Small Business Taxes in Vermont | Our Essential Guide


Steve Bennett
Steve Bennett
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Vermont Small Business Taxes

Owning and operating a small business in Vermont is exciting and fulfilling. However, it also comes with responsibilities, including staying informed about Vermont tax laws and ensuring that your Vermont business complies with all applicable regulations. If you will start a Limited Liability Company in Vermont, this one’s for you! 

This comprehensive guide will walk you through the critical aspects of Small Business Taxes in Vermont. Understanding different taxes allows you to make informed decisions that will benefit your business and help you stay on the right side of the law.

Webinarcare Editorial Team will help you easily understand small business taxes in Vermont. You must be guided by all the factors gathered in this article.

Small Business Tax Law in Vermont

Vermont’s small business tax law defines and outlines the tax obligations and exemptions for various businesses, including Limited Liability Companies (LLCs). These laws comprise various taxes that small businesses must comply with for income, sales, payroll, property, and other industry-specific taxes. Each type of tax presents unique implications for small businesses, and navigating through this maze can be quite challenging. Therefore, understanding these taxes in detail is crucial for LLCs as it aids in effective tax planning and helps avoid non-compliance penalties.

LLCs in Vermont enjoy certain benefits under the small business tax law. Generally, an LLC is considered a pass-through entity, and its profits are passed directly to its owners, who then report this income on their personal tax returns. This differs from starting a corporation in Vermont that faces double taxation on corporate profits and dividends. However, it’s noteworthy that the taxable profit of an LLC is not just the cash the owners take out – it includes the company’s overall profits.

So, appropriate measures must be taken to ensure accurate reporting and minimize tax liabilities as much as possible. Tax laws concerning LLCs often change, and keeping abreast of these updates plays a pivotal role in the successful running of the business. If you are still looking for an LLC service to help you with your taxes, we reviewed these services, including the top features and affordable prices.

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Type of Taxes For Small Businesses in Vermont

Starting a business in Vermont significantly contributes to the local economy. However, operating such businesses here requires an in-depth understanding of the types of small business taxes. Small businesses must adhere to these taxes’ specific regulations, rates, and filing deadlines to avoid penalties and operational interruptions. These taxes include but are not limited to:

  • Income Tax: Typically, all businesses in Vermont must file an income tax return and may need to pay capital gains tax on any profits. The income tax rate in Vermont can range from 3.35% – 8.75% (depending on income).
  • Sales Tax: Businesses in Vermont that sell physical products might be required to collect sales tax on transactions and forward it to the Vermont government. The sales tax rate in Vermont is 6.00%.
  • Payroll Tax: If a business in Vermont has employees, it is responsible for withholding payroll taxes from the employee’s wages and transferring them to the relevant tax agency.
  • Property Tax: Businesses that own property in Vermont may be subject to a property tax varying from county to county. The property tax rate in Vermont is 1.88%.
  • Franchise Tax: Some states, including Vermont, may have a franchise tax, which applies to businesses simply for the privilege of operating in that state. Vermont does not have a franchise tax for LLCs.
  • Self-Employment Tax: Sole proprietors and freelancers in Vermont may be required to pay self-employment taxes, covering social security and Medicare costs.
  • Excise Tax: Some businesses may be liable to pay excise taxes, typically applied to certain goods and services such as alcohol, tobacco, and gasoline.
  • Unemployment Insurance Tax: Employers in Vermont might be required to pay unemployment insurance taxes, which fund unemployment benefits for workers who lose their jobs.

Understanding the types of small business taxes in Vermont is the first step towards financial transparency. Remember, when you start an LLC, you’re not only launching a business, you’re also taking on a mantle of fiscal responsibility. Stay informed, stay compliant, and contribute to the growth of Vermont’s economy.

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Calculate Taxes in Vermont

Understanding how to calculate taxes for small businesses in Vermont. You will not just fathom the different taxes and how they work but also how you came up with them. Here is how you calculate taxes in Vermont.

  • Income Tax: Business income tax is calculated based on the profits reported on your income tax return. The amount of tax due will be based on the tax rate in your specific tax bracket.
  • Sales Tax: To calculate sales tax, multiply the total sales receipts by the sales tax rate in Vermont. The sales tax amount should be added to the customer’s price for goods or services.
  • Payroll Tax: Payroll taxes include federal income tax, Social Security, and Medicare taxes. You can use the tax tables or tax calculator provided by the IRS to calculate these taxes. In addition, employers are responsible for paying the Federal Unemployment Tax (FUTA).
  • Property Tax: Property taxes are calculated by multiplying the property’s assessed value by the local property tax rate.
  • Franchise Tax: Franchise tax calculation varies by state. It could be based on your net worth, income, or a flat fee. Consult the Vermont Department of Taxes for details.
  • Self-Employment Tax: Self-employment tax consists of Social Security and Medicare taxes. To calculate it, multiply your net profit from self-employment by 15.3%.
  • Excise Tax: Excise taxes are usually included in the product’s price, like gasoline or alcohol, and are often levied per unit (like per gallon or bottle) rather than as a price percentage.
  • Unemployment Insurance Tax: These rates vary by state and by the individual employer’s experience rating. The employer’s experience rating is based on the benefits paid to former employees, so new businesses in Vermont usually have a relatively low rate.

