Vermont Corporate Tax Rates, Rules, and How to File

Corporations operating in Vermont are subject to a corporate income tax applied to the profits they generate within the state. This tax is a component of the state tax system and functions under a specific set of regulations and rates determined by Vermont law.

Vermont’s Corporate Tax Structure

Vermont employs a graduated corporate income tax system for C corporations, meaning the tax rate increases as a company’s income rises. For net income up to $10,000, the tax rate is 6.0%. Income between $10,001 and $25,000 is taxed at 7.0%, and all net income exceeding $25,001 is taxed at the highest rate of 8.5%.

In addition to the income-based tax, Vermont imposes a mandatory minimum tax on all active corporations, including LLCs that elect to be taxed as C-corporations. This tax is based on the corporation’s Vermont gross receipts and is structured in tiers. The minimum tax is:

• $100 for gross receipts under $500,000
• $500 for receipts between $500,000 and $1 million
• $2,000 for receipts from $1 million up to $5 million
• $6,000 for receipts between $5 million and $300 million
• $100,000 for gross receipts exceeding $300 million

Certain types of businesses are subject to different tax regimes. Banks and other financial institutions, for example, do not pay the corporate income tax. Instead, they are subject to a franchise tax, which is calculated differently and has its own set of rules and rates.

Calculating Vermont Net Income

The process of determining a corporation’s taxable income in Vermont begins with the federal taxable income from the company’s federal corporate income tax return. Vermont law requires certain modifications to this amount, which are categorized as either additions or subtractions.

Common additions to federal taxable income include any state and local income taxes that were deducted on the federal return. A Vermont-specific addition is the amount of any federal bonus depreciation claimed, as Vermont does not conform to this federal provision.

Conversely, there are specific subtractions that can reduce a corporation’s Vermont taxable income. These include interest income earned from U.S. government obligations and wages that were used to claim the federal work opportunity tax credit.

For corporations that operate in multiple states, determining the portion of their income taxable by Vermont requires apportionment. Vermont utilizes a single-sales factor apportionment formula. This method calculates the share of a company’s total income attributable to its business activities in Vermont based solely on the percentage of its total sales that occur within the state.

Available Corporate Tax Credits

After calculating the base tax liability, corporations can reduce the final amount of tax owed by claiming available tax credits. Unlike deductions, which reduce taxable income, credits provide a dollar-for-dollar reduction of the tax due.

One available credit is the Vermont Investment Tax Credit. This credit is for businesses that invest in projects related to rehabilitation, energy, and other qualifying advanced projects. To be eligible, the project must first qualify for the federal investment tax credit, and the Vermont credit is calculated as 24% of the federal credit amount attributable to the investment in Vermont.

The Vermont Research and Development (R&D) Tax Credit is available to businesses that have incurred eligible R&D expenditures in the state and have also claimed the federal R&D credit. The state credit is equal to 27% of the federal credit allowed for the tax year. Any unused portion of this credit can be carried forward for up to ten years.

Businesses may also benefit from credits aimed at community and economic development, such as the Downtown and Village Center Tax Credits. These credits are intended to encourage private investment in designated downtowns and village centers to restore historic buildings, create jobs, and improve infrastructure.

Corporate Tax Filing Requirements

A corporation must file a Vermont corporate income tax return if it was incorporated under Vermont law or if it received any income allocable or apportionable to Vermont. This requirement is based on having “nexus,” or a sufficient business presence in the state, such as property, employees, or sales.

The primary form for filing is Form CO-411, the Vermont Corporate Income Tax Return. Corporations that operate in multiple states and must apportion their income must also complete and attach Schedule BA-402, the Apportionment and Allocation Schedule. These forms and their instructions can be obtained from the Vermont Department of Taxes website.

The due date for the annual corporate income tax return aligns with the federal due date, which is the 15th day of the fourth month following the close of the corporation’s fiscal year. For calendar-year filers, this is April 15th. If a corporation anticipates a tax liability of more than $500 for the year, it must make quarterly estimated tax payments using Form CO-414.

How to Submit and Pay Your Taxes

The Vermont Department of Taxes encourages electronic filing through its online portal, myVTax. This system allows businesses to file Form CO-411 and associated schedules securely and receive an immediate confirmation of receipt. For businesses that prefer to file a paper return, the completed forms must be mailed to the address specified in the form instructions.

Payment of corporate income taxes can be made through several methods.

• Electronic payment through the myVTax portal, which allows for direct debit from a bank account at no charge.
• Credit card payments are accepted through the portal but are subject to a third-party processing fee.
• Payment by check or money order, which should be made payable to the Vermont Department of Taxes and mailed with a payment voucher to the designated address.