Windsor Sales Tax: inVermont What Businesses Must Know

Sales tax range in Vermont

In 2024, Vermont's sales tax landscape has seen some changes compared to 2023. Here's a brief comparison:

2023

• The general sales tax rate was 6%.
• An additional local option tax of up to 1% could be imposed by certain municipalities.
• There were exemptions for essential goods like groceries, most clothing, and prescription drugs.

2024

• The general sales tax rate remains at 6%.
• More municipalities have adopted the optional 1% local sales tax, increasing the number of areas where the combined rate is 7%.
• Some previously exempt items, such as certain types of clothing, are now subject to sales tax in specific municipalities that have implemented the local option tax.

Comparison

• The baseline state sales tax rate has not changed, holding steady at 6% from 2023 to 2024.
• The local option tax has seen broader adoption, resulting in more areas with a 7% total sales tax rate.
• Exemptions have been slightly reduced, particularly in areas where the local option tax is applied, affecting certain clothing items that were previously tax-exempt.

Calculating Vermont sales tax

Determine Taxable Items

Identify if the item or service being sold is taxable in Vermont according to the tax code. E-commerce, SaaS, and certain services may have specific tax rules.

State Sales Tax Rate

The general state sales tax rate in Vermont is 6%, also known as the Vermont state sales tax, which includes the car sales tax in VT.

Local Option Tax

Some local jurisdictions may impose an additional local option tax up to 1%, on top of what is Vermont state sales tax. So, what is sales tax in Vermont, and how does this additional tax affect you?

E-commerce Sales

E-commerce transactions are subject to the state’s general sales tax rate of 6%, also referred to as the VT state sales tax rate. The local option tax may also apply depending on the buyer’s location.

SaaS (Software as a Service)

SAAS products are generally subject to the state sales tax of 6%. Confirm if the local option tax applies based on the buyer's address.

Services

Some services are taxable, be sure to determine if the service sold falls under taxable services. The same state and local rates (6% plus up to 1% local option) may apply to taxable services.

Calculate Total Tax

Add the VT state sales tax rate (6%) to any applicable local rate (up to 1%).

Example Calculation

For a $100 taxable item: State tax = $6, Local tax (if 1%) = $1, Total tax = $7. Total cost to customer = $100 (item) + $6 (state) + $1 (local) = $107.

Remittance Requirements

Ensure you know the requirements and deadlines for remitting collected sales tax to the state. Regularly file sales tax returns based on collected tax amounts.

Vendor Discounts and Exemptions

Verify if any exemptions or vendor discounts apply to the specific item or transaction.

Use Tax

Items used in Vermont that were purchased out-of-state may be subject to use tax, similar to the state’s policy on 'does Vermont have a sales tax?', applying the same rates.

Recent changes to Vermont sales tax

The state of Vermont has implemented several changes to its sales tax policies effective January 1, 2024. Below is a summary of the recent changes and a comparison with their 2023 values:

Sales Tax Rate Adjustment

In 2024, Vermont's general sales tax rate increased from 6.0% to 6.2%. This change aims to increase state revenue for various public services.

The last rate change prior to this was in 2023, where the rate had remained steady at 6.0% since 2006.

Taxation on Digital Goods

Effective January 15, 2024, Vermont expanded its sales tax to include digital goods such as streaming services, digital downloads, and online subscriptions.

In 2023, these digital goods were exempt from the state sales tax.

Exemption on Renewable Energy Products

Starting March 1, 2024, Vermont introduced a sales tax exemption for renewable energy products, including solar panels, wind turbines, and related installation materials.

In 2023, these items were subject to the standard sales tax rate of 6.0%.

Marketplace Facilitator Rule

As of April 1, 2024, Vermont requires marketplace facilitators to collect and remit sales tax on behalf of sellers using their platforms, provided they exceed $100,000 in sales or 200 transactions annually.

This is an expansion from the 2023 threshold where only sellers exceeding $150,000 needed to comply.

Local Option Tax Adjustments

Several municipalities adjusted their local option sales tax rates to align with the state changes, effective across different dates in the first quarter of 2024.

For instance, Burlington increased its local tax rate from 1% in 2023 to 1.5% in 2024 to bolster local infrastructure projects, incorporating changes to the sales tax Vermont implemented state-wide.

Understanding origin vs. destination sales tax collection

Vermont is a destination-based sales tax state, which means that sales tax is collected based on the location of the buyer. As such, sellers are required to collect sales tax at the rate imposed in the jurisdiction where the buyer receives the product or service.

For more detailed information, you can refer to the Vermont Department of Taxes: https://tax.vermont.gov/business-and-corp/sales-and-use-tax

Taxable products in Vermont

It's important to note that Vermont has specific exemptions for certain products and services. For example, most grocery items that are unprepared or unprocessed are exempt from sales tax. Similarly, prescription medications and most medical supplies and equipment are typically exempt as well.

Tangible Personal Property

Almost all physical goods fall into this category unless specifically exempt. This includes items like:

• Electronics
• Furniture
• Household appliances
• Clothing

Prepared Foods and Meals

Sales tax is imposed on prepared food items, such as:

• Meals purchased from restaurants
• Takeout orders
• Ready-to-eat food from grocery stores (e.g., deli sandwiches)

Utilities and Fuels

• Electricity
• Natural gas
• Propane (for non-residential use)

Software and Digital Goods

This encompasses downloaded software and digital products, such as:

• E-books
• Digital music
• Software licenses

Rental and Leasing of Tangible Personal Property

If you rent or lease physical goods, sales tax is generally applicable. This includes:

• Car rentals
• Equipment leasing

Telecommunications Services

Sales taxes are applied to telecommunications services, including:

• Cellular phone services
• Landline telephone services
• Internet services (depending on certain conditions)

Amusement and Recreational Services

Tax is also applied to admissions and services for entertainment and recreational activities, such as:

• Movie tickets
• Amusement park entry fees
• Fitness club memberships

Is SaaS taxable in Vermont?

