We provide information, so you can determine when sales and use tax applies to your business.
What is Sales and Use Tax?
Sales tax is charged on the retail sales of tangible personal property unless exempted by law. The sales tax rate is 6%. Retail sales include goods you sell at your place of business as well as at other locations in Vermont. Businesses must collect sales tax at the time and place of the sale and remit the tax to the state. Sales tax is destination-based. This means that the tax is applied based on the location where the buyer takes possession of the item or where it is delivered.
Certain municipalities also impose a local option tax on taxable sales. If you are doing business in, or delivering to, a municipality with a local option tax, taxable sales are subject to the additional 1% local option tax.
Use Tax is imposed on the buyer at the same rate (6%) as the sales tax. The buyer pays the Use Tax when the sellers fail to collect the sales tax, or the item is purchased from a source where no tax is collected. The Use Tax applies to items taxable under the Sales Tax.
How to Calculate Sales Tax
To determine tax due, multiply the sales amount by 6% (or 7% if the sale is subject to local option tax), and round up to the nearest whole cent according to the following rules:
- Tax computation must be carried to the third decimal place, and
- The tax must be rounded to a whole cent using a method that rounds up to the next cent whenever the third decimal place is greater than four.
Sellers may elect to compute the tax due on a transaction on an item or an invoice basis. This rounding rule may be applied to the aggregated state and local taxes.
When is Use Tax Paid?
- When you make a purchase from a vendor not registered to collect tax with the state of Vermont
- When you use property you normally manufacture for sale
- When you use property in the operation of your business or for personal use that you originally purchased for resale with an exemption certificate
- Self-employed individuals purchasing items for use in their business must follow the rules for businesses.
Individuals may also be responsible for personal use tax on Vermont taxable purchases where sales tax was not paid and must be claimed on the Vermont personal income tax return.
Before You Open for Business:
Vermont businesses, including nonprofits, must register for a business tax account and license prior to collecting the tax. Registration is free.
Examples of types of businesses required to register for an account are:
- Sellers of tangible personal property at retail
- Transient vendors coming into Vermont for short periods of time
- Vendors with no permanent Vermont address
- Nonprofit organizations, even if applying for exemption
- Manufacturers that sell tangible personal property at wholesale
Ready to register for your business tax account?