We have compiled a list of some of the most frequently asked questions about Vermont Sales Tax and the U.S Supreme Court decision
If you still have questions after reviewing this list, please contact us directly.
What was the U.S Supreme Court decision (South Dakota v. Wayfair)?
On June 21, 2018, the U.S. Supreme Court ruled in South Dakota v. Wayfair that sellers can be required to collect sales taxes in states where the sellers do not have physical presence. This decision overruled the 1992 case of Quill v. North Dakota. 504 U.S. 298 (1992).
The Wayfair decision highlighted the need for state laws to protect small businesses in order to be constitutionally valid. One way that states have tried to protect small, out-of-state businesses is by setting thresholds that must be reached before a state can legally impose the obligation to collect sales tax. The South Dakota law at issue in Wayfair, which is substantially the same as Vermont’s law (see below), requires a business to meet either a monetary or a transactional threshold before that business has an obligation to collect and remit sales tax.
What is the impact of the Wayfair decision on sales into Vermont?
The U.S. Supreme Court decision in South Dakota v. Wayfair changes who is required to collect sales tax on sales into Vermont. Shortly after the Wayfair decision was handed down, certain remote sellers became required to collect and remit sales tax to Vermont.
Vermont Act 134 of 2016 requires all vendors who make sales of tangible personal property into the state above a certain threshold to collect Vermont Sales Tax on their taxable sales, even if the vendors do not have a physical presence in Vermont. 32 V.S.A. § 9701(9)(F), (G); see Act 134 of 2016, Secs. 27, 41(5). This law had a contingent effective date, which means that it only took effect when certain conditions were met. One of these conditions was that a controlling court had to overrule the physical presence requirement of Quill v. North Dakota. The law would then take effect on the first day of the first quarter after the court decision. The U.S. Supreme Court’s decision in South Dakota v. Wayfair on June 21, 2018 overruled the physical presence requirement of Quill, therefore triggering Vermont’s remote seller provision. The first day of the first quarter after the decision was July 1, 2018. As a result, starting July 1, 2018, certain remote sellers are required to collect and remit sales tax.
What is the Vermont sales tax?
Vermont law imposes a 6% sales tax on retail sales in the state. 32 V.S.A. § 9771.
What is a retail sale?
Retail sale is defined under Vermont law as any sale, lease, or rental for any purpose other than for resale, sublease, or subrent. The Vermont sales and use tax statute reads:
"Retail sale" or "sold at retail" means any sale, lease, or rental for any purpose other than for resale, sublease, or subrent, including sales to contractors, subcontractors, or repair persons of materials and supplies for use by them in erecting structures or otherwise improving, altering, or repairing real property. […]. 32 V.S.A. § 9701(5).
The Vermont Sales and Use Tax Regulation reads:
The term "retail sale" means a sale for any purpose other than for resale, sublease, or subrent. The term "sale" includes any transfer of title or possession or both, exchange or barter, rental, lease or license to use or consume, conditional or otherwise, in any manner or by any means whatsoever for a consideration, or any agreement therefore. Vt. Reg. § 1.9701(5)-1.
What is tangible personal property? Which sales of tangible personal property are taxable in Vermont?
Vermont imposes a 6% sales tax on retail sales in the state of certain categories of transactions, including tangible personal property. 32 V.S.A. § 9771. Tangible personal property is “personal property which may be seen, weighed, measured, felt, touched, or in any other manner perceived by the senses. "Tangible personal property" includes electricity, water, gas, steam, and prewritten computer software.” 32 V.S.A. § 9701(7). Tangible personal property is therefore taxable in Vermont, unless an exemption applies. For more information on the Vermont Sales and Use tax, see 32 V.S.A. Chapter 233; Vermont Sales and Use Tax Regulation, § 1.9701.
Who is a remote seller?
Generally, a remote seller is a person who makes sales of products to customers into a state, using the Internet, mail order, or telephone, without having a physical presence in that state. Vermont’s statutory definition of vendor includes remote sellers and sets a minimum threshold to determine whether vendors make enough sales to be required to collect and remit Vermont sales tax. 32 V.S.A. § 9701(9)(F) reads:
(9) "Vendor" means:
(F) A person making sales of tangible personal property from outside this State to a destination within this State and not maintaining a place of business or other physical presence in this State that:
(i) engages in regular, systematic, or seasonal solicitation of sales of tangible personal property in this State:
(I) by the display of advertisements in this State;
(II) by the distribution of catalogues, periodicals, advertising flyers, or other advertising by means of print, radio, or television media; or
(III) by mail, Internet, telephone, computer database, cable, optic, cellular, or other communication systems, for the purpose of effecting sales of tangible personal property; and
(ii) has either made sales from outside this State to destinations within this State of at least $100,000.00, or totaling at least 200 individual sales transactions, during the 12-month period preceding the monthly period with respect to which that person's liability for tax under this chapter is determined.
What is the Vermont threshold for small remote sellers?
