During the pandemic, many people have relocated to Vermont to live and to work remotely. Vermont taxable income includes any wages earned while living in and performing work in Vermont.
Although all income earned in Vermont is considered Vermont income, employers are not required to begin withholding Vermont Income Tax until an employee has been working from a Vermont location for thirty days. This applies to your employees working from a home, a rental property, a co-work space, or any other location within Vermont. The Department recommends that Employers conduct a review of their employees’ work locations to ensure that income tax is withheld and remitted in the correct state where the tax will be due.
What if my business is located outside of Vermont but my employee lives in Vermont?
If the work is performed in Vermont, Vermont Income Tax must be withheld regardless of whether the employer is located inside or outside of Vermont.
Do I need to register my business in Vermont to withhold taxes for my employee?
You must register for an employer withholding account. When you register for a Vermont business tax account, be sure to answer the question about hiring employees. If you answer "Yes," then that will prompt the Department to open an employer withholding account for your business.
If you live and work remotely in Vermont, then income earned during the entire period of time that you live in Vermont is subject to Vermont income tax. This is true even if you claim another state as your domicile, or even if you perform the remote work for a company that is not located in Vermont. We recommend that you speak with your employer(s) so that the correct amount of Vermont income tax can be withheld.
Learn more about Vermont Income Tax Withholding.