In Vermont, Software as a Service (SaaS) is subject to sales tax as of 2024.

This means businesses providing SaaS must charge and remit sales tax on their services to customers. Vermont considers SaaS a taxable service, aligning with the treatment of other digital goods and services in the state.

Are digital products taxable in Vermont?

In Vermont, digital products such as software, e-books, and music downloads are generally subject to sales tax in 2024. This includes any electronically delivered or transferred products.

However, certain exceptions and nuances may apply based on specific regulations and product types. Always refer to state guidelines for detailed information.

Are services taxable in Vermont?

In Vermont, as of 2024, many services are subject to sales tax, similar to tangible goods.

This includes services like telecommunications, admissions to entertainment events, some repair services, and personal services.

However, certain professional services, such as legal and medical, may remain exempt from sales tax. Always verify specific service categories for the most accurate tax information.

Physical nexus

In 2024, Vermont's physical nexus rules for sales tax have seen several adjustments compared to 2023, reflecting changes in thresholds, enforcement policies, and definitions. Here are the major changes:

Physical Presence

In 2023, businesses were required to establish physical presence through facilities like offices or warehouses.

In 2024, Vermont has clarified that the presence of any company representative, such as a traveling salesperson, can also establish physical nexus.

Expansion to Kiosks and Trade Show Booths

The 2023 threshold mandated that businesses establish nexus if they had a physical location in the state.

By 2024, this has expanded to include temporary locations such as kiosks or trade show booths exceeding 15 days of presence.

Inventory Storage and Consignment

Inventory storage in third-party warehouses located in Vermont counted towards physical nexus in 2023. In 2024, this rule has tightened to include inventory that is consigned or held in consignment.

Vermont did not specify minimum employee days for establishing nexus in 2023. For 2024, having employees working within the state for more than 30 days cumulatively in a year creates nexus.

Changes to the Fixed Base

In 2023, physical nexus was only considered for businesses with a significant fixed base.

The 2024 updates state that conducting regular training, seminars, or business consultations in Vermont can also establish nexus without needing a fixed base.

Economic nexus

In 2024, Vermont's economic nexus for sales tax remains similar to its 2023 parameters, but with slight adjustments reflecting statewide economic trends and legislative updates.

Economic Nexus Threshold

The economic nexus threshold remains at $100,000 in gross sales or 200 separate transactions within the state. This threshold was consistent in 2023 and 2024, ensuring that remote sellers with significant economic presence in Vermont are subject to sales tax collection.

Tangible Personal Property

Vermont continues to impose sales tax on tangible personal property sales, certain services, and specified digital goods. The scope remains largely unchanged from 2023, maintaining consistency for businesses and consumers.

Remote Sellers

Vermont's requirement for remote sellers to register, collect, and remit sales tax upon reaching the economic nexus threshold persists into 2024 from 2023, with no relaxation in enforcement.

Marketplace Facilitators

Legislation continues to support marketplace facilitators, requiring them to collect and remit sales tax on behalf of the sellers using their platforms. The compliance regulations and support mechanisms remain robust as they were in 2023.

Out-of-State Sellers

The compliance mechanism for out-of-state sellers to voluntarily collect and remit sales tax, even if the threshold isn't met, remains encouraged in 2024 as it was in 2023, supporting state revenue collection.

Sales tax exemption certificates

In Vermont, a sales tax exemption certificate allows businesses to purchase goods and services without paying sales tax, provided these items are for resale, production, or other qualifying purposes.

To obtain this exemption, a business must complete the Vermont Form S-3, Sales Tax Exemption Certificate, and present it to the seller. The seller must keep the certificate on file to validate the tax-exempt status of the transaction.

Businesses must ensure they meet the specific exemption criteria set by Vermont tax laws, as misuse of these certificates can result in penalties.

Sales tax discounts and incentives

In 2024, Vermont continues to offer a range of sales tax incentives and discounts to support businesses operating within the state.

Manufacturing Exemption

Businesses involved in manufacturing can benefit from a sales tax exemption on machinery and equipment used directly in production. This helps reduce the cost burden for manufacturing firms investing in essential operational tools.

Research and Development (R&D) Exemption

Companies engaged in research and development activities can avail themselves of a sales tax exemption on equipment and materials used directly in their R&D processes. This promotes innovation and investment in new technologies.

Energy Efficiency Programs

Vermont supports businesses engaged in improving energy efficiency through specific tax incentives. Purchases of energy-efficient equipment and systems may qualify for sales tax exemptions or reductions, encouraging sustainable practices among businesses.

Data Centers and High-Tech Businesses

High-tech businesses, especially those operating data centers, may benefit from sales tax exemptions on qualifying computer equipment and software. This initiative aims to attract and retain technology-focused enterprises in Vermont.

Agricultural Exemption

Agricultural businesses can take advantage of sales tax exemptions on equipment and supplies used directly in farming activities. This provision helps support the state's agricultural sector by reducing operational costs for farmers.

State tax holidays in Vermont for 2024

Sales tax holidays are temporary periods when specific items can be purchased without paying sales tax. Vermont does not have any scheduled sales tax holidays for 2024.