What Is Vermont Sales Tax and How Does It Work?

Sales tax is a consumption tax applied to the sale of goods and services, collected by the seller as a percentage of the retail price. These revenues are then remitted to the taxing authority, funding various public services. Vermont imposes such a tax on transactions occurring within its borders.

Understanding Vermont Sales Tax

Vermont’s sales tax is a levy on the retail sale of tangible personal property and certain specified services. The statewide sales tax rate is 6%, applying to the majority of retail transactions. Businesses acting as retailers are responsible for collecting this tax from consumers. The collected amounts are submitted to the state tax department. Some municipalities in Vermont have the authority to impose an additional local option tax of 1%, which can bring the total sales tax rate in those areas to 7%.

Goods and Services Subject to Sales Tax

In Vermont, sales tax applies to the sale and rental of tangible personal property, unless exempt. Common examples of taxable tangible goods include electronics, furniture, home goods, and various general retail merchandise. Cosmetics are subject to the state’s sales tax. If an item is not explicitly exempt, it is considered taxable.

While many services are not taxed in Vermont, certain categories incur sales tax. For instance, fabrication services, where tangible personal property is modified for a customer, are taxable. This can include services like printing or custom manufacturing. Additionally, charges for amusement, entertainment, or recreation, such as admission fees, are subject to sales tax.

Common Sales Tax Exemptions

Numerous goods and services are exempt from Vermont sales tax. Food and groceries intended for home consumption are exempt, though this excludes prepared meals and alcoholic beverages. Prescription medications and certain medical equipment, such as wheelchairs and prosthetics, are also exempt.

Most clothing and footwear are exempt from Vermont sales tax, including everyday wear like coats and shoes. However, this exemption does not extend to clothing accessories like jewelry or handbags, or items specifically designed for athletic or protective use. Additionally, certain agricultural machinery and equipment used primarily for producing commodities for sale may qualify for an exemption.

Vermont Use Tax

Vermont’s use tax is a complementary tax to the sales tax, applied when Vermont sales tax was not collected on a taxable purchase. Its purpose is to ensure a fair playing field for businesses and to capture tax on items purchased outside the state for use within Vermont. The use tax rate is the same as the statewide sales tax rate, which is 6%.

This tax applies to purchases made online from out-of-state vendors who do not collect Vermont sales tax, or items bought in a state with a lower or no sales tax and brought into Vermont for use. For example, if an appliance taxable in Vermont is purchased in a state without sales tax and brought back to Vermont, use tax would be owed. Consumers are responsible for self-assessing and paying this use tax, often reported on their state income tax returns.