Vermont Sales and Use Tax and Fuel Tax, and the Petroleum Distributor Licensing Fee apply differently to fuel in Vermont, depending on the type and use of fuel. A person buying at retail will pay 6% sales and use tax for natural gas to fuel a motor vehicle, propane in a free-standing container, and dyed diesel except for specific exempt uses (exemption certificate required). Heating oil, gas, and other fuels used for commercial purposes are also subject to 6% sales and use tax, but not when used in the home.
Where a municipality has voted to impose a local option sales tax, an additional 1% tax will apply to taxable sales made in that municipality.
The $0.02 per gallon fuel tax applies to heating oil, propane, kerosene, or other dyed diesel fuel delivered in Vermont. The Petroleum Distributor Licensing Fee is $0.01 per gallon of fuel sold. Its application is similar to the fuel tax. The charts on this fact sheet explain the types of fuels assessed and exempted in each case.
Dyed diesel is subject to sales and use tax except for specific uses. Exemption certificates are required. Dyed Diesel is exempt from sales and use tax when purchased for any of the following uses:
- to power the types of forestry machinery and equipment listed below;
- to propel a vehicle off road;
- for farming, if used directly and exclusively for farming purposes; and
- to manufacture tangible personal property for sale, whether used directly or indirectly.
The types of exempt forestry machinery and equipment are:
- skidders with grapple and cable
- feller bunchers
- cut-to-length processors
- loader slashers
- log loaders
- whole-tree chippers
- stationary screening systems
- and firewood processors, elevators, and screens.
The exemption can be claimed by completing Form S-3F, Vermont Sales Tax Exemption Certificate for Fuel or Electricity.
Dyed diesel used off road in stationary equipment (i.e., generators) when used for commercial purposes remains taxable.
Wood pellets sold for residential use are not subject to Sales Tax, even when sold in smaller quantities at a retail establishment. An Exemption Certificate is not required.
Vermont Sales and Use Tax
A sales tax of 6% is imposed on the retail sales of tangible personal property (TPP) unless exempted by Vermont law. Sales tax is destination-based, meaning the tax is applied based on the location where the buyer takes possession of the item or where it is delivered. Sellers should collect Vermont Sales Tax on TPP delivered to destinations in Vermont at the time and place of the sale.
Businesses are responsible for collecting sales tax from their customers and then filing and paying the tax to the State of Vermont. Sales tax is reported using the accrual basis, requiring that sales tax be charged at the time of the sale and reported even if full payment for the sale has not been received by the seller.
Use tax is paid by the buyer of an item when the purchase subject to Vermont sales tax is made from a seller that is not registered by the state of Vermont to collect tax. Sales tax and use tax work together to create the same tax result whether a seller collects sales tax or not. Use tax has the same rate, rules, and exemptions as sales tax.
Learn more about Vermont Sales and Use Tax.
Local Option Tax May Apply
Some Vermont municipalities impose a local option tax of 1% in addition to state sales tax. Businesses are responsible for collecting and remitting local option tax to the Vermont Department of Taxes. Note: Local option tax does not apply to use tax.
The Fuel Tax is imposed on the retail sale by means of delivery in Vermont of heating oil, propane, kerosene, and other dyed diesel fuel at a rate of $0.02 per gallon.
A new gross receipts tax on retail sales of coal and natural gas is also imposed at a rate of 0.75%. Additionally, a gross receipts tax on the retail sale of electricity is now imposed at a rate of 0.5%.
The Fuel Tax must now be filed and paid monthly. Returns and payments for the Fuel Tax must be made to the Department of Taxes using Form FGR-615, Fuel Tax and Petroleum Distributor Licensing Fee Return.
Fuel dealers who choose to itemize an invoice or bill in order to show the amount of the Fuel Tax must include the following statement:
Petroleum Distributor Licensing Fee
The Petroleum Distributor Licensing Fee of $0.01 per gallon is imposed on sellers for the retail sales of heating oil, kerosene, or other dyed diesel sold in Vermont. Sales for resale, sales made from a dealer’s retail pump, and delivery sales to an out-of-state location are exempt. The revenue collected from this fee funds the cleanup and restoration of contaminated soil and groundwater caused by leaking storage tanks, as well as third-party claims for compensation.
Vermont Business Tax Account and License
Businesses and nonprofits must register for a Vermont Business Tax Account and license before collecting Vermont tax. Registration is free.
|Sales and Use Tax (32 V.S.A. ch. 233)|
|Tax rate||6% of the retail sales price, plus 1% of the retail sales price in municipalities that have voted to impose a local option sales tax|
|Taxpayer||Any purchaser, unless exempt|
|Types of fuels taxed||
|Types of fuels exempt from sales tax, based on use||
|Types of exempt purchasers||
Organizations that are exempt from sales and use tax under 32 V.S.A. § 9743:
|Fuel Tax (33 V.S.A § 2503)|
|Tax rate||$0.02 per gallon of fuel sold at retail|
|Taxpayer||Any seller who makes a retail sale of fuel by means of delivery in Vermont|
|Types of fuels taxed||Heating oil, propane, kerosene, and other dyed diesel fuel sold by means of delivery are subject to fuel tax. There are also two percentage-based gross receipts taxes imposed on the retail sale of natural gas and coal (0.75%), and on electricity (0.5%).|
|Types of Exempt Sales||Only sales for resale, sales from a dealer pump, or deliveries to an out-of-state location.|