Retail sales of tangible personal property are always subject to Vermont Sales Tax unless specifically exempted by Vermont law. This applies to any sale, lease, or rental but does not include resale, sublease, or subrental.
We will not cover all exemptions here but will discuss the three broad categories of exemptions, exemptions commonly used, and provide examples. For more information on Vermont Sales and Use Tax and exemptions, see Vermont law at 32 V.S.A Chapter 233 and Vermont regulation at Reg. § 1.9701.
Exemption for Agricultural Machinery and Equipment
Agricultural machinery and equipment is exempt from sales and use tax if it is used predominately in the production of agricultural or horticultural commodities for sale. “Predominately” means 75 percent of the time it is in use. Learn more about the exemption for agricultural machinery and equipment.
Exemption for Forestry and Wood Products Machinery, Equipment, and Repair Parts
In 2017, purchases of specific types of machinery used in timber cutting, timber removal, and the processing of timber or other solid wood products, as well as repair parts, became exempt from the Vermont Sales and Use Tax. In 2019, purchases of specific accessories used on these machines also became exempt. Some purchases require a completed exemption certificate. Learn more about the exemption for forestry and wood products machinery, repair parts, and accessories, and print an exemption certificate.
Exemption for Advanced Wood Boilers
Beginning July 1, 2018, sales of advanced wood boilers are exempt from Vermont Sales and Use Tax. Act 194(S.276), Secs. 25-27. 32 V.S.A § 9741(52). Buyers and sellers of wood boilers should review the questions and answers below to understand how the exemption is applied.
What type of boiler or furnace is exempt as an “advanced wood boiler"?
A boiler or furnace is exempt if it is:
- installed as a primary central heating system;
- has a higher heating value or gross calorific value of 85 % or more;
- contains a fuel feed system with at least one-week fuel storage and automated startup and shutdown;
- meets efficiency and air emissions standards established by the Vermont Department of Environmental Conservation.
How do I know whether an advanced wood boiler meets the heating value or efficiency standards?
If the information relating to heating value, efficiency standards, or emissions standards are not available from a manufacturer, contact the Vermont Clean Energy Development Fund for advice on whether a system qualifies.
Is all equipment and personal property sold with an exempt boiler or furnace also exempt?
No. Equipment that directly contributes to the operation of the system is exempt. Fuel storage and conveyance equipment that can be attached to a system are exempt as part of the system, as well as connected control devices. Buffer tanks are exempt if they are required for an advanced wood boiler system to operate. Electrical wiring and components used to connect a boiler, storage tank, and a control device are also exempt. However, fuel, heat distribution equipment (such as zone circulator pumps, distribution piping, ducting, and radiators), cleaning supplies, shelving, lattices, and similar items are not exempted as part of the system.
How do I know if a sale takes place on or after July 1? What if the customer placed a deposit or made a payment prior to July 1?
The exemption applies if the customer takes possession of the advanced wood boiler on or after July 1, 2018. See Vermont Sales and Use Tax Regulations, Reg. § 1.9701(5)-1.
As the seller of an exempt advanced wood boiler, how do I track that a sale was exempt in case of an audit?
The seller should itemize an invoice so that the tax-exempt advanced wood boiler is separate from other taxable tangible personal property. A copy of the invoice should be kept for a minimum of three years.
This exemption is based on the type of organization making the purchase or sale. Some exempt organizations are the federal government, State of Vermont, nonprofit organizations qualifying for exempt status under federal law at 26 U.S.C. § 501(c)(3), agricultural organizations qualifying under 26 U.S.C. § 501(c)(5) in some circumstances, volunteer fire departments, ambulance companies, and rescue squads.
The exemptions for these and other qualifying organizations are not always blanket exemptions. The exemption may depend on what is purchased, the type of event being held where items are sold, and other restrictions placed on the exemption.
Some entity-based exemptions are very specific and narrow. For example, sales of the United States flag either to or by veterans’ organizations exempt under federal law at U.S.C. § 501(c)(19) are exempt from tax.
Organizations that qualify for tax exemption in Vermont must register with the Vermont Department of Taxes before making sales or purchases. Learn more about nonprofits and exempt organizations.
An item is exempt from tax based on how the purchaser actually uses the item. For example:
- The sale of fertilizer is subject to sales tax. If you buy fertilizer for the flower beds surrounding your home, you will pay the sales tax. If, however, the fertilizer is to be used directly and exclusively for farming purposes, it is exempt from tax.
- Tangible personal property that becomes a component of a manufactured product is also exempt. If you’re a manufacturer who buys a bolt that becomes part of a product for sale, then you will not pay tax. If, however, you buy a bolt at the hardware store to repair your fence, you will pay the sales tax.
An item is exempt from tax based on the product type or category. Tangible personal property in this category is exempt from sales tax regardless of who purchases the product or how it will be used. For example, drugs intended for human consumption is a product-based exemption. This means aspirin is exempt whether the purchaser uses the drug to relieve a headache or to nourish houseplants.
Another example is food sold by a grocery store or market and which is intended for human consumption later off the premises of the seller. It does not matter whether you are purchasing canned tuna for yourself to make the next day’s lunch or to feed your cat. The tuna is exempt from sales tax for any use.
To obtain an entity-based, used-based, or resale exemption, the buyer must provide the seller with an exemption certificate at the time of purchase. The seller retains the exemption certificate for at least three years from the date of the last sale covered by the certificate. Exemption certificates are not filed with the Vermont Department of Taxes, but the seller must produce an exemption certificate when it is requested by the Department.