If you are a Vermont small business owner, you likely already know that paying taxes is part of doing business and staying legally compliant. However, making sure you pay the right taxes on time can cause anxiety for even the most experienced business owners, which is why we’ve put together a short guide to small business taxes for Vermont-specific state taxes. Read on to learn about the types of taxes you might need to pay, when and how to do so, and which of our products and services can make your life easier at tax time.
If you’re looking for more comprehensive compliance help, take a look at our Worry-Free Compliance Service. Missing an annual filing requirement or deadline can result in serious consequences, and our service keeps track of these so that you won’t miss required filings like annual reports and warns you of upcoming deadlines.
If you’re looking for information about federal taxes, head over to our page on federal taxes for small businesses to learn more.
Step 1: Establish your Vermont business’s corporate income tax obligations
According to the Vermont Department of Taxes, partnerships, S corporations, and limited liability companies must file an annual business entity income tax return with the Commissioner of Taxes. The due date for the business income tax return is the same date established by the IRS for filing your federal income tax return.
According to the Vermont Department of Taxes, the business entity income tax applies to entities that elect to be taxed as S corporations or partnerships. The income from these pass-through business entities passes through to the partners, shareholders, or members to be taxed at the individual or corporate rate, as applicable.
C corporations and limited liability companies (LLCs) electing to be taxed as C corporations pay income taxes on the company’s net income. The due date for corporate tax returns is the same as for the company’s federal income tax return. A corporation with a Vermont tax liability over $500 must pay estimated tax payments on the 15th day of the fourth, sixth, ninth, and twelfth months of the year.
The Vermont business tax rate is a flat rate based on income brackets. Some companies owe a base tax in addition to the marginal tax rate. The Vermont business tax rate is:
- 6% for net income between $0 and $10,000
- A base tax of $600 plus 7% on amounts over $10,000 for companies with a net income between $10,000 and $25,000
- A base tax of $1,650 plus 8.5% of amounts over $25,000 for companies with a net income of $25,001 or more
A minimum annual tax applies for business taxes in Vermont. The company’s gross receipts from activity in Vermont determine the minimum tax. Minimum annual taxes for corporations in Vermont are:
- $300 if gross receipts are below $2 million
- $500 if gross receipts are between $2,000,001 and $5 million
- $750 if gross receipts are $5,000,001 and over
Most companies conducting business in Vermont must register with the Vermont Department of Taxes. However, a company may need more than one tax account if it pays other types of taxes, such as withholding and sales tax.
Step 2: Determine your Vermont business’s employment taxes
Vermont imposes state income taxes on individuals earning income in the state. Employees complete a Withholding Allowance Certificate. An employer uses the information on the certificate to calculate the withholding tax. Employers must deduct the required withholding amount from each employee’s wages. The Department of Taxes provides employers with a guide that includes tax tables and instructions for withholding taxes, which is available on its website.
Typically, state withholding tax due dates are the same as the company’s federal withholding due dates. Companies pay withholding taxes semi-weekly, monthly, or quarterly. The due dates for employee withholding tax are as follows:
- Quarterly withholding tax payments are due when the company files the quarterly withholding report.
- Monthly withholding payments are due on the 25th day of the following month (January payments are due February 23).
- Semi-weekly withholding payments are due the following Wednesday for pay dates on Wednesday, Thursday, or Friday and due the following Friday for other payment dates.
Companies can typically choose to file withholding returns and pay taxes either online or by mail. However, there may be a requirement for a company to file and pay online under some circumstances.
Step 3: Establish your Vermont business’s additional state tax obligations
Companies may owe additional business taxes depending on the type of business they conduct. Below are four of the common business taxes that many companies in Vermont pay.
Vermont charges a 6% sales tax on retail sales of tangible personal property. In addition, a local option tax applies to some sales, which increases the tax rate to 7%. Businesses that sell products subject to state sales tax must charge and collect the tax on each transaction. Companies remit sales tax to the Vermont Department of Taxes.
