The Green Mountain State employs a tiered corporate income tax structure, featuring graduated rates ranging from 6.00 percent to 8.5 percent, impacting businesses based on their income brackets. This structure reflects Vermont’s commitment to balancing revenue generation with fostering a conducive environment for corporate growth and economic development.

In addition to corporate income tax considerations, Vermont’s sales tax regime stands at the forefront of financial regulations. The state imposes a 6% sales tax rate, with the potential for a maximum rate of 7% based on local jurisdictions. Vermont’s unique tax landscape also incorporates income tax credits, offering incentives for activities such as research and development, investment, job creation, and renewable energy projects.

What is the Vermont Corporate Income Tax Rate?

Vermont employs a tiered corporate income tax structure, featuring graduated rates that span from 6.00 percent to 8.5 percent.

Is There a Corporate Minimum Tax in VT?

Vermont has a corporate minimum tax of $100 for companies earning less than $500,000, and the minimum amounts increase for gross receipts above this amount. 

When is the Vermont Corporate Income Tax Return Due?

Due dates for businesses and corporations fall on Wednesday, March 15, 2023.

How is State Income Tax Nexus Triggered?

Vermont’s corporate income tax is an annual levy applied to the income earned or received within the taxable year by any taxable corporation. A corporation falls under the category of “taxable” if it meets one of the following criteria: (1) incorporation under the State’s laws, (2) possession of a certificate of authority to conduct business within the State, or (3) receipt of income that is allocable or apportionable to Vermont. For foreign business entities, establishing nexus with Vermont for income tax purposes occurs through various activities, including:

• Owning or leasing real or personal property in Vermont.
• Using or selling intangible property, such as royalties and licensed software, within the state.
• Making sales of tangible personal property into Vermont.
• Maintaining offices, stores, or warehouses in Vermont, whether in-home or otherwise.
• Employing individuals in Vermont, including telecommuting employees.
• Providing services in Vermont through employees or independent contractors.
• Participating in trade shows, conferences, or events in Vermont.
• Giving performances or conducting training or seminars in Vermont.
• Holding inventory or goods on consignment within the state.
• Delivering goods into Vermont, acting as a carrier independent of a sale.
• Using Vermont roadways to transport tangible personal property.
• Making loans using Vermont property as collateral or extending loans to Vermont residents.

Does Having an Employee or Contractor Trigger Nexus?

Yes, having an employee or contractor in Vermont triggers nexus for income tax purposes. A business, including a foreign entity, is considered to have nexus with Vermont if it engages in activities such as employing individuals, including those who work or telecommute from their homes in Vermont. This presence creates a connection that subjects the business to Vermont’s corporate income tax obligations.

Are There Vermont Income Tax Credits Available?

Vermont offers various income tax credits to businesses to encourage specific activities and investments. Some notable Vermont income tax credits may include:

Research and Development (R&D) Tax Credit:

Aimed at companies involved in qualified research and development activities, providing an incentive for innovation and technological advancements.

Investment Tax Credits:

Available for businesses making qualified investments in the state, such as machinery, equipment, or facilities, to encourage capital investment.

Job Creation Tax Credits:

Designed to reward businesses that create new jobs in Vermont, providing a credit based on the number and quality of jobs generated.

Renewable Energy Credits:

Geared towards businesses investing in renewable energy projects, supporting sustainable and clean energy practices.

Brownfields Redevelopment Credits:

Provides incentives for businesses involved in the redevelopment of contaminated or underutilized properties, promoting environmental remediation.

Vermont Employment Growth Incentive (VEGI) Credits:

Aimed at businesses that make substantial capital investments and create new, full-time jobs in Vermont, contributing to economic growth.

What is the Vermont Sales Tax Rate?

The current sales tax rate in the state of Vermont is 6%. However, depending on local municipalities, the total tax rate may reach a maximum of 7%.

How is Sales Tax Nexus Triggered?

If your sales in Vermont reached $100,000 or more, or if you conducted 200 or more transactions in the preceding twelve-month period, you are obligated to collect and remit sales tax in the state.

What is the Click Through Advertising Law?

If a remote seller has an arrangement with a Vermont resident to direct potential customers to the seller, the seller is required to collect and remit Vermont Sales Tax when the seller has conducted taxable sales in Vermont exceeding $10,000 in the preceding year. 

