Getting Started with Meals and Rooms Tax

If your business is selling meals or renting rooms, you must charge, collect, and remit Vermont Meals and Rooms Tax to the Vermont Department of Taxes. Be sure to post your Vermont license authorizing you to collect meals and rooms tax in a place where customers can see it. If you are selling alcohol for immediate consumption, please see information on the Alcoholic Beverage Tax.

Before You Open for Business

Vermont businesses, including nonprofits, must register for a Vermont Business Tax Account and a Meals & Rooms Tax license prior to collecting the tax. Registration is free.

Apply for Your License

If your business will be collecting Meals and Rooms Tax, you are required to obtain a license from the Department. The license authorizes you to collect taxes on behalf of the State of Vermont. The license must be displayed at your place of business where it can be easily seen by customers. There is no charge for a Meals and Rooms Tax license.

Multiple Locations

If you operate in more than one location in Vermont you will have just one Vermont Business Tax Account, but each location must obtain its own license and will file its own meals and rooms tax schedule. To obtain additional licenses, you must register each location separately.

Taxable Rooms and Meals

Any meal offered for sale by a “restaurant” or room offered for sale by a “hotel.” It is important to know what is included in the definition of a “restaurant” or a “hotel.” Please refer to the Vermont Meals and Rooms Tax regulations and publications for more information.

Please note: If you offer a room in your home (or any kind of privately owned lodging) for rent and your rental falls within the guidelines for a “hotel,” you must collect and remit rooms tax.

All food and beverage are taxable when sold by restaurants.

When food and beverage are sold by non-restaurants, non-pre-packaged foods are taxable. Examples include sandwiches (except frozen), heated food or beverages, items from a salad bar, and party platters and prepared food.

How to Calculate and File Meals and Rooms Tax

Tax Rate

To determine tax due, multiply the sale amount by 9% (or 10% if the sale is subject to local option tax), and round up to the nearest whole cent according to the following rules:

  1. Tax computation must be carried to the third decimal place, and
  2. 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.

Go to our Meals & Rooms Tax section for a list of filing methods, forms, and tools to help you get started.

Exempt Meals

These are not considered taxable meals, even when sold by a restaurant:

  • Self-serve, bulk, non-prepackaged grocery items such as fruit, vegetables, candy, flour, nuts, and coffee beans
  • Grocery-type items furnished for take-out such as whole pies or cakes, loaves of bread, single serving bakery items sold in quantities of three or more

Groceries

Groceries are not taxable. Generally, groceries are items of food sold not for immediate consumption, but intended for consumption later off the premises of the seller.

Resale Exemption

Meals and beverages are exempt when purchased for resale. To be eligible, the purchaser must provide Form M-3, the Vermont Meals Tax Exemption Certificate for Purchases of Meals for Resale. When the food or beverage purchased for resale is subsequently sold, the subsequent purchase is subject to tax. 32 V.S.A. § 9202(10)(D)(iii).

To receive the exemption, the buyer must present to the seller an accurate and properly executed exemption certificate, Form M-3, Vermont Meals Tax Exemption Certificate for Purchases of Meals For Resale for the exempted sale. The responsibility is on the seller to verify that the buyer will resell the meals.  If the seller accepts an exemption certificate with no reasonable expectation that the meals will be resold, the seller will be responsible for the meals tax not collected from the buyer.

The exemption certificate must be received at the time of sale and must be signed, dated, and complete. Sellers must retain exemption certificates for at least three years from the date of the last sale covered by the certificate to document why tax was not collected from the buyer.

Once the buyer resells the meals to the final customer, it must collect meals tax from the customer and remit the tax to the Department of Taxes.

For more exemptions for meals and rooms tax, see information on vending machines and tax-exempt nonprofits.

Other Specific Circumstances

Meals and beverages (but not alcoholic beverages) are tax-free when sold under the following specific circumstances:

1. Religous or Charitable Nonprofits

Meals are sold tax free by nonprofits when the following conditions are met. 32 V.S.A. § 9202(10)(D)(ii)(I).

  • The meals must be served or furnished on the premises of a nonprofit corporation or association. 
  • The nonprofit must be organized and operated exclusively for religious or charitable purposes. 
  • The sale of the meals must be in furtherance of any of the purposes for which the nonprofit was organized.
  • The net proceeds of the sales of food or beverage must be used exclusively for the purposes of the corporation or association.  

Note: Meals sold to nonprofits, including federally exempt 501(c)(3) organizations, are subject to meals tax.

2. Schools

Meals are sold tax-free when “served or furnished on the premises of a school.” 32 V.S.A. § 9202(10)(D)(ii)(II). 

A school “means an incorporated nonstock educational institution, including an institution empowered to confer educational, literary, or academic degrees, which has a regular faculty, curriculum, and organized body of pupils or students in attendance throughout the usual school year, which keeps and furnishes to students and others records required and accepted for entrance to a school of secondary, collegiate, or graduate rank, no part of the earnings of which inure to the benefit of any individual.” 32 V.S.A. § 9202(9). 

For more information, see Technical Bulletin TB-48, Application of Meals and Rooms Tax for Meals and Rooms Charges at a School or College.  

3. Government

Meals are sold tax-free when both of the following two conditions are met: 32 V.S.A. § 9202(10)(D)(ii)(III). 

  1. The meals must be “served or furnished on the premises” of government institutions, which includes “any institution of the State, political subdivision thereof or of the United States.”  An example of a political subdivision of the State is a municipality. 
  2. The meals must be served to inmates or employees of the government institution. 

State of Vermont. When the State is the customer purchasing the meal, it must be sold to and paid for directly by the State of Vermont.  Purchases by a Vermont government employee off of State premises are taxable even if the State reimburses the employee for the purchase. 

Federal government. When the federal government is the customer purchasing the meal, it must be sold to and paid for directly by the federal government. Purchases by a federal government employee off of federal premises are taxable even if the federal government reimburses the employee for the purchase. 

Governments of other states. Meals sold to other state governments or their employees are fully taxable. 

Foreign governments. Foreign diplomats who provide an exemption card issued by the U.S. Department of State are exempt. 

For more detailed information on government exemptions, see Technical Bulletin TB-13, Purchaser-Based Treatment of the Vermont Meals and Rooms Tax and Sales and Use Tax.  

4. Meals Prepared by Employees and Served in Licensed Hospitals

Meals are sold tax-free when “prepared by the employees thereof and served in any hospital licensed under 18 V.S.A. chapter 43” by the State Board of Health. 32 V.S.A. § 9202(10)(D)(ii)(IV).  

5. Passengers on Trains, Buses, or Airplanes

Meals are sold tax-free when “furnished by any person while transporting passengers for hire by train, bus, or airplane if furnished on any train, bus, or airplane." 32 V.S.A. § 9202(10)(D)(ii)(V).

6. Children's Summer Camps

Meals are sold tax-free when “furnished by any person while operating a summer camp for children, in such camp.” 32 V.S.A. § 9202(10)(D)(ii)(VI).  

7. Nonprofits Selling Meals at Events

Meals are sold tax-free when “sold by nonprofit organizations at bazaars, fairs, picnics, church suppers, or similar events:

  • to the extent of four such events of a day's duration, held during any calendar year;
  • provided, however, where sales are made at such events by an organization required to have a meals and rooms registration license or otherwise required to have a license because its selling events are in excess of the number permitted,
  • the sale of such food or beverage shall constitute sales made in the regular course of business and are not exempted from the Vermont meals and rooms gross receipts tax." 32 V.S.A. § 9202(10)(D)(ii)(VII).  

8. Employer-Provided Meals 

Meals are sold tax-free when “furnished to any employee of an operator as remuneration for his employment”. 32 V.S.A. § 9202(10)(D)(ii)(VIII).  

9. Elderly Recipients 

Meals are sold tax-free when provided to the elderly pursuant to the Older Americans Act, 42 U.S.C. Chapter 35, Subchapter III. 32 V.S.A. § 9202(10)(D)(ii)(IX).  

10. SNAP Recipients 

Meals are sold tax-free when “purchased under the USDA Supplemental Nutrition Assistance Program (SNAP)." 32 V.S.A. § 9202(10)(D)(ii)(X).  

11. Retirement Communities 

Meals are sold tax-free when “served or furnished on the premises of a continuing care retirement community certified under 8 V.S.A. chapter 151." 32 V.S.A. § 9202(10)(D)(ii)(XI).  

12. Nursing Homes

Meals are sold tax-free when “prepared and served by the employees, volunteers, or contractors of any nursing home, residential care home, assisted living residence, home for the terminally ill, therapeutic community residence as defined pursuant to 33 V.S.A. chapter 71, or independent living facility; provided, however, that “contractor” under this subdivision excludes meals provided by a restaurant as defined by subdivision (15) of this section when those meals are not otherwise available generally to residents of the facility.” 32 V.S.A. § 9202(10)(D)(ii)(XII).  

Alcoholic Beverages

Alcoholic beverages sold for immediate consumption are subject to the Alcoholic Beverages Tax under 32 V.S.A. § 9741(c). The exemptions from tax for meals and rooms (for nonprofits, schools, government, etc.) do not apply to the furnishing of alcoholic beverages for immediate consumption.

Meals, Rooms, Alcoholic Beverage Tax Included in Pricing

Businesses are required to give notice to their customers when the Vermont Meals and Rooms Tax or Alcoholic Beverage Tax is included in the pricing of food, room rentals, or served alcoholic beverages.

You must do one of the following:

  1. Provide a sign or signs with the type of tax charged in an area where customers may view them, such as near the cash register.
  2. Make a statement on the menu, price list, bill, invoice, statement, or receipt given to the customer.

In addition, you must provide an itemized bill to any purchaser upon request.

Below is an example of how a notice might read:

All prices include the Vermont Meals Tax

OR

All prices include the Vermont Alcoholic Beverage Tax

 

All businesses that include the 9% meals tax and the 10% alcoholic beverage tax in their prices must give notice. This includes, but is not limited to, the following:

  • Restaurants and bars
  • Hotels
  • Mobile facilities such as street vendors and lunch wagons
  • Vending machines
  • Other businesses and facilities described in 32 V.S.A. §  9202(15)

Local Option Tax

If you are doing business in or delivering products to a municipality with a 1% local option meals and/or rooms tax, you must also collect and remit that tax to the Vermont Department of Taxes. Learn more about Local Option Tax, including a list of local option towns.

Other Local Taxes

The City of Burlington, City of Rutland, and City of St. Albans administer and collect their own local meals, entertainment, lodging, or alcoholic beverage taxes.  If you have a business in Burlington, Rutland City, or St. Albans City, please contact the appropriate city for information on how to pay and remit the tax.

Contact the City of Burlington:
(802) 865-7000

Contact the City of Rutland:
(802) 773-1800

Contact the City of St. Albans:
(802) 524-1500

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