Should you collect sales tax in Vermont?
Sales tax is levied on retail selling tangible personal property to your customers, including leasing or renting tangible property. However, you will collect the sales tax if you determine the nexus in Vermont. Nexus is the presence that may come physically or economically.
A Physical nexus is typically created when your business has a store, warehouse, or office in Vermont. An economic nexus is intertwined when you cross paths with threshold limits as already stipulated by the state. These thresholds can be on revenue or some other transactional basis.
Let’s explore if your business has a Physical nexus in Vermont.
A physical nexus is integrated when your business is engaged in the following in Vermont:
- Servicing tangible personal property in Vermont.
- Maintaining, occupying, or using a place of business or an office in Vermont.
- Employing or retaining any contractor, including an agent, representative, or salesman, by whatever name called, engaged in activities relating to selling, delivering, installing, or taking business orders.
- Leasing or owning any tangible personal property in a state.
- Having a stock of goods in Vermont.
Is it constituting an Economic nexus in Vermont?
You are required to comply and register under sales tax rules if you are a remote seller (i.e., don’t have a physical presence in the state) and business sales in Vermont exceed $100,000 during the current or previous calendar year or make 200 or more separate retail transactions or delivery into the state.
You may also refer to the Vermont Taxation Department advisory to know more about business activities that may create a physical or economic nexus within the state.
How can you Register for Sales tax in Vermont?
You must apply online to get the sales tax permit by visiting the Vermont Department website.
Additionally, before applying for a new tax account number, make sure you have the following information handy:
- EIN and Social Security numbers of all officers, partners, or owners.
- Address details (physical and mailing).
- Business incorporation dates in Vermont.
- Contact information.
- Estimated total monthly sales.
- NAICS Code.
- Nature of business.
Is your product or services liable to Sales tax in Vermont?
Tangible Property: Sales tax in Vermont is imposed primarily on the retail sale of tangible personal property, e.g., Furniture, giftware, toys, etc.
Services: Albeit the services are not subject to sales tax in Vermont, a few exceptions include service or labor costs leading to the creation of tangible personal property, telecommunication, amusement charges, etc. For more information on the taxability of services, read here.
Digital Product: Vermont charges sales tax on digital products. So, you must collect sales tax if you sell digital products such as software, streaming services, e-books, etc. Please see the Vermont Revenue Department advisory on digital transactions.
SAAS: SAAS is software that allows users to connect to the cloud and use it over an internet connection. This is taxable in Vermont as it is considered a digital product. Please review the Vermont Revenue Department advisory (pg. 7) on SAAS.
The state provides certain exemptions from the sales tax levy, such as food for home consumption, prescription drugs, manufacturing equipment, etc. To see what exemptions are covered, please click here.
You can read further by visiting the department website to know exactly what’s included in your list of items bound to pay sales tax.
How should you collect and calculate state taxes in Vermont?
Collecting and computing accurate sales tax to be remitted to the state may involve stratospheric efforts, especially when you are not Vermont-based, as the sales tax is destination-based in Vermont, which means you must collect taxes on tangible property sold to buyers based in Vermont.
Complexities are involved where you have a business nexus, even if not in the state. Any default may lead to severe concerns, penalties, or fines by the state. That is what TaxDo is here for you! Our specialized sales tax calculator and professional services will simplify your job and lighten your compliance burden.
Vermont has a base sales tax rate of 6%, followed by the local tax rates, which go up to 1%. You may visit the sales tax rates page to know the sales tax rates of each city or county.
Below is the simple formula you can use to calculate your sales tax collection on each merchandise sold:
Sales Tax collectable = Sale value * (6% plus local tax rate)
Do you need to collect sales tax on Shipping Charges?
If non-taxable items are sold, shipping charges associated with such sale are not liable to sales tax. However, when a sale includes taxable and non-taxable items, shipping charges need to be apportioned relatively between the taxable and non-taxable parts of the sale. Accordingly, sales tax applies to the taxable portion of the sale. This link will take you to the official guidance issued by the state on shipping charges.
How should you file sales tax in Vermont?
E-file: You can e-file your return using the Vermont department’s online portal. You must pay the sales tax along with filing the return to avoid penalties and interest. If your business operates from one location, does not collect Local Option Tax on sales, and cannot process payments through myVTax, you are still eligible to utilize paper forms.
Filing frequencies and due dates
Based on your reported sales tax or estimated taxable sales, the Vermont Department of Revenue assigns you a filing frequency, which can be Monthly, Quarterly or Annual. According to your filing frequency, the due date for filing sales tax would be the 25th day of the month following the relevant reporting period.
Note: If the due date is a holiday or weekend, the next business day would be considered the final due date. This link will take you to the official website of the Vermont Taxation Department, where you can see what the state has to say about sales tax filing due dates.
Are there any fines or penalties for default when filing or paying sales tax?
The state levies a penalty of 5% of sales tax due if returns are filed or tax is paid after the due date, subject to a maximum penalty of 25% of tax due. The minimum penalty imposed would be $50. Interest is also accrued monthly at the rate specified by the state.
However, assigning your tax burden to TaxDo would not result in you paying any penalty or interest. We will adhere to the due dates. Please review the penalties and interest guidelines the Vermont Department of Taxation issued.