Remote sellers must collect and remit sales tax to Vermont when they have made sales from outside Vermont to destinations within Vermont of at least $100,000.00 or totaling at least 200 individual sales transactions during any preceding 12-month period. 32 V.S.A. § 9701(9)(F).
I am a remote seller. What should I do?
Remote sellers who were registered in Vermont before the U.S. Supreme Court's decision in South Dakota v. Wayfair are not impacted by this decision. You need to continue to collect and remit sales and use tax.
Unless you make sales below the threshold, remote sellers who were not already registered in Vermont before the Wayfair decision must register and collect and remit sales tax in Vermont. This requirement took effect on July 1, 2018. Go to myVTax to register with the Vermont Department of Taxes for a sales tax account. To register with multiple states through the Streamlined system, go to Streamlined Sales Tax.
To determine whether I meet the threshold, do I count only taxable sales into Vermont, or do non-taxable sales count, too?
All sales count toward determining whether a remote seller is required to register with the Vermont Department of Taxes to collect sales tax. This means that if a remote seller makes sales of both taxable and nontaxable items (either personal property or products transferred electronically) into Vermont, the total number of those transactions or their combined dollar must be taken into account.
However, if all of the items that a business sells are tax-exempt under Vermont law, and therefore none of that business’ sales could be taxable in Vermont, then there is no requirement to register for a sales tax account.
To determine whether I meet the threshold, what is an individual sale transaction?
An individual sale transaction for purposes of threshold determinations means a sale transaction that is documented on a unique invoice, regardless of the manner in which the tangible personal property is delivered to the purchaser.
How do I determine whether or not I meet the threshold?
As of July 1, 2018, if you had sales of $100,000 or more, or 200 transactions in the preceding twelve-month period, you must collect and remit sales tax.
If you did not meet the sales threshold as of July 1, 2018, you must monitor your sales into Vermont to determine if and when you have a Vermont collection obligation. At the end of each quarter, you must review your sales over the prior twelve months and identify whether you had sales of $100,000 or more or 200 transactions. If you met this threshold, you must collect and remit tax starting no later than the first day of the following month. Thirty days are permitted to conduct the threshold analysis.
Example: A new seller, or a seller with increasing Vermont sales, first met the sales threshold for the period July 1, 2017 through June 30, 2018. Through its threshold analysis, the seller discovered that it met the threshold at the close of the second quarter on June 30, 2018. The seller must collect and remit sales tax commencing on August 1, 2018.
I exceeded the threshold for small remote sellers. When do I need to register to collect Vermont sales tax?
You must determine whether your Vermont sales exceed the threshold for small remote sellers at the end of each quarter (March 31, June 30, September 30 and December 31). You have 30 days after determining that your sales exceeded the threshold to register with the Vermont Department of Taxes, and to begin collecting and remitting sales tax. This means that you would start collecting on May 1 if you determined that you exceeded the threshold in the first quarter ending March 31, and August 1, November 1, and February 1 for the second through fourth quarters, respectively.
I exceeded the threshold, but my Vermont sales decreased, and I am now under the threshold. Should I stop collecting?
Yes, the same analysis applies if your sales decrease. Each quarter, you must check the sales you made during the prior twelve-month period. If your sales decrease and fall under the threshold, then you can stop collecting sales tax. If you wish, you may continue to collect and remit sales tax even if you believe you may periodically fall below the threshold but rise above it again in the near future.
Example: After the close of the second quarter on June 30, 2019, a seller conducts the threshold analysis and determines that Vermont sales have decreased and fallen below the threshold for the first time in the period of July 1, 2018 to June 30, 2019. The seller has the option either to stop collecting sales tax, or to continue to collect and remit if the seller anticipates sales will rise above the threshold again.
I fell below the threshold, but still collected tax for a period of time. May I claim a refund?
No. If you have collected the tax, it must be remitted to the Department. Your customer was still liable for use tax on the purchase. Refunds may only be claimed if the tax is not due and the vendor refunds the tax to its customer.
Will I need to collect sales tax on the sales under the threshold for small remote sellers?
No, you do not need to collect sales tax on the sales under the threshold, as long as you do not exceed the threshold. However, once you exceed the threshold, you must collect and remit sales tax due on all sales, including sales below the threshold.
If you are below the threshold, but you make taxable sales of tangible personal property or services to Vermont purchasers, you may be considered a “noncollecting vendor.” 32 V.S.A. § 9701(54). Vermont imposes notice and reporting requirements on noncollecting vendors, including notifying purchasers of taxable products that they owe use tax on these transactions. 32 V.S.A. § 9712.
How often will I need to file a return?
The required filing frequency depends on the dollar amount of the seller’s sales tax liability for the immediately preceding calendar year, although the Commissioner of Taxes has the authority to set the filing and payment dates. 32 V.S.A. § 9775. Sellers meeting the remote seller threshold will most likely need to file monthly.
How do I register to collect Vermont sales tax?
