When I hear ‘Vermont’ two things immediately come to my mind. The first is a huge stack of pancakes covered in warm, think, sugary Vermont Maple Syrup.
In fact I can think of a lot of things covered in Maple Syrup: waffles, “Johnny” corn cakes, cowboy-toast, grits, bacon, sausage, almost anything is better with Maple Syrup. I’ve been known to eat it on fried chicken, fried quail, chicken-fried steak, chicken-fried chicken, ham, ribs, and even mix it in 'my special Bar-b-q sauce.' I’m making myself so hungry I am going to have to stop and go have some Maple syrup on something. Vermont is the leading producer of Maple syrup in the United States, and for such a little state (only 9,620 square miles – ranked 45th in the US), that is saying a lot since they produce more than 1-million gallons of the stuff. As you can probably tell, I just ‘love the stuff’ and Murph’s waist-line shows it.
But this series isn’t about my love for Maple syrup, it’s about Sales and Use Tax and it’s a prime example of how fickled Sales Tax can be. If you buy Maple syrup at the grocery store in sizes designed for personal consumption you won’t pay any Sales tax because of Vermont’s exemption of food from sales taxes. On the other hand if you order Maple syrup in bulk quantities, and have it delivered in the State of Vermont you will pay Sales Tax because bulk quantities are not considered food product for personal consumption. I made check-outs from several Vermont vendors to my Oklahoma address, one was going to charge me sales tax even with an Oklahoma zip code, one was going to charge me ‘use tax’, and the third wasn’t going to charge me any tax. Obviously more than one seller of Maple Syrup is ‘confused’.
I told you that two things come to my mind when I hear ‘Vermont’, and yes it is hard to beat Maple Syrup, but perhaps even that most delicious sugary concoction can be trumped by Norman Rockwell.
Most Americans first knew and loved Norman Rockwell’s artwork when it appeared on the cover and within the pages of the Saturday Evening Post. But I have told you before that the Boy Scouts of America played a key role in my childhood and youth, and it did also in the early adulthood of Norman Rockwell. At the ripe old age of 18, he went looking for a job and left the offices of the Boy Scouts with a commission to do magazine illustrations featuring scouting. It was a relationship that would last 60 years and include everything from the covers of the Boy Scout Handbook to their annual calendar. Not only did Rockwell’s illustrations help define Scouting, but they also helped to define Americans both here and abroad for much of the 20th century. Rockwell always had a special fondness for Vermont, it probably started by his visiting his first Boy Scout camp in Pownal, Vermont. Throughout the years, much of Rockwell’s work depicted life in Vermont as ‘typical’ of life in America, especially when it came to holiday time.
Today Vermont’s estimated 2014 population is 626,562, with a density of 67.7 people per square mile. The median household income is $52,104 ranking as 20th in the US. The state capital is Montpelier and the largest city is Burlington. Vermont is a great host for tourists, some of the best ski areas in New England are located in Vermont, and it’s a great place to go ‘ice fishing’. For as small a place as Vermont is, it’s full of ‘rail service’ allowing you to get just about anywhere via a train.
Probably the best thing would be to travel thru the Vermont countryside via train while eating pancakes with Maple syrup in the dining car. (Reminds me of an earlier life….). You won’t pay sales tax for that experience.
The general sales tax rate is imposed on the buyer on the purchase price of tangible personal property, amusement charges, fabrication charges, and some public utility charges.There are 46 exemptions from the tax which include medical items, food, manufacturing machinery, equipment and fuel, residential fuel and electricity, clothing and shoes. The Use Tax is imposed on the buyer at the same rate (6%) as the sales tax. The buyer pays the Use Tax when the sellers fail to collect the sales tax or the items is purchased from a source where no tax is collected. The Use Tax applies to items taxable under the Sales Tax. Certain Municipalities may also impose a local option tax on sales.
About Sales Taxes and this series:
Thanks to Avalara, the 'tax people', this article is one in a 50 part series covering sales tax for each and every state tax jurisdiction in the United States. "Sales Tax Tuesday" is being published every Tuesday during 2015.
Sales tax provides critical revenue for states. Other than property and income tax, sales tax is the largest source of tax revenue in the majority of the 46 states that collect it. From a government perspective, making sure every sales tax dollar is collected, through audits, fines, penalties rates and rules, is an exercise for income. It’s easy to be lured into a false sense of compliance when it comes to sales tax, this series is intended to insure that you are aware of the key sales tax facts for YOUR state.
Note: For sales tax definitions and essentials check out the opening article to this series.
Vermont – Sales Tax Facts1:
- Sales and Use tax managed by the Vermont Department of Taxes.
- Vermont is a full member of the SST.
- Vermont has 12 different sales tax jurisdictions. The state rate is 6% and the total rate can range as high as 7% when including local jurisdictions. The average is 6.14% making it the 34th highest average sales tax rate.
- Local taxes are imposed by 11 municipalities at 1%. A separate sales tax of 9% is imposed on prepared foods, restaurant meals, and lodging. A 10% rate is imposed on sales of alcohol in restaurants.
- Sales tax is sourced at the destination address.
- Some common nexus creating activities are: place of business, systematic or seasonal sales solicitation (display advertisement, distribution of print, radio or television media), this can be performed by employees, independent contractors, agents or other representative of a business.
- Vermont will tax pre-written software (maintenance contracts associated), SAAS, digital goods (if sold to the end user), sporting equipment and grooming products.
- Vermont does not tax custom software (maintenance contracts associated), clothing (unless considered an accessory or equipment), health related products (with or without prescriptions), or installation services associated with tangible property.
- Vermont has exemption certificates including but not limited to resale, agriculture, manufacturing, publishing, research and development, or packaging. The certificate for fuel and electricity must be renewed every three years.
- Sales tax returns for Vermont may be completed online or by paper, and are due either monthly quarterly or annually depending on the amount of tax due.
Did Vermont Shoot Itself in the Foot with 2011 ‘Click-through’ sales tax legislation?
In January (2015) Amazon began notifying Vermont members of the Amazon Associates program that they were being terminated from the program.
Vermont is one of six states whose residents are no longer eligible for the program according to Amazon. Amazon has indicated that this step was taken as result of Vermont’s state tax collection legislation’. In 2011 the Amazon legislature passed a bill to apply sales tax laws to companies such as Amazon that solicit business via customer-referral agreements with Vermont residents. This is ‘legal jargon’ for Internet click-through sales. Vermont’s law isn’t actually in effect at present from a practical standpoint, because of a clause which provides that 25% of the other states adopt similar laws. While Vermont officials indicate that their legislation was intended to either spur other states on to similar enactments, or pressure congress for a federal law, a great many states have expressed concerns over any such enactments in light of Amazon’s actions. Some businesses in the six states presently under ban have, or are in the process of relocating to states where they will once again have access to the Amazon Associate program.
Manual sales and use tax management is prone to error as could be seen from the 3 examples I gave while trying to purchase Maple Syrup in bulk. Not only is it error prone but it also consumes staff time in pass-through rather than revenue-generating activities. Avalara provides solutions for sales tax automation, including tax calculation, exemption certificate management, returns processing and 1099 filing and reporting. Automation via Avalara allows businesses to be fully sales tax compliant without sacrificing productivity.
1 - State by State Sales Tax - Vermont, Patrick Neu, Avalara – March 23, 2015