Tangible personal property (TPP) is subject to the Vermont Sales and Use Tax unless specifically exempted. The sales tax applies to retail sales.
Hotel and motel owners and managers need to know when the Vermont Sales and Use Tax applies to TPP purchased for their businesses so that they pay the right amount of tax. This overview provides general information about the tax and also explains specific situations when use tax must be paid on hotel and motel purchases that are consumed by or incorporated into a business.
How Sales Tax and Use Tax Are Related
Purchases of TPP used in Vermont are subject to 6% Vermont Sales Tax. If a seller does not charge sales tax, or charges at a rate less than 6%, then the buyer is required to pay the 6% tax (the difference between the amount of tax paid and 6%) directly to Vermont as use tax. Use tax payments are due on the same cycle as sales tax.
Sales and use tax work together to create fairness. For taxable items used in Vermont, the same tax is paid regardless of where the items were purchased. Use tax is the same rate and has the same exemptions as sales tax.
Here are situations in which businesses must pay use tax when purchasing taxable property to be used in Vermont:
- Purchases made via the internet where sales tax was not collected at the time of purchase
- Purchases made in a state that does not have a sales tax or has a lower sales tax rate than Vermont’s 6%
- Purchases of TPP consumed by or incorporated into a business
Types of Items Subject to Vermont Sales and Use Tax
If sales tax was not paid at the time of purchase, hotels and motels must pay use tax on the items in this table.
|Tangible personal property that becomes part of or permanently affixed to the real property, such as cabinets, dishwashers, ovens, ranges, and air conditioners|
|Tangible personal property used in renovations, remodeling, and repair of rooms, such as paint, wallpaper, drywall, and carpet/tile/flooring|
|Furniture and fixtures for use in the hotel’s guest rooms, including beds, mattresses, dressers, night stands, headboards, chairs, televisions, telephones, radios, desks, and lamps|
|Sundry items including sheets, bath towels, soap, glasses, ice buckets, coffee makers, etc.|
|Machinery and equipment used in the offices or business center, such as computers, printers, credit card machines, cash registers, fax machines, and photocopiers|
|Kitchen equipment and supplies, including linens, kitchen towels, napkins, cutlery, silverware, glassware, serving utensils, table covers, straws, stirrers, paper products, etc.|
|Cosmetics, toiletries, hygiene products, including toothbrushes, toothpaste, mouthwash, shampoo, soap, toilet paper, and skin lotions|
|Flowers for hotel common areas and other items used for decorating|
How to Avoid Underreporting
- Improve your understanding of Vermont’s use tax requirements.
- Review your purchases of property and items that are subject to Vermont Sales and Use Tax.
- Include regular operating supplies as well as renovations, improvement projects, and investments in durable goods.
- Determine if your business paid sales tax at the time of these purchases and, if not, whether use tax was paid.
- If you identify an underpayment of tax greater than $50, you may choose to file an amended return at myvtax.
- Going forward, keep in mind these tax requirements on purchases of TPP and pay the tax correctly.
- Be sure to report and pay tax for every scheduled payment due date of your business, even if you owe no tax.
Vermont Sales and Use Tax
A sales tax of 6% is imposed on the retail sales of 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.
Vermont Meals and Rooms Tax
Any private person, entity, institution, or organization selling meals, serving alcohol, or renting rooms to the public must collect the Vermont Meals and Rooms Tax from their customers on their gross receipts and remit the tax to the Vermont Department of Taxes.
These are the rates for meals and rooms tax in Vermont:
- 9% on sales of prepared and restaurant meals
- 9% on sales of lodging and meeting rooms
- 10% on sales of alcoholic beverages served in restaurants
All food is taxable when sold by a restaurant. The type of sales and amount of sales determine if a business is a restaurant. A restaurant is defined as:
- an establishment that charges for food or beverage intended for immediate consumption, or
- an establishment that has made total sales of food or beverage in the previous taxable year of at least 80% taxable food and beverage
- a new establishments that projects its total sales for the first year to be at least 80% taxable for and beverage.
Some types establishments that sell taxable food and beverage and are typically associated with hotels, motels, and similar businesses include: restaurants, cafes, dining rooms, salad bars, snack bars with seating, and vending machines. (Note: food sold at a snack bar with no seating is not subject to meals tax.)
Examples of Accommodations Subject to Rooms Tax
- Hotels, motels, inns, bed and breakfasts
- Cottages, cabins, condominiums, campsites, and ski lodges
- Rooms in homes, primary homes, vacation or second homes
- Other types of sleeping accommodations owned by private individuals for which a rental fee is charged, such as treehouses and yurts
Local Option Tax May Apply
Some Vermont municipalities impose a local option tax of 1% in addition to state sales tax and meals and rooms 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.
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.
LAWS, REGULATIONS AND GUIDANCE
Technical Bulletin 13 Purchaser-Based Treatment of the Vermont Meals and Rooms Tax and Sales and Use Tax
Technical Bulletin 25 Requirement to Collect Local Option Meals & Alcoholic Beverages Tax and Local Option Rooms Tax