Overview
Vermont Sales and Use Tax applies to all sales of tangible personal property (TPP), unless an exemption applies. Veterinary services are not subject to tax but must be itemized on a receipt or invoice when listed with taxable items.
Exemptions
Prescription Drugs
Prescription drugs intended for animal use are not subject to sales tax. This applies whether sold by a veterinarian or a pharmacist. No exemption certificate is required.
For this exemption, the term “prescription” has a limited, specific meaning. It means that a drug may only be dispensed through the written order of a licensed veterinarian. Even if a veterinarian writes a prescription, any product that may be legally sold without a prescription is subject to tax (unless some other exemption applies).
The Vermont Department of Taxes will treat any drug as exempt if it has a label stating one of the following, as required by the U.S. government: “prescription only,” “Rx only,” or “Caution: Federal law restricts this drug to use by or on the order of a licensed veterinarian.” See 21 U.S.C. § 353(b),(f); 21 C.F.R. § 201.105.
Over-the-counter animal drugs prescribed and dispensed for extra label use are exempt, but only if they include the labeling required by federal law. See 21 C.F.R. § 530.12.
Drug Compounding
Sometimes a veterinarian or pharmacist will compound two or more substances to meet a patient’s needs. A drug is exempt as a prescription drug if it is the result of multiple compounded drugs combined together and is legally required to have its own unique “prescription only” and drug legend labels. For tax purposes, the compounded product is a new prescription drug.
If there is no additional labeling on the final product, you must charge separately for the component parts when combining taxable ingredients with exempt prescription drugs. This is to simplify tax compliance and to avoid under-collection of tax.
Food
Food and food ingredients are exempt from sales tax if sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. Note that this is limited to food that is sold for humans, which means it does not apply to pet food. Manufacturers’ claims, such as “human grade,” do not make a pet food product exempt as human food. It does, however, apply to any edible botanicals that can be sold for ingestion or chewing by humans for taste or nutritional value, even when sold for pets. Non-prescription vitamins and dietary supplements intended for consumption by humans are also exempt as food, even when sold for use by pets.
Cannabidiol (CBD) Products
Most CBD products sold for humans or animals are taxable and do not qualify for an exemption. Unless approved by the U.S. Food and Drug Administration, CBD products do not qualify as exempt drugs or as exempt food. See more information regarding the taxability of CBD.
Durable Medical Equipment and Prosthetics
Durable medical equipment and prosthetics intended for animal use are not subject to sales tax. The Department will generally consider an item “durable medical equipment” if it can withstand repeated use, is primarily and customarily used to serve a medical purpose, generally is not useful to an animal in the absence of illness or injury, and is not worn on or in the body. Repair and replacement parts would also be exempt. This means medical equipment and devices used in the veterinary office to diagnose or treat animals are exempt. Items that cannot withstand repeated use are not exempt as durable medical equipment but may qualify as exempt veterinary supplies (see below).
The Department will generally consider an item a prosthetic if it is a replacement, corrective, or supportive device that is worn on or in an animal’s body to artificially replace a missing portion of the body, prevent or correct a physical deformity or malfunction, or support a weak or deformed portion of the body.
Supplies
Veterinary supplies are not subject to sales tax. A veterinary supply is tangible personal property therapeutic in nature, not normally used absent illness or injury, and not intended for repeated usage. Veterinary supplies used to spay and neuter animals and to run diagnostic tests are considered therapeutic and are therefore exempt. Over-the-counter drugs are never considered to be veterinary supplies. Taxable over-the-counter drugs are nonprescription products with an active ingredient and include antiseptics, antifungals, skin medications, and analgesics.
Examples of supplies that are exempt include bandages and surgical dressings, hypodermic syringes and needles, and disposable heating pads. Examples of supplies that are not exempt from tax include office, cleaning, animal training, grooming, and boarding supplies.
| Quick Reference Chart | |
|---|---|
| Taxable Products Sold for health or medical benefit |
Nontaxable Products Sold for Health or Medical Benefit |
| Over-the-counter drugs intended for animal use (such as some flea and tick medications, or anything else, that can be sold without a written order by a veterinarian) | Prescription drugs intended for animal use (must be dispensed only by or upon the lawful written order of a licensed veterinarian) |
| Pet food or treats (even if referred to as prescription) | Botanicals sold for ingestion or chewing by humans and are consumed for their taste or nutritional value |
| Pet toys, leashes, collars, bowls, bedding, and shampoos | Non-prescription vitamins and dietary supplements intended for use by humans |
| Devices and supplies used for comfort but are not primarily therapeutic or medical in purpose | Durable medical equipment intended for animal use |
| Prosthetics intended for animal use | |
| Veterinary supplies | |
Vermont Sales and Use Tax
Sales Tax
A sales tax of 6% is imposed on the retail sales of tangible personal property (TPP) unless exempted by Vermont law. Sales tax is destination-based, meaning the tax is applied based on the location where the buyer takes possession of the item or where it is delivered. Sellers should collect Vermont Sales Tax on TPP delivered to destinations in Vermont at the time and place of the sale.
Businesses are responsible for collecting sales tax from their customers and then filing and paying the tax to the State of Vermont. Sales tax is reported using the accrual basis, requiring that sales tax be charged at the time of the sale and reported even if full payment for the sale has not been received by the seller.
Use Tax
Use tax is paid by the buyer of an item when the purchase subject to Vermont sales tax is made from a seller that is not registered by the state of Vermont to collect tax. Sales tax and use tax work together to create the same tax result whether a seller collects sales tax or not. Use tax has the same rate, rules, and exemptions as sales tax.
Learn more about Vermont Sales and Use Tax.
Local Option Tax May Apply
Some Vermont municipalities impose a local option tax of 1% in addition to state sales tax. Businesses are responsible for collecting and remitting local option tax to the Vermont Department of Taxes. Note: Local option tax does not apply to use tax.
Business Tax Account and License
Businesses and nonprofits must register for a Vermont Business Tax Account and license before collecting Vermont tax. Registration is free.