Nonprofit organizations may have to file returns and pay taxes for some tax types and activities, but may be exempt from others.
Corporate Income Tax
Most nonprofits do not have to file a Vermont corporate income tax return or pay corporate income tax or the minimum entity tax. If the IRS has determined your organization is exempt from federal income tax, it is not required to register for or file Vermont corporate income tax return. No application or notification to Vermont is necessary.
However, if the organization has receipts that are classified as Unrelated Business Income by the IRS, there may be a filing requirement with Vermont.
A nonprofit organization which produced unrelated business income subject to federal income tax (receipts greater than $1,000 in Vermont) during the tax year is subject to Vermont corporate income tax laws and provisions, and required to file Form CO-411, Vermont Corporate Income Tax Return and pay the calculated tax.
Please see Technical Bulletin 59 and the Instructions for Form CO-411 Vermont Corporate Income Tax for details.
Requirements For Filing With The State
- Your nonprofit must obtain an Employer Identification Number (EIN) regardless of whether it will hire employees.
- You must also register for a Vermont Business Tax Account . Ready to register?
- The only nonprofits recognized by the State of Vermont for sales tax exemption are federally recognized 501(c)(3) organizations.
- After receiving your IRS Determination Letter, present Form S-3, Vermont Sales Tax Exemption Certificate for Resale and Exempt Organizations to sellers to use your exemption.
Vermont Sales and Use Tax
501(c)(3)s are exempt from sales and use tax. If you are exempt from federal income tax under 26 U.S.C. § 501(c)(3). The following steps must be taken for the exemption to be effective:
- Obtain a license by registering with the Vermont Department of Taxes as a 501(c)(3) organization
- Submit the Internal Revenue Service (IRS) determination granting tax exempt status with the application for the license
- Provide a completed Form S-3, Vermont Sales Tax Exemption Certificate For Purchases For Resale And By Exempt Organizations to any vendor from which the nonprofit is purchasing taxable items tax-free.
You will be required to pay tax in the following situations:
- If your 501(c)(3)had total sales of tangible personal property exceeding $20,000 in the prior year, the nonprofit must collect and remit the sales tax on any sales of tangible personal property in the current year.
- Generally, charges for admission to a place of entertainment provided by a nonprofit are exempt from sales tax. However, when gross sales of admission fees to a live performance by or on behalf of a nonprofit exceeded $100,000 in the prior year, the nonprofit must collect and remit sales tax on any entertainment in the current year.
Nonprofits that are not registered as a a 501 (c)(3) are not exempt from sales and use tax. Organizations with tax exempt status under § 501(c) (4)-(13) and (19), and political organizations under 26 U.S.C. § 527(e), are generally subject to sales tax. However, entertainment charges by such organizations are exempt at events meeting all the following criteria:
- No more than four special events in a calendar year
- Held over no more than four days
- Open to the public
Vermont Meals and Rooms Tax
Is my Nonprofit Organization Exempt from charging Meals and Rooms Tax?
Generally speaking, no. Nonprofits must charge, collect, and remit Vermont Meals and Rooms Tax.
Nonprofits are not required to charge tax when all three of the following conditions are met:
- Meals served or rooms rented occur on the premises of the nonprofit
- The nonprofit is organized and operated exclusively for religious or charitable purposes
- The activity is in furtherance of any purpose for which the nonprofit was organized