Go to myVTax to register for an account to collect and remit Vermont sales tax.
Do I need to register each year?
No, sellers only need to register for a sales tax account once. Go to myVTax to register.
Are remote sellers subject to audits by the department?
Remote sellers are subject to audits like any other business. For remote sellers using a Certified Service Provider (CSP), the department works with the CSP for the audit.
I am a remote seller and only sell through a Marketplace. Do I need to collect sales tax?
Yes. You are required to register to collect and remit Vermont sales tax, provided you meet the threshold, unless the marketplace is collecting and remitting Vermont sales tax on your behalf. We recommend contacting your marketplace for more information.
I am a remote seller and sell through a marketplace, my own website, and through other sources. What are my sales tax responsibilities?
If all sales into Vermont combined – including your sales made through any marketplace, your own website, and through other sources – exceed the threshold, then sales tax must be collected and remitted to Vermont. You must collect and remit sales tax on your taxable sales through your website and other sources. If the marketplace is not collecting Vermont sales tax on your behalf, then you must also collect Vermont sales tax on your taxable sales made through that marketplace.
What effect does the Wayfair decision have on Vermont purchasers?
Vermont purchasers may see an increased number of remote sellers charging sales tax. If a remote seller does not charge sales tax on a taxable item in Vermont, then the purchaser must report use tax on the sales price. An individual must report the use tax on their personal income tax return, the IN-111, or online.
I am a Vermont business and I make sales remotely to other states. Do I need to register to collect sales tax in other states? Are items that are taxable in Vermont taxable in every state?
The sales that you make into other states may or may not be subject to those states' sales tax laws. Vermont law does not require Vermont businesses to collect and remit sales tax to other states. That requirement is imposed by other states, and each state has their own laws. The taxability of items varies from state to state. Items taxable in Vermont are not necessarily taxable elsewhere. Each state has different rules of what is subject to sales tax.
To determine which laws apply to your business and your sales, go to the Streamlined Sales Tax - State Website and Contact Information for collection requirements in all 24 Streamlined Sales Tax states.
If the state is not a member of Streamlined Sales Tax, we recommend you contact that state.
Has Vermont signed the Streamlined Sales and Use Tax Agreement?
Yes, Vermont has signed the Streamlined Sales and Use Tax Agreement and has been a Streamlined Full Member State since January 1, 2007.
What are the benefits of Streamlined Sales Tax for my business?
Streamlined Sales Tax benefits to your business include:
- You can use a Certified Service Provider (CSP) to calculate, collect, remit, and file sales tax returns in all member states. For more information, see “What is a Certified Service Provider?”
- You can register at one time for all full member and associate states through the Streamlined Sales Tax Registration System (SSTRS)
- Member states have uniform product definitions for consistency for businesses that sell in multiple states.
The following states are Streamlined Sales Tax members:
|Iowa||Nevada||Rhode Island||West Virginia|
|Kansas||New Jersey||South Dakota||Wisconsin|
|Kentucky||North Carolina||Tennessee (associate)||Wyoming|
What does it mean to register through the Streamlined Sales Tax Registration System (SSTRS)?
The Streamlined Sales Tax Registration System (SSTRS) is a quick and easy way to register for a sales and use tax account in all Streamlined Sales Tax member states. When you register through the SSTRS, you receive sales tax accounts to collect and remit sales and use tax in all Streamlined Sales Tax full member states. You may also choose to register in any associate member states. Once you are registered, you must collect and remit sales and use taxes in those states.
How do I register for states that are not Streamlined Sales Tax members?
You need to register for each non-member individually. For more information, contact each non-member state directly.
If you use a Certified Service Provider (CSP), they may register you for non-member states.
How do I file and pay my sales and use tax if I register through the SSTRS?
You must file returns and make payments directly to the state where taxes are due. You will not file returns or make payments directly to Streamlined Sales Tax through the Streamlined Sales Tax Registration System (SSTRS). Each state will send you registration information and filing instructions.
Note: If you use a Certified Service Provider (CSP), they will file monthly returns and remit taxes to each state for you. If you have questions on filing or paying the taxes, contact your CSP.
What is a Certified Service Provider (CSP)?
A CSP can file sales and use tax returns and remit sales taxes for you. Your business is responsible to pay use tax on its own purchases. Any business may contract with a CSP.
- The CSP software works with your accounting system to identify which products and services are taxable, apply the appropriate tax rate, and record the transaction.
- The CSP sets up their software with your system, prepares and files returns, and remits tax to each member state.
- The CSP resolves any notices or audits by member states.
- Streamlined Sales Tax member states certify the accuracy of the CSP software and provide liability relief for incorrect tax calculation based on the certification.
- Free monthly return processing in states where you are a remote seller. If you have nexus in member states, a small fee may apply to file those returns.
The Streamlined Sales Tax Governing Board provides a list of CSPs. Their websites are below.
Note: Some CSPs also provide services in non-Streamlined states. Check their websites for more information.