Area Development Vermont Resource Page
Basic Business Taxes
Vermont has a corporate net income tax that applies to taxable income allocated or apportioned to Vermont as follows: $0 to 10,000, 7.00 percent; $10,001 to 25,000, $700 plus 8.10 percent of the excess over $10,000; $25,001 to 250,000, $1,915 plus 9.2 percent of the excess over $25,000; $250,001 and over, $22,615 plus 9.75 percent of the excess over $250,000.
Corporations, S corporations, partnerships, and limited liability companies are subject to a minimum tax of $250. Small farm corporations are subject to a $75 minimum tax.
General sales tax:
Vermont's general sales tax rate is 6% of taxable sales, purchases, charges and rentals. Use tax applies to storage, consumption, or use of tangible personal property or services. Unless already subject to sales tax; meals and rooms taxed at 9%. There are 44 exemptions, including food, clothing with purchase price of $110 or less, medicines, machinery and equipment used in manufacturing, fuel and electricity used in residences, and fuels used at manufacturing sites of tangible personal property for sale. Tax is also imposed at a rate of 4.36 percent on telecommunication services (but not those provided with respect to calling cards) with an exemption for the first $20 of residential local exchange service.
Meals and rooms tax:
The meals and rooms tax rate is 9 percent. The tax on sale of alcoholic beverages is 10 percent.
Property taxes:
The base education tax rate for homestead property is $1.05. The base tax rate for nonresidential property is $1.54. A statewide education tax is imposed on these two classes of property at different rates (32 V.S.A. Chapter 135). The basis for this classification is the Homestead Declaration. Any property that is not a homestead is nonresidential property. The homestead education tax rate in each municipality depends upon the local per pupil spending. Both the homestead and nonresidential education tax rates are adjusted by the local common level of appraisal. Each town will receive notice on or about June 30 of the education rates to be levied.
Property transfer tax:
There is a tax of 1 1/4 percent (.0125) of the value of real property that is to be paid by the purchaser of the property. However, on the first $100,000 of the value of property purchased as a principal residence, the rate is one-half of 1 percent (.005). This lower rate may also apply to transfers of certain farm and forestlands enrolled in the state's use-value appraisal programs.
Land gains tax:
There is a land gains tax on the gain from sale or exchanges of land (not buildings or structures) if the land has been held by the seller for fewer than six years and the land is not part of the first 10 acres beneath or contiguous to the seller's principal residence. Land purchased to build a principal residence may be exempt if certain conditions are met. "Land" includes timber rights purchased and sold within six years provided that the underlying land is also sold within six years.
Vermont Economic Progress Council (VEPC) tax credits:
As a condition of awarding tax credits, VEPC must make a threshold determination that "but for" the economic incentive the proposed economic development would not occur or would occur in a significantly different and significantly less desirable manner.
Each application for credits must be evaluated by VEPC for consistency with nine guidelines including the creation of new, full-time jobs which make a net positive contribution to employment in the area; the creation of positive fiscal impacts on the state; conformance with all appropriate town and regional plans and permits; protection of Vermont's natural, historical, and cultural resources and enhancement of Vermont's historic settlement patterns; use of Vermont resources; and use of existing infrastructure and location in an existing downtown redevelopment project.
The cost-benefit model used by VEPC must measure the projected net fiscal benefit to the state.
Information and materials submitted by a business concerning its income taxes and other confidential financial information shall be available to the joint fiscal office and the auditor of accounts, but those parties shall not disclose any proprietary business information except upon court order or as otherwise provided by law.
Economic incentives are conditional upon meeting performance expectations and the reporting requirements of the VEPC and the Department of Taxes. The Department of Taxes has been given final authority to determine whether a tax credit shall be allowed. Compliance with respect to other economic benefits shall be detailed in a report to VEPC.
Small business investment tax credit:
The small business tax credit was retroactively amended (effective Jan. 1, 1998) to allow a credit for the first dollar of investment, not only dollars expended over $150,000, provided the investment exceeds $150,000. A company may receive a credit in the amount equal to 5 to 10 percent of its investments within the state of Vermont in plants, facilities, and machinery and equipment. Requirements vary depending upon the number of employees in the business.
Financial services companies tax credit:
Vermont offers a tax credit up to 75 percent off the state income tax, based on a formula that combines the company's in-state payroll and out-of-state revenues.
High-tech tax credits:
High-technology companies may apply for three of five tax credits including investments in machinery and equipment; renovation of existing facilities to provide cable, fiber, or telecommunications access; work-force training; and a sales and use tax exemption for personal computers and software.
Sales tax exemption:
Vermont offers a sales tax exemption on certain building materials in excess of $1 million.
Fuel and electricity sales tax exemption:
This exemption applies to sales of electricity, oil, and other fuels used directly or indirectly in manufacturing tangible personal property for sales.
Machinery and equipment sales tax exemption:
This applies to machinery and equipment used directly or indirectly in manufacturing tangible personal property for sale.
Industrial fuels and raw materials tax exemption:
Motor fuels, except for railroad and jet fuel; component parts for manufacturing, packaging, and shipping materials; and newspapers and tangible property used as ingredients in the manufacture of newspapers are exempt from sales taxation. An exemption from property taxation is provided for plants and shrubs in commercial nurseries or greenhouses.
Payroll tax credit:
This program provides a credit against income tax liability equal to a percentage of increased payroll costs. A company with sales less than $10 million may receive equal to 10 percent of its increased costs of salaries and wages in the applicable tax year.
Research and development tax credit:
This program provides a 10 percent tax credit against income tax for qualified research and development expenditures. Qualified R&D expenditures are those included in the IRS code.
Work force development tax credit:
A corporation can receive an income tax credit in the amount of 10 percent of its qualified training, education, and work-force development expenditures.
Export tax credit:
This provision allows exporting businesses to claim credit against income tax liability. The credit is the difference between income tax calculated under the existing state apportionment formula and the proposed formula, which double weights the sales factor and disregards "throwback" provisions.
Brownfields property tax exemption:
Statewide education property tax exemptions are provided for expenditures incurred by a business for the construction of new, expanded, or renovated facilities on contaminated property.
Pollution-control equipment tax exemption:
Real and personal property used to control air or water pollution is exempt from property taxation.
Energy and fuel conservation measures:
Alternative energy sources used to generate electricity or energy not sold or exchanged may be exempted by municipalities from property taxation.
Vermont Department of Economic Development
National Life Building, Drawer 20
Montpelier, VT 05620
(802) 828-3080
