charges

Shipping and delivery charges may be exempt from Vermont sales tax when the charges are separately stated and the goods are shipped directly to the customer by common carrier, contract carrier, or U.S. mail. Other delivery-related charges may be taxable depending on the circumstances. When the underlying sale is exempt, related delivery charges are generally exempt as part of the exempt transaction, subject to Vermont’s specific rules. When a shipment contains both taxable and exempt items, sellers should determine the taxable portion of any delivery-related charges according to Vermont’s applicable rules.

There are exceptions to almost every rule with sales tax, and the same is true for shipping and handling charges. Specific questions on shipping in Vermont and sales tax should be taken directly to a tax professional familiar with Vermont tax laws.

For additional information, see Sales and Use Tax FAQs.