Meals and Rooms Tax for Nonprofits

If you want to charge for a meal or room and collect tax, you must first register for a Vermont Business Tax Account and obtain a license to collect meals and rooms tax.

All federally designated tax-exempt nonprofit organizations, no matter their IRS exempt designations, must charge, collect, and remit Vermont Rooms and Meals Tax unless specifically exempted. See Technical Bulletin 13.

The following nonprofits are not exempt from Vermont Meals and Rooms Tax:

  • Social clubs, fraternal organizations, and nonprofit organizations, including those listed under Section 501(c)(3) of the Internal Revenue Code
  • Government of states and municipalities other than Vermont
  • Vermont credit unions
  • Nonprofit medical service corporations
  • Nonprofit hospital service corporations
  • Private schools, private colleges, any school district located outside of the State of Vermont, and other non-profit organizations located within the state of Vermont.

Hospital service corporations, medical service corporations, and credit unions are subject to Vermont Meals and Rooms Tax, although they may be exempt from some other Vermont taxes. 32 V.S.A. § 9247.

Buying Meals and Renting Rooms

Vermont law does not provide any exemption for any tax-exempt nonprofit organization to buy meals or rent rooms tax-free. For example, if members of your nonprofit’s staff attend a conference and rent rooms at a hotel and eat meals at restaurants, they must pay Vermont Meals and Rooms Tax. See Reg. § 1.9202(10)-1.

Renting Out Rooms

Exemption For 501(c)(3) Nonprofits

501(c)(3) tax-exempt nonprofit organizations do not have to charge rooms tax on rentals of sleeping accommodations if all three are true:

  1. Room rentals are provided by a 501(c)(3) tax-exempt nonprofit.
  2. Rooms are on the premises owned and operated by the 501(c)(3).
  3. Room rentals are used exclusively to further an exempt purpose.

A 501(c)(3) nonprofit may sponsor an event off its premises at a location such as a conference at a public hotel or convention center. In this example, the nonprofit must pay the rooms tax on its rentals of accommodations and meeting rooms, even if the conference is to further the organization’s charitable purposes.

Selling Meals

Exemption for Any Tax-Exempt Nonprofit

Meals served by any federally designated tax-exempt nonprofit organization are exempt from meals tax if the nonprofit meets all four requirements:

  1. Meals are served or furnished on the premises of the nonprofit.
  2. The nonprofit is organized and operated exclusively for religious or charitable purposes.
  3. Meals served are meant to further any of the purposes for which the entity was organized.
  4. Net proceeds of the food or beverage sold are used exclusively for the purposes of the nonprofit.

Any nonprofit may have a fundraising dinner at a location other than on its premises, such as restaurant or banquet hall. In this example, the nonprofit must charge meals tax on the meals served there, even if the proceeds are used to further its mission and purpose.

Exemption for Meals Sold At Bazaars, Fairs, Picnics, Church Suppers, Etc.

Meals sold by any federally designated tax-exempt nonprofit organization at bazaars, fairs, picnics, church suppers, or similar events are exempt from tax if the nonprofit meets both of the following conditions:

  1. The nonprofit holds no more than four such events in a calendar year.

    Please note: If your nonprofit sells meals more than four times in a calendar year, the Department considers sales of food or beverage to be a regular course of business. We will require you to register for a Vermont Business Tax Account and obtain a license to collect tax. You must then charge, collect, and remit meals tax.

  2. Each event is no more than a day long.

Taxation of Credit Unions

Credit unions are chartered at either the federal or state level. Federal credit unions are exempt from federal income tax under Internal Revenue Code, section 501(c)(1). State credit unions are exempt from federal income tax under the Internal Revenue Code, section 501(c)(14). Both federal and state credit unions are exempt from Vermont income tax under Vermont law at 8 V.S.A. § 30901.

Vermont law exempts federal and state credit unions from some state taxes. Credit unions must pay state and municipal property taxes and personal property taxes. Credit unions are exempt from Vermont Sales and Use Tax, but Vermont Meals and Rooms Tax applies to credit unions.

Quick Reference Table

Nonprofit Type Buying Renting or Selling
Nonprofits (all categories) Must pay meals and rooms tax Must charge, collect, and remit meals and rooms tax (see below for exceptions)
Exception: 501(c)(3) for rooms tax NA

Exempt from rooms tax only when all three criteria are met:

  1. Room rentals are provided by a 501(c)(3) tax-exempt nonprofit;
  2. Rooms are on the premises owned and operated by the 501(c)(3); and
  3. Room rentals are used exclusively to further an exempt purpose.
Exception: any tax-exempt nonprofit for meals tax NA

Exempt from meals tax only when all four criteria are met:

  1. Meals are served or furnished on the premises of the nonprofit;
  2. The nonprofit is organized and operated exclusively for religious or charitable purposes;
  3. Meals served are meant to further any of the purposes for which the entity was organized; and
  4. Net proceeds of the food or beverage sold are used exclusively for the purposes of the nonprofit.
Exception: any nonprofit that sells meals at bazaars, fairs, picnics, church suppers, etc. NA

Exempt from meals tax only when both criteria are met:

  1. The nonprofit holds no more than four such events in a calendar year and
  2. Each event is no more than a day long.
Tax-exempt nonprofits other than 501(c)(3)s from another state Subject to Vermont tax laws Subject to Vermont tax laws