For instance, consider a Vermont resident who is an author operating her own website. She sells her books through an online seller and includes a link to the company’s website on her own site, establishing click-through nexus. When customers “click through” to the website and make a purchase, subject to Vermont sales tax, the seller must collect and remit the tax to the Vermont Department of Taxes if the seller’s taxable sales to Vermont customers surpass $10,000.

What Transactions are Included or Excluded from Sales Tax in VT?

In Vermont, sales tax is applicable to a wide range of transactions involving tangible personal property and specific services. Taxable transactions include the sale, lease, or rental of tangible personal property, and certain services are also subject to sales tax. However, it’s essential to be aware of specific exclusions. To provide a clearer understanding, here’s a breakdown:

Included in Sales Tax:

• Sale, lease, or rental of tangible personal property.
• Certain services that fall within the taxable category, such as charges for labor to repair tangible personal property.

Excluded from Sales Tax are services that do not involve the repair of tangible personal property, including:

• Providing customer service or technical support.
• Running diagnostics.
• Performing computer monitoring services.
• Removing software from a computer (e.g., viruses, spyware, malware).
• Converting data from one form to another.
• Web page development.
• Data backup or disaster recovery services in the absence of a repair.
• Compressing or zipping files.
• Nontaxable internet access fees.
• Email access fees.
• Attaching personal property to real property (refer to Publication 42 for details on attaching personal property to real property).

Are Services Taxed for Sales Tax?

In Vermont, services are typically exempt from taxation; however, there are specific exceptions that apply to:

Services to Tangible Personal Property:

When labor is expended to produce a new or different item, a tax is applicable to the labor charge.

Examples include fabrication services such as job printing, engraving, lettering memorials and monuments, silk screen printing, custom drapery, taxidermy, sign making, and more.

Telecommunication Services:

Charges related to telecommunication services are subject to taxation.

Amusement Charges:

Admission charges to any place of recreation or amusement, including athletic events and facilities, performances, theaters, golf courses, and ski areas, are subject to sales tax.

Is SaaS Taxable for Sales Tax?

Software as a Service (SaaS) is currently not taxable in Vermont. Vermont applies the Vermont Sales Tax primarily to retail sales involving tangible personal property. The definition of tangible personal property encompasses prewritten computer software. However, it’s important to note that prewritten software accessed remotely without installation on a computer, such as SaaS, does not fall within this classification.

Prewritten software that is downloaded from the internet and installed on a computer, along with software delivered via portable storage media, is considered taxable tangible personal property. Additionally, specific digital products such as digital audio-visual works, digital audio works, digital books, and electronically transferred ringtones are taxed.

Frequently Asked Questions (FAQs) – Vermont Business Taxes

What is the corporate income tax rate in Vermont?

Vermont has a graduated corporate income tax, with rates ranging from 6.00 percent to 8.5 percent based on the corporation’s taxable income.

Is there a corporate minimum tax in Vermont?

Yes, Vermont imposes a corporate minimum tax, and the amount varies based on the corporation’s gross receipts. For instance, corporations with Vermont gross receipts exceeding $500,000 face an increased minimum tax.

When are business and corporate tax returns due in Vermont?

Business and corporate tax returns in Vermont are typically due on Wednesday, March 15, 2023.

How does Vermont determine income tax nexus for businesses?

Vermont establishes income tax nexus for businesses through various activities, including owning or leasing property, making sales of tangible personal property into the state, maintaining offices or stores, and providing services within Vermont. Even remote sellers with specific agreements with Vermont residents may trigger nexus.

Are there income tax credits available for businesses in Vermont?

Yes, Vermont provides various income tax credits to incentivize specific business activities and investments. These credits may include Research and Development (R&D) Tax Credit, Targeted Business Tax Credits, Investment Tax Credits, Job Creation Tax Credits, Rural Economic Development Incentive (REDI) Tax Credit, and Renewable Energy Systems Tax Credit.

What is the Vermont sales tax rate, and what transactions are subject to sales tax?

The Vermont state sales tax rate is currently 6%, with potential variations at the local level. Retail sales of tangible personal property are generally subject to sales tax. However, specific digital products, services, and certain exemptions exist, and businesses need to be aware of these nuances to ensure proper tax compliance.