Registering a Business in Texas
Before you begin to do business in Vermont, you must register your business with the Vermont Secretary of State. The Secretary of State’s website offers an Online Business Service Center with guidance to get your started.
Businesses will also want to register with the Vermont Agency of Administration - Department of Taxes. More information can be found on their website here.
S-Corporation Income Tax
Vermont recognizes the federal S-election, and Vermont S corporations are not required to pay tax to the state. However, individual S corporation shareholders will owe tax on their share of the corporation’s income.
Vermont S corporations are subject to the business entity tax of $250.
LLC/Partnership Income Tax
LLCs and partnerships are not required to pay income tax to Vermont. Instead, income from the business is distributed to individual LLC members or partners, who then pay Vermont income tax on that amount with their personal return. Vermont LLCs and partnerships are required to pay the $250 annual business entity tax.
Business Entity Income Tax
The Business Entity Income Tax applies to S corporations, LLCs, and partnerships. These types of business entities must pay a flat annual tax of $250.
In order to file BI-476, businesses must meet ALL of the following requirements:
All shareholders, partners, or members are residents of Vermont
Which have no income/losses from any state other than Vermont
Which have no income adjustment due to disallowance of bonus depreciation
Which owe the minimum tax of $250 – no exceptions to minimum tax, and no additional tax due (such as built-in gains or LIFO recapture)
If a business does not meet ALL of the requirements, they must file form BI-471.
Business entities may elect to file a composite return, and pay income tax at the entity level on behalf of all owners who are nonresidents of Vermont. Businesses with more than 50 non-resident shareholders, partners, or members. Owners who are included in a composite return are relieved of the obligation to file their own income tax return, provided there is no other income or activity that creates a requirement to file in Vermont. The composite tax rate is 7.8%
Composite filers use form BI-473 - Composite Schedule when filing BI-471/476.
Individual Income Tax
Vermont has a static conformity with the Internal Revenue Code as it existed on December 31, 2019.
The starting point for computing Vermont's personal income tax liability is the federal taxable income and allows their own state defined additions and subtractions to arrive at Vermont's adjusted gross income.
Vermont allows their own state defined standard deduction. The standard deduction amounts are as follows:
Single — $6,150
Head of household — $9,200
Married filing jointly or surviving spouse — $12,300
Married filing separately — $6,150
You aren't able to itemize, but you may claim a credit for certain federal itemized deductions on top of taking the standard deduction.
Personal and dependent exemptions are offered. The amount is $4,250 which can be claimed for yourself, your spouse and for each qualifying dependent.
Vermont does not conform to the Internal Revenue Code (IRC) section 199A, also known as the QBI deduction.
Shareholders and partners with income assignable to Vermont may need to file an individual income tax return. Individual income tax rates vary by filing status and income and are as follows.
CARES Act Guidance
Vermont decouples from all CARES Act provisions.
Business entity income tax returns are due on the date that your federal pass through entity return is due.
Individual income tax returns also follow the federal due date and are typically due on the 15th day of the fourth month following the close of the tax year. This is usually April 15th. If the date falls on a weekend or holiday, the return is due the following business day.
Taxpayers who can reasonably expect to have over $500 in taxes due at the end of the tax year should make estimated quarterly payments. The payments should be equal to 100% of the previous year’s tax liability or 90% of this year’s tax liability. Estimated payments should be made on the 15th day of the 4th, 6th and 9th month during the tax year and the 1st month of the following tax year.
Individuals use form IN-114 found here.
Filing An Extension
Business entities holding Federal extensions may file thirty days after the extended Federal due date. Businesses must still file Form BA-403 found here. Any tax due, including the Vermont minimum tax, must be paid by the original due date of the return.
Individuals can use form IN-151 to request a six month extension. An extension does not allow for an extension of the payment. Taxpayers will want to pay any tax liability by the original due date. Form IN-151 can be found here.
If the filing is over 60 days late from the original due date, even if no tax is due, a $50 late penalty applies unless timely filed under extension.
If your business was formed or is located in another state, but generates income in Vermont, it may be subject to Vermont taxes. The rules for taxation of multistate businesses, including what constitutes nexus with a state for the purpose of various taxes, are complicated. If you run such a business, you should consult with a tax professional.
Vermont Secretary of State:
Vermont Agency of Administration - Department of Taxes: