If you want to make a sale and collect sales tax, you must first register for a Vermont Business Tax Account with the Vermont Department of Taxes and obtain a license to collect sales and use tax.
Buying Taxable Items
Only federally designated 501(c)(3) tax-exempt nonprofit organizations are normally exempt from Vermont Sales Tax when making purchases of items that are taxable in Vermont. If your eligible 501(c)(3) nonprofit wants to use the exemption to buy items subject to sales tax in Vermont, you must first register for a Vermont Business Tax Account with the Vermont Department of Taxes.
After your business tax account is set up with the Department, you may make qualifying tax-exempt purchases. To do this, first complete Form S-3, Vermont Sales Tax Exemption Certificate for Resale and Exempt Organizations. Please read the instructions on the second page of Form S-3 carefully before you complete and submit the form. Complete the form accurately and in its entirety. Present Form S-3 to the seller at the time of purchase.
Vermont Use Tax is due if tax is not collected on a taxable purchase made without an exemption. This usually occurs when the seller is not registered with the Vermont Department of Taxes to collect tax and therefore does not charge Vermont Sales Tax. Examples of sellers who do not charge sales tax are online and other out-of-state vendors.
Following the United States Supreme Court decision in South Dakota v. Wayfair, the out-of-state vendor provisions of Vermont Act 134 of 2016 became effective. Starting July 1, 2018, all out-of-state vendors who make sales into Vermont above a certain threshold are required to register with the Vermont Department of Taxes, and to collect and remit sales tax. That threshold is $100,000 of sales, or 200 individual transactions into Vermont in any preceding twelve-month period. An out-of-state seller, including a non-profit, who makes sales of at least that threshold amount must register, and collect and remit sales tax. For more information see South Dakota v. Wayfair.
As the buyer, the nonprofit must pay the sales tax in the form of use tax. Both sales tax and use tax have the same rate of 6%. If you pay less tax than the 6% rate in another state, you must pay the difference between the two rates.
You may file and pay use tax online though myVTax. If you prefer to use a paper form, use Form SUT-451, Sales and Use Tax Return if you have a Vermont Business Tax Account. If you don’t have an account, use Form SUT-452, Vermont Use Tax Return.
Other Tax-Exempt Nonprofits Are Subject to Tax
A tax-exempt nonprofit organization that is not a 501(c)(3) is not exempt from Vermont Sales and Use Tax. Organizations with tax exempt status under subsections 501(c)(4)-(13) and (19), and political organizations under 26 U.S.C. § 527(e), are subject to sales and use tax unless specifically exempted.
Exception for 501(c)(19) nonprofits: Vermont’s only exception for other nonprofits is that 501(c)(19) organizations (veterans’ organizations) may purchase or sell United States flags tax-free in Vermont. See 32 V.S.A § 9741(33). There is no exemption certificate for this exception, and Form S-3 may not be used for this purpose.
If the seller refuses to exempt the sale, the veteran’s organization may pay the tax charged and then request a refund. To request a refund, submit Form REF-620, Application for Refund of VT Sales and Use Tax or Meals and Rooms Tax.
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.
Tax-Exempt Nonprofits from Another State
Vermont tax laws apply to tax-exempt nonprofit organizations from other states that come into Vermont to conduct business or for an event in the same way they apply to Vermont-based organizations. In other words, they are not exempt from Vermont taxes just because they may be exempt from similar tax types in their own states.
Selling Taxable Items
When your 501(c)(3) tax-exempt nonprofit organization is selling taxable items, such as tangible personal property, you do not have to collect sales tax as long as you meet the requirements for the exception explained below.
If the town where you are selling tangible personal property has a Local Option Tax, you are also exempt from this tax.
Exception for sales more than $20,000 in the previous year: If your 501(c)(3) tax-exempt nonprofit organization’s total sales of tangible personal property exceeded $20,000 in the prior year, you must collect and remit the sales tax on any sales of tangible personal property in the current year. If the town where you are selling tangible personal property has a Local Option Tax, you also must collect and remit this tax to the Department of Taxes. See Technical Bulletin 19 for more information.
Sales Tax On Charges For Admission To Events
Charges for admission to a place of entertainment provided by a 501(c)(3) tax-exempt nonprofit organization are exempt from sales tax.
Exception for gross sales more than $100,000 in the previous year: If gross sales of admission fees to a live performance by or on behalf of your tax-exempt nonprofit organization exceeded $100,000 in the previous year, you must collect and remit sales tax on any entertainment charge in the current year. If the town where the event is held has a Local Option Tax, you also must collect and remit this tax to the Department of Taxes.
Reminder: You must register for a Vermont Business Tax Account and obtain a license to collect sales tax on sales and admission charges before you begin charging for the event.
When You Are a Tax-Exempt Nonprofit Other Than A 501(c)(3)
If you are a tax-exempt nonprofit organization other than a 501(c)(3), you must charge tax on the admission to an event.
Exception: You do not have to charge tax on admission if you meet all three of the following criteria:
- No more than four special events in a calendar year
- Held over no more than four days
- Open to the public
In other words, this means that if:
- your nonprofit holds a monthly dinner/dance—12 per calendar year— you must charge sales tax on admission.
- your nonprofit holds a week-long fair or carnival—more than four days—you must charge tax on admission.
- your nonprofit holds a members-only event—not open to the public—you must charge sales tax on admission.
Quick Reference Table
|501(c)(3)||Tax exempt||Tax exempt (see below for exception)|
|Exception: 501(c)(3) with more than $20,000 in sales in previous year||NA||Must charge, collect, remit sales tax for current year|
|501(c)(3) charging admission to events||NA||Tax exempt (see below for exception)|
|Exception: 501(c)(3) with gross sales of more than $100,000 in previous year||NA||Must charge, collect, remit sales tax for current year|
|501(c)(19)||Flags only—tax exempt||Flags only—tax-exempt|
|Tax-Exempt orgs other than 501(c)(3)s||Must pay sales and use tax||Must charge, collect, remit sales tax for current year (see below for exception)|
|Exception: Tax-exempt orgs other than 501(c)(3)s charging admission to an event||NA||Exempt from sales tax only when all three criteria are met: 1) No more than four special events in a calendar year; 2) Held over no more than four days; and 3) Open to the public|
|Tax-exempt nonprofits other than 501(c)(3)s from another state||Subject to Vermont sales and use laws||Subject to Vermont sales and use laws|