It is recommended to consult a tax professional to ensure accuracy and compliance with all relevant tax laws.

File and Pay Business Taxes in Vermont

The process of filing and paying taxes in Vermont can be broken down into several steps. Here is a step-by-step guide on how to go about it:

  1. Gather all relevant documents: Collect all the necessary paperwork, including W-2 forms from your employer(s), 1099 forms for freelance or self-employment income, income statements from banks or financial institutions, and any other relevant receipts or records.
  2. Determine your filing status: Assess your marital status and household situation to determine the appropriate filing status, such as Single, Married Filing Jointly, Married Filing Separately, Head of Household, or Qualifying Widow(er) with Dependent Child.
  3. Choose a filing method: In Vermont, you can file taxes electronically using tax software or prepare a paper return. Electronic filing is generally faster, more convenient, and can minimize errors. You can file your taxes by mail and submit them to the Vermont Department of Taxes.
  4. Calculate your taxable income: Calculate your total income by adding up all your earnings, including wages, tips, self-employment income, dividends, and interest. Deduct any eligible adjustments and deductions to arrive at your taxable income.
  5. Complete the tax return: Fill out the Vermont tax forms electronically or on paper based on your chosen filing method. Take your time to review and double-check the information provided to minimize errors.
  6. Submit your tax return: If filing electronically, follow the instructions provided by the tax software to submit your return electronically. If filing on paper, mail your completed tax return to the Vermont Department of Taxes. Include any required forms, schedules, and copies of your W-2 or other income statements.
  7. Determine your payment method: Calculate the taxes owed or the refund due. If you owe taxes, there are several payment options available, such as electronically via direct debit or credit card, by mail with a check or money order, or through an electronic funds transfer. Choose the payment method that suits you best.
  8. Pay your taxes: Submit your tax payment by the Vermont deadline. Ensure the payment is postmarked by the due date to avoid penalties or interest charges.
  9. Keep copies for your records: Make copies of all documents associated with your tax return, including the completed forms, payment proof, and any supporting documentation. Store these records in a safe place for future reference.

Remember to consult Vermont’s official tax website or seek professional advice to ensure compliance with any specific tax regulations or updates in the state.

Small Business Tax Deductions

Tracking and claiming deductions for your Vermont small business can significantly reduce your tax burden. Some common deductions available to small businesses in Vermont include:

  • Business Expenses: Ordinary and necessary expenses, such as rent, utilities, and office supplies, can be deducted from your income.
  • Depreciation: The cost of business property, such as equipment, vehicles, and buildings, can be deducted over a specified period. Knowing it has tax deductions is better if you plan to create a rental property for your Vermont LLC
  • Employee Wages and Benefits: Employees’ salaries, wages, and benefits can be deducted as a business expense. 
  • Business-related Travel and Meals: Expenses incurred while traveling for business purposes or meals consumed during business meetings can be deducted, subject to certain limitations.
  • Home Office Deduction: If you use a portion of your home exclusively for business purposes, you may be able to deduct a portion of your home expenses, such as mortgage interest, property taxes, and utilities.
  • Retirement Plan Contributions: Contributions made to a qualified retirement plan for yourself and your employees can be deducted as a business expense.

Hire a Tax Professional in Vermont

Accurate tax filing requires a certain level of expertise. Recognizing this, seeking the services of a good tax professional in Vermont can be beneficial for your small business. Hiring a tax professional will safeguard you from possible mistakes and help you maximize your tax savings. Considering their value, selecting the right professional becomes crucial.

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Sanctions For Not Filing Small Business Taxes in Vermont

Sanctions and penalties exist for not paying taxes for a small business in Vermont. The specific sanctions and penalties can vary depending on the amount owed and the time the taxes remain unpaid. Some common sanctions and penalties for unpaid small business taxes in Vermont include:

  • Late payment fees
  • Interest charges on unpaid taxes
  • Revocation of business license
  • Seizure of business assets
  • Legal action, such as wage garnishment or liens on the property.

Paying small business taxes on time and in full is important to avoid these sanctions and penalties. Suppose you are unable to pay your small business taxes. In that case, it is recommended that you contact the Vermont Department of Taxes or a tax professional to discuss payment options and avoid any penalties.

Where Do I File My Small Business Taxes in Vermont?

Small business taxes in Vermont can be filed with the Vermont Department of Taxes or a state-approved online tax filing service. The specific process for filing small business taxes can vary depending on the business entity type and the revenue earned during the tax year. It is recommended that small business owners consult with a tax professional or visit the Vermont Department of Taxes website for more information on how to file small business taxes in Vermont.

