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Fuel

Overview

Vermont Sales and Use Tax and Fuel Tax apply differently to fuel in Vermont, depending on the type and use of fuel. For example, 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 for limited specific uses. 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 charts shown below explain the types of fuels taxed and exempted under each of these two taxes.

Dyed Diesel

Dyed diesel is exempt from Vermont 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
  • To manufacture tangible personal property for sale, whether used directly or indirectly
     

The types of exempt forestry machinery and equipment are the following:

  • Skidders with grapple and cable
  • Feller bunchers
  • Cut-to-length processors
  • Forwarders
  • Delimbers
  • Loader slashers
  • Log loaders
  • Whole-tree chippers
  • Stationary screening systems
  • Firewood processors, elevators, and screens
     

The exemption may 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.

Vermont Sales and Use Tax

Sales 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

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.

Fuel 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 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 imposed at a rate of 0.5%.

The Fuel Tax must 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:

The purpose of the Fuel Tax is to support Vermont’s Low-Income Home Weatherization Program

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
  • Heating oil, gas, and other fuels used for commercial purposes in mixed-use buildings (both residential and commercial) are subject to sales tax, but the portion of fuel used for residential purposes is exempt. 32 V.S.A. § 9741(26)
  • Propane sold at retail in free-standing containers, or sold as part of a transaction where a free-standing container is exchanged without a separate charge 32 V.S.A. § 9741(26) No sales tax on propane refills using the purchaser’s own container
  • Natural gas used to propel a motor vehicle 32 V.S.A. § 9741(7)(B)
  • Dyed diesel used off road in stationary equipment (e.g., generators) for commercial purposes 32 V.S.A. § 9741(7)(A)(iii);
    • If equipment is capable of both propulsion and non-propulsion use, only the non-propulsion use of dyed diesel is taxable.
Types of fuels exempt from sales tax, based on use
  • Heating oil, gas, and other fuels used in a residence for all domestic use, including heating 32 V.S.A. § 9741(26)
    • In mixed-use buildings (both residential and commercial), the portion of fuel used for residential purposes is exempt, but the portion for commercial purposes is subject to sales tax.
  • Dyed diesel used to:
    • power forestry machinery; for a full list of exempt machinery and equipment that dyed diesel is bought to power, see 32 V.S.A. § 9741(51)
    • propel a vehicle on or off road, including specifically for agricultural or manufacturing purposes, 32 V.S.A. § 9741(7)(A)(iii), (27), (34)
      • If equipment is capable of both propulsion and non-propulsion use, only the propulsion use of dyed diesel is exempt.
  • Sales of electricity, oil, gas, and other fuels used:
    • directly and exclusively for farming purposes 32 V.S.A. § 9741(27)
    • directly or indirectly in manufacturing tangible personal property for sale 32 V.S.A. § 9741(34)
Types of exempt purchasers

Organizations that are exempt from sales and use tax under 32 V.S.A. § 9743:

  • Federal and State of Vermont (including municipal) government entities
  • Nonprofit organizations that qualify for exempt status under 26 U.S.C. § 501(c)(3), agricultural organizations, qualified for exempt status under 26 U.S.C. § 501(c)(5), when presenting agricultural fairs, field days or festivals
  • Schools as defined in 16 V.S.A. § 11(7) and (8); and municipalities, which include any city, town, unorganized town, village, grant, or gore
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.