Vermont
Taxes and business formation • USA 2025–2026
Corporation in Vermont
Tax system of Vermont
Income Tax
Vermont applies a progressive personal income tax scale for individuals, with rates ranging from 3.35% to 8.75% depending on income level and filing status. Income from wages, business, investments, and rentals is subject to taxation. A tax on capital gains also applies and is included in the overall taxable base, although a partial exclusion may be granted for long-term holdings. The state offers standard and individual deductions, tax credits, and support programs for low-income families.
Sales Tax
Vermont's base sales tax rate is 6%, and municipalities may add up to 1% in local tax, bringing the total rate to 7%. The tax applies to most goods, as well as to digital products, cloud services, and certain services. Groceries, prescription medications, and certain medical devices are exempt from taxation. Determining the taxable base and applying the sales tax rate can be quite complex and requires a professional approach and knowledge of state law. Our firm provides services for obtaining a Sales Tax Certificate, as well as for preparing and filing the Sales and Use Tax Return. We advise business owners on matters related to this tax, including registration, calculation, and reporting.
Property Tax
Property tax is levied at the city and school district level. The average effective rate is about 1.71% of market value, which is one of the highest in the country. The rate can vary depending on the area, the purpose the property is used for, and decisions by local authorities. Individuals may receive tax reductions (homestead exemption), and renters can obtain a partial refund of tax through a return.
Business Taxes
Vermont imposes a Corporate Income Tax on owners of C-corporations on a progressive scale: 6.0% on the first $10,000 of profit, 7.0% from $10,001 to $25,000, and 8.5% on profit above $25,000. A Minimum Annual Tax also applies to C-corporations, ranging from $100 to $100,000 depending on gross income. The minimum tax for S-corporations, LLCs, and partnerships is $250 per year. An Annual Report is required for all legal entities (LLCs, corporations, and others). Filing deadlines: within 3 months after the end of the fiscal year for LLCs, and 2.5 months for corporations.
Excise Taxes
Vermont levies excise taxes on alcohol, tobacco, gasoline, medical equipment, and sugary beverages. In addition, there are taxes on car rentals and hotel services.
Estate / Inheritance Tax
Vermont has no gift tax, but it does have an estate tax. The exemption threshold in 2025 is $5 million. Rates start at 16% and can reach 20% depending on the amount exceeding the threshold. This tax applies regardless of the federal estate tax.
Favorable Tax Conditions
The minimum tax on pass-through business is just $250 per year — less than, for example, in New York ($25–$4,500) or California ($800/year). There is also no tax on personal tangible property.
Compared to Other States
Property tax is high, comparable to New Jersey or Illinois. Personal income tax is above the U.S. average, especially for high earners. In addition, an estate tax exists, unlike in most states. Mandatory annual reporting and minimum business taxes also add to the burden.
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