Due dates for sales tax are based on the frequency of the payments. Monthly filers remit sales taxes on the 25th day of the following month. Quarterly filers pay by the 25th of the month following the end of the quarter. Annual filers pay by January 25 of each year.
Franchise or Privilege Tax
Some states charge a franchise or privilege tax in addition to corporate income taxes. The franchise tax pays for the “privilege” of doing business within the state. Vermont doesn’t charge an additional tax above the base tax and taxes based on the company’s net income.
Companies with employees are subject to an unemployment insurance tax. The amount of the tax is based on the company’s gross payroll, current taxable wage base, and the tax rate assigned to the employer. Vermont unemployment tax is due on the first $14,000 in wages paid to each employee during a calendar year.
Employers are required to submit quarterly reports to the Vermont Department of Labor electronically. Reports are due on the last day of the month following the end of the quarter.
An excise tax is a special tax charged on specific goods. The excise tax is in addition to state sales tax. Companies must collect and remit excise taxes to the state.
Vermont imposes excise or miscellaneous taxes on numerous products, including alcohol, tobacco products, and fuel. It’s the responsibility of a small business owner to know which products they sell are subject to an excise tax. The reporting requirements, tax rates, and due dates vary depending upon the type of excise or miscellaneous tax.
Step 4: Prepare to file and pay your Vermont business taxes
Most business taxes in Vermont are paid through the myVTax website. Companies may also file returns electronically. The Department of Taxation handles business taxes except for unemployment taxes. Unemployment taxes are paid online, as discussed above.
You will need to register with both entities before filing and paying taxes online. Gather all documents and information you received when forming your business, and follow the instructions on the website.
Before you prepare your tax returns, it’s helpful to gather the documents needed to prepare them. Documents include, but are not limited to:
- Balance sheets
- Employer wage statements
- Sales reports
- Income statement
- Asset purchase statements
- Credit card statements
- Accounting documents
- Bank account statements
One of the most important pieces of information you need to prepare your corporate tax returns is the company’s income and expenses. Carefully tracking income throughout the tax year makes it easier to prepare tax returns. We help you keep track of invoices and manage your business finances with our ZenBusiness Money App.
Not sure how to stay compliant? Learn more about legal compliance for small business owners.
Do I need an accountant?
A small business owner benefits from hiring professional accounting help to assist with business accounting. Accounting tasks are time-consuming. Having an accountant allows you to focus on growing your company. Furthermore, an accountant helps you avoid tax mistakes that could result in audits and penalties.
How can we help?
Our ZenBusiness Money App gives you the platform you need to manage your finances and client interactions. The app allows you to easily send custom invoices, accept credit card and bank transfer payments, and manage your clients from an easy-to-use dashboard. All information regarding your business’s finances is at your fingertips.
No matter what stage your business is in, we have the tools and services to support you.
Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
- How much can a Vermont small business make before paying taxes?
Vermont imposes corporate taxes on all income. As a result, the minimum tax liability for a small business operating in Vermont is $300.
- What percentage does a Vermont small business pay in taxes?
A small business pays between 6% and 8.5%, depending on the company’s net income. Corporate tax rates based on net income are:
6% of total net income for those with net income between $0 and $10,000
A base tax of $600 plus 7% on net income over $10,000 when total net income is between $10,001 and $25,000
For those with net income over $25,000, base tax of $1,650 plus 8.5% of amounts over $25,000
Tracking expenses is crucial because it lowers your net income for tax purposes.
- How does a Vermont small business pay taxes?
Most companies pay small business taxes online through the myVTax system. However, some businesses may be permitted to submit taxes through the mail. Unemployment taxes are paid online with the Vermont Department of Labor.
- Do I have to file taxes for my small business in Vermont?
Yes, if your company is a C corporation, you must file a tax return and pay taxes on net income. LLCs taxed as corporations have the same requirements. Partnerships, S corporations, and LLCs taxed as partnerships file an annual business entity income tax return, but the owners pay taxes on income.
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