When starting a new business, there are some basic steps to take as follows:
Step 1: Obtain a Federal Employer Identification Number
A Federal Employer Identification Number (FEIN), also known as a Federal Tax Identification Number, is a nine-digit number used to identify a business entity. Generally, a business needs an FEIN, which is assigned by the IRS, but not all businesses may need one depending on the business structure. If you plan to hire employees, you must obtain an FEIN. If you are unsure about whether you need an FEIN, the IRS can walk you through a quick Q and A.
You should have one FEIN per business and use your FEIN for business activities only. If you purchased an existing business, do not use the previous owner’s FEIN. You must apply for a new FEIN.
Buying an Existing Business
If you are the new owner of an existing business, you should apply for a new Federal Employer Identification Number (FEIN). Do not use the previous owner’s FEIN.
Once you have received your new FEIN, contact the Vermont Department of Taxes in writing to provide any new information on the company’s Vermont business tax accounts.
Request a letter from the Department of Taxes stating the amount to be held in escrow to cover any outstanding tax liability.
If the company does not have the required accounts to collect tax appropriate to the business, you must apply for them.
Step 2: Register your business with the Vermont Secretary of State
Before you begin to do business in Vermont, you must register your business with the Vermont Secretary of State. The Secretary of State’s website offers an Online Business Service Center with guidance to get your started. If you have never owned a business, we recommend you start there to learn about trade names, business structures, licensing, permitting, signage, insurance, etc.
Step 3: Register for a business tax account
If you plan to sell tangible personal property, rent rooms, sell meals and/or alcohol, or hire employees, you must register for a business tax account before doing business. Each tax type—Vermont Sales and Use Tax, Vermont Meals and Rooms Tax, and Vermont Withholding Tax—requires a separate account.
Obtain and display appropriate licensing
You also must obtain appropriate licensing as required. A business tax license authorizes you to collect Vermont taxes on behalf of the State of Vermont. When you apply for and receive a license authorizing you to collect state tax, you should display it in your business where it can be easily seen by customers (for example, near a cash register or at a front desk). You must then hold the state tax you've collected in trust until you remit it to the Vermont Department of Taxes by the due date.
Please note: If you register online through the Vermont Secretary of State or with the Department of Taxes through myVTax, you will receive your registration and licensing more quickly than submitting a paper application.
What you need to register for a business tax account
Before you begin the registration process, we recommend you collect all the information you will need to complete the application. This includes the following:
- Business type (Sole Proprietorship, Partnership, Single Member LLC, LLC, S-Corporation, C-Corporation, Federal Government, Vermont State Government, 501(c)(3) Tax-exempt Nonprofit Organization, etc.)
- Business Name
- Federal Employer Identification Number (apply to the IRS, and it will assign a number to your business)
- Social Security Number (sole proprietorship only)
- Business principals—names and Social Security Numbers
- Person to contact for the business
- Mailing address
- Physical address
- Phone number and fax number
- Email address
- Date authorized to do business in Vermont by Secretary of State
- State of incorporation (LLC, Partnership, S-Corp or C-Corp)
- Business activity (Manufacturer, Wholesales, Retail, Construction, Hotel/Motel/Bed and Breakfast, Restaurant, Service, etc.)
- Name and information of previous owner (if applicable)
The application will guide you through the process by asking questions about the type of business tax account and licensing you need.
Filing and paying business or corporate income tax
If your business earns income by doing business in Vermont, you must file and pay income tax in Vermont. How you must file and what forms you must use depends on your business structure. See Miscellaneous Taxes for more tax types that may apply to your business.
Learn more about Corporate and Business Income.
Step 4: Determine which taxes you need to pay
To obtain information regarding the major business taxes find out which taxes apply to you:
- Sales & Use Tax – Applies to purchases and sales
- Meals & Rooms Tax – Applies to charges for meals and rooms
- Alcoholic Beverage Tax – Applies to charges for alcoholic beverages
- Local Option Tax – Applicable if doing business in or delivering products to a municipality with a 1% local option tax
- Corporate & Business Income Tax – Applies to businesses that earn income by doing business in Vermont
Depending on the goods and services your business provides, there may be additional taxes that apply. See Miscellaneous Taxes to learn more about other taxes that may apply to your business.