Understanding Vermont Sales and Use Taxes
Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in Vermont.
In Vermont a tax is imposed on receipts from:
- retail sales of tangible personal property (including leases and rentals)
- sales at retail of public utility services, including gas and electricity, but excluding water, telephone, and transportation
- charges for producing, fabricating, printing, or imprinting tangible personal property for a consideration for consumers who furnish, directly or indirectly, the materials used
- amusement charges
- bottle deposits
- telecommunications services
Leases. In Vermont the taxable sale of tangible personal property includes any transfer of title or possession (or both), including rentals or leases.
Sales and use tax rate. The Vermont sales and use tax rates is generally 6 percent. The tax rate is 9 percent of the gross receipts from meals and occupancies under the meals and rooms tax instead of the general sales tax.
Seller Must Collect Sales Tax
In Vermont the sales tax is imposed on the receipts from taxable sales. The sales tax is imposed on the purchaser, and the seller is required to collect the sales tax.
Absorbing sales tax is not permitted. In Vermont it is against the law to refund or offer to refund all or any part of the amount collected or to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the sales tax that is required to be added to the sales price.
Obtaining tax permits in Vermont
In Vermont persons required to collect the tax and persons purchasing tangible personal property for resale must register with the Vermont Commissioner of Taxes. No permit fee is required.
Many Items Are Exempt from Tax
Vermont has many specific items that are exempt from sales tax — for example, certain prescription medications are exempt from Vermont sales tax. Resale exemptions and blanket exemptions are two of the most important exceptions to sale tax liability. You'll want to check and see if you are exempt from the sales tax.
An exemption certificate may be issued by a purchaser of a nontaxable item. The exemption certificate may be based on the type of transaction (such as a resale exemption) or on the item itself.
Items Purchased for Resale Are Tax Exempt
In Vermont, the burden of proving that a sale of tangible personal property is for resale is upon the person making the sale. The seller is relieved of this burden of proof if the seller requires a resale certificate from you the purchaser.
Resale exemption certificate. In Vermont a general exemption certificate is prescribed by the state. The resale exemption certificate must include the following information:
- the purchaser's name
- the purchaser's address
- the purchaser's signature
- a description of the articles purchased
- a certification that the property will be used for an exempt purpose
- the number from the purchaser's certificate of authority
In no case can the seller sell tax exempt goods for resale, unless you specify in your order, whether written or oral, that the goods are purchased for resale. Invoices of goods sold for resale must be marked or stamped to indicate that they are exempt purchases. The words "Vermont Sales Tax Exempt, for Resale" will satisfy this requirement.
Blanket Resale Certificates Are Permitted
Sellers may accept blanket certificates from a purchaser who repeatedly purchases the same type of property or services for processing or resale. However, blanket certificates may not be used to purchase property or services not covered by a blanket certificate. The purchaser must check the box on the state form for a blanket resale certificate. Also, the purchaser must include a general description of the kind of property to be purchased for resale on the blanket resale certificate. The blanket certificate is valid until revoked in writing. If a seller has not accepted a blanket certificate in good faith, liability for the tax does not shift from the seller to you, the purchaser.
Physical Presence Triggers Sales Tax Liability
Vermont has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within Vermont. To determine if you have physical presence, ask yourself the following:
- Do I have retail facilities, a warehouse, or any office space in Vermont? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
- Do my employees or I enter Vermont for purposes of taking and transmitting orders from Vermont? If your employee or independent contractor goes into Vermont to take or transmit orders, your business may have physical presence in Vermont. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
- Do my delivery vehicles frequently enter Vermont for purposes of delivering property? Frequent deliveries in Vermont by your trucks will give you physical presence in Vermont.
Vermont Does Not Have a "Bracket System"
Beginning July 1, 2009, Vermont law does not provide for a bracket schedule.
Use Tax Imposed on Out-of-state Purchases
In Vermont, unless the property is subject to the sales tax, the use tax is imposed on the use, storage, or consumption of taxable property or services in Vermont. However, property brought into Vermont on which a sales or use tax has been paid in another state equal to or in excess of the Vermont tax is not subject to tax in Vermont.
The use tax is imposed on persons using tangible personal property or taxable services in Vermont that were not subject to the sales tax.
Claiming Refund for Excess Tax Payments
When your customers return goods to you and you refund the purchase price, don't include those sales in the gross sales receipts computation. If you are unable to collect accounts receivable on accounts that the tax has already been remitted, you may apply for a refund or credit. The refund or credit must be made within two years of the date the accounts were actually charged off your books and records.