FAQs

What is the sales tax rate in Vermont for small businesses?
The sales tax rate in Vermont for small businesses is 6%.
Who needs to file a Vermont business tax return?
Any business that is operating in Vermont and has generated income needs to file a Vermont business tax return.
What is the state income tax rate in Vermont for small businesses?
The state income tax rate in Vermont for small businesses ranges from 3.35% to 8.75%.
How often do small businesses in Vermont need to file state taxes?
Small businesses in Vermont need to file state taxes on an annual basis.
Are there any exemptions for small businesses in Vermont when it comes to taxes?
Yes, there are exemptions available for businesses that qualify for certain tax credits and incentives in Vermont.
Can small businesses in Vermont get help with filing their taxes?
Yes, small businesses in Vermont can get help with filing their taxes through various resources, such as the Small Business Administration and the Vermont Department of Taxes.
Does Vermont have any tax incentives for small businesses?
Yes, Vermont offers tax incentives to small businesses that meet certain criteria, such as businesses that create jobs and invest in their local communities.
How do I know if my business qualifies for tax incentives in Vermont?
You can find out if your business qualifies for tax incentives by contacting the Vermont Department of Economic Development.
What is the Vermont Business Education Tax?
The Vermont Business Education Tax is a tax levied on businesses to support education in the state.
How is the Vermont Business Education Tax calculated?
The Vermont Business Education Tax is calculated based on the value of each business’s property in the state.
Are there any exemptions or abatements available for the Vermont Business Education Tax?
Yes, there are exemptions and abatements available for the Vermont Business Education Tax in certain cases, such as for small businesses and businesses that invest in new construction.
Does Vermont have a use tax?
Yes, Vermont has a use tax that applies to businesses that purchase goods or services from out-of-state vendors but use them in Vermont.
Do small businesses in Vermont need to file a use tax return?
Yes, small businesses in Vermont that owe use tax must file a use tax return.
Are there any exclusions to the Vermont use tax?
Yes, certain items, such as most food and prescription drugs, are excluded from the Vermont use tax.
Does Vermont have a corporate income tax?
Yes, Vermont has a corporate income tax that applies to all corporations operating in the state.
How is the Vermont corporate income tax calculated?
The Vermont corporate income tax is calculated based on the business’s net income from the state.
Does Vermont have a franchise tax?
No, Vermont does not have a franchise tax.
Does Vermont have a business privilege tax?
No, Vermont does not have a business privilege tax.
Are there any penalties for late payment of Vermont business taxes?
Yes, there are penalties and interest charged on taxes that are paid late in Vermont.
What should I do if I can’t pay my Vermont business taxes on time?
If you can’t pay your Vermont business taxes on time, you should contact the Vermont Department of Taxes to discuss your options.
Is e-filing available for Vermont business tax returns?
Yes, e-filing is available for Vermont business tax returns.
Where can I find more information about Vermont’s tax laws for small businesses?
You can find more information about Vermont’s tax laws for small businesses by visiting the Vermont Department of Taxes website.
Are there any tax breaks available for renewable energy businesses in Vermont?
Yes, there are tax breaks available for renewable energy businesses in Vermont, such as the Green Mountain State Energy Plan.
How do I claim tax breaks for my renewable energy business in Vermont?
You can claim tax breaks for your renewable energy business in Vermont by contacting the Vermont Department of Taxes.
What is the Vermont Use Tax Education and Enforcement Program?
The Vermont Use Tax Education and Enforcement Program is a program designed to educate small businesses about their use tax obligations and help them comply with Vermont’s use tax laws.
How do I enroll in the Vermont Use Tax Education and Enforcement Program?
You can enroll in the Vermont Use Tax Education and Enforcement Program by contacting the Vermont Department of Taxes.
What is the State Purchasing Card Program in Vermont?
The State Purchasing Card Program in Vermont is a program that allows small businesses to make tax-exempt purchases for state contracts.
How do I apply for the State Purchasing Card Program in Vermont?
You can apply for the State Purchasing Card Program in Vermont by contacting the Vermont Agency of Administration.
What is the Best Management Practices for Reduced Costs Program in Vermont?
The Best Management Practices for Reduced Costs Program in Vermont is a program that helps small businesses reduce their total tax liability.
How do I enroll in the Best Management Practices for Reduced Costs Program in Vermont?
You can enroll in the Best Management Practices for Reduced Costs Program in Vermont by contacting the Vermont Agency of Natural Resources.

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Conclusion

Understanding and complying with small business tax laws in Vermont is crucial for the success of your business. By staying informed about filing requirements, tax rates, deductions, and credits, you can make informed decisions that will benefit your business and help you avoid potential tax penalties. Consider consulting with a tax professional to ensure your small business fully complies with all applicable tax laws in Vermont.

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