Vermont’s tax structure includes several major taxes that apply to individuals and businesses. Indinero offers support for tax services for people who refer to this material and need assistance understanding or managing their tax obligations.
Income Tax
Vermont imposes a progressive individual income tax on residents and on nonresidents with income sourced to the state. Rates increase with income level.
Key points:
The income tax is based on federal taxable income with Vermont adjustments.
Rates range from 3.35 percent to 8.75 percent depending on filing status and income bracket.
Residents pay tax on all income, while nonresidents owe tax only on Vermont-sourced income.
Credits and deductions may apply, including credits for taxes paid to other states.
Sales and Use Tax
Vermont levies a statewide sales and use tax on most retail sales of tangible personal property and certain services.
Key points:
The statewide sales tax rate is 6 percent.
Local option sales taxes may add 1 percent in participating municipalities.
Clothing is generally taxable.
Groceries, prescription drugs, and most manufacturing machinery are exempt.
Use tax applies when taxable items are purchased out of state without paying Vermont sales tax.
Property Tax
Vermont administers property tax through a combination of statewide education tax rates and municipal property tax rates.
Key points:
Property is assessed annually at fair market value.
Education property tax rates vary based on local school budgets and state calculations.
Municipalities also levy their own property tax rates, creating variation across the state.
Businesses may owe tax on machinery and equipment depending on local rules.
Corporate Income Tax
Businesses operating in Vermont are subject to corporate income tax based on net income attributable to the state.
Key points:
Vermont’s corporate income tax uses tiered rates from 6 percent to 8.5 percent depending on taxable income.
Businesses operating in multiple states use apportionment based primarily on sales.
Returns are required for corporations with Vermont-sourced income.
Certain credits and incentives may apply to qualifying activities.
Meals and Rooms Tax
Vermont applies a statewide tax to prepared meals, short-term lodging, and alcoholic beverages.
Key points:
Prepared meals are taxed at 9 percent.
Lodging is taxed at 9 percent.
Alcoholic beverages served for immediate consumption are taxed at 10 percent.
Businesses in these categories must register, collect, and remit the tax regularly.
Motor Fuel Tax
Vermont imposes taxes on gasoline and diesel fuel to fund transportation infrastructure.
Key points:
Gasoline is taxed through a combination of cents-per-gallon charges and percentage-based assessments.
Diesel fuel is subject to its own per-gallon tax rate.
Distributors remit the tax, which is reflected in pump prices.
Tobacco Products Tax
Vermont levies excise taxes on cigarettes and other tobacco products.
Key points:
Cigarettes are taxed per pack at a rate set by state law.
Other tobacco products, including cigars and smokeless tobacco, are taxed based on wholesale price.
E-cigarette liquids are taxed per milliliter or as a percentage of wholesale cost depending on product type.
Solid Waste Franchise Tax
Vermont applies a tax related to solid waste disposal facilities.
Key points:
The tax supports environmental and waste management programs.
Rates depend on facility type and volume of waste processed.