Vermont has some of the highest income taxes in the country. C corporations pay up to 8.5%, and individuals pay up to 8.75%, with the second bracket starting at under $50,000 of taxable income. A gross receipts-based minimum tax introduced in 2025 can reach $100,000 for large corporations. On the other hand, Vermont's 6% sales tax is moderate, and formation and annual fees are low.
This guide covers Vermont's business taxes for 2026, with worked examples and comparisons with New Hampshire, New York and Massachusetts.
Vermont business taxes at a glance
A Vermont C corporation pays graduated rates that reach 8.5% on profit above $25,000, with a minimum tax based on gross receipts. Pass-through owners pay personal rates that reach 6.6% above about $49,400 and 8.75% above about $249,700. S corporations and partnerships pay a $250 minimum entity tax. Customers pay 6% sales tax, 9% on lodging and 10% on meals and alcohol. LLCs pay $155 to form and $45 a year. Vermont also funds education through high statewide property taxes.
Corporate income tax
| Taxable income | Rate |
|---|---|
| $0 to $10,000 | 6% |
| $10,000 to $25,000 | 7% |
| Over $25,000 | 8.5% |
Minimum tax (from 2025):
| Vermont gross receipts | Minimum tax |
|---|---|
| Up to $100,000 | $100 |
| $100,000 to $500,000 | $250 |
| $500,000 to $1 million | $500 |
| Higher brackets | Rising to $100,000 for receipts above $300 million |
- Apportionment: Single sales factor from 2025.
- Combined reporting: Required for unitary groups.
- Credits: Vermont Employment Growth Incentive (VEGI), research and development credit.
- Returns: Form CO-411 is due on the 15th day of the fourth month after year-end.
Personal income tax and pass-through owners
| Taxable income (single, 2026, approx.) | Rate |
|---|---|
| $0 to $49,400 | 3.35% |
| $49,400 to $119,700 | 6.6% |
| $119,700 to $249,700 | 7.6% |
| Over $249,700 | 8.75% |
- LLC owners, partners and sole proprietors pay these rates on profit.
- S corporation shareholders pay on their share. The entity pays a $250 minimum tax.
- PTE election: Available from 2025, making state tax deductible federally.
- Nonresident withholding: Pass-through entities withhold for nonresident owners.
Sales and use tax
| Item | Rate |
|---|---|
| General sales | 6% |
| Meals and alcohol | 10% |
| Lodging | 9% |
| Local option tax (some towns) | 1% |
- Clothing and groceries are exempt.
- Prewritten software and digital products are taxable, including software as a service in some cases.
- Remote sellers with more than $100,000 of Vermont sales or 200 transactions must collect.
Payroll and property taxes
- Unemployment insurance: Employers pay on a wage base above $15,000, indexed each year.
- Child care contribution: Since 2024, employers pay 0.44% of wages to fund child care, and can withhold up to a quarter of that from employees. Self-employed people pay 0.11% of self-employment income.
- Property tax: Vermont funds education through a statewide property tax, with a higher nonhomestead rate for commercial property. Business personal property is taxed by some towns.
Forming a business in Vermont: fees and ongoing costs
| Item | LLC | Corporation |
|---|---|---|
| Formation filing fee | $155 | $125 |
| Annual report | $45 | $45 |
| Minimum entity tax | $250 (if multi-member) | $100+ (by receipts) |
| Registered agent | Required | Required |
Worked example: $500,000 of profit
| Step | Amount |
|---|---|
| Taxable income | $500,000 |
| Vermont tax (6% on $10,000, 7% on $15,000, 8.5% on $475,000) | $42,025 |
| Federal tax at 21% on $457,975 | $96,175 |
| Total income tax | $138,200 (27.6%) |
For a single LLC owner with $150,000 of Vermont taxable income, state tax is about $8,598. At $75,000 it is about $3,345.
How Vermont compares with its neighbors
| State | Corporate rate | Top personal rate | Sales tax |
|---|---|---|---|
| Vermont | 6% to 8.5% | 8.75% | 6% |
| New Hampshire | 7.5% BPT + 0.55% BET | None | None |
| New York | 6.5% to 7.25% | 10.9% | 4% plus local |
| Massachusetts | 8% | 9% (5% below $1.08M) | 6.25% |
New Hampshire's lack of a personal income tax and sales tax is a constant competitive pressure on Vermont, especially along the Connecticut River. Vermont's personal rates hit middle-income owners harder than Massachusetts' flat 5%, though New York's top rate is higher.
Choosing an entity in Vermont
- Sole proprietorship: No entity minimum tax, but no liability protection.
- Single-member LLC: $155 to form and $45 a year; disregarded for Vermont income tax.
- Multi-member LLC or S corporation: $250 minimum entity tax; owners pay personal rates.
- C corporation: Up to 8.5% plus 21% federally.
Vermont taxes by business type
Restaurants and inns. Restaurants collect 10% on meals and alcohol, and inns and hotels collect 9% on lodging, plus 1% local option tax in towns such as Burlington and Stowe. Vermont's tourism economy relies heavily on these businesses.
Farms and food producers. Agricultural land can enroll in the Current Use program, which taxes it on use value rather than market value. Many food products are exempt from sales tax.
Remote workers and freelancers. Vermont has offered grants to attract remote workers, but the 6.6% rate starting below $50,000 makes the state relatively expensive for middle-income self-employed people.
Large corporations. The new minimum tax based on gross receipts can exceed regular income tax for large companies with thin margins.
Doing business across Vermont
Burlington and Chittenden County form Vermont's main economic center, with health care, higher education, technology and manufacturing. Ski towns such as Stowe, Killington and Manchester depend on seasonal tourism. Many Vermont residents in the Upper Valley commute to New Hampshire, where wages are taxed only by Vermont for Vermont residents. New Hampshire residents working in Vermont pay Vermont income tax on their wages.
Tax planning tips for Vermont businesses
Elect the PTE tax. With rates up to 8.75%, the federal deduction from the election is valuable for profitable pass-through owners.
Apply for VEGI before expanding. Vermont's Employment Growth Incentive pays cash incentives for new jobs and payroll, but requires approval before hiring.
Consider the minimum tax. Large corporations with low Vermont profits should model the new gross receipts minimum tax, which may now exceed their regular tax.
Who pays the most in Vermont
Middle- and upper-middle-income households carry an unusually large share of Vermont's income tax, because the 6.6% rate starts below $50,000 of taxable income. Commercial property owners pay the higher nonhomestead education tax rate, which has risen sharply in recent years as school costs climbed. Large corporations face the new gross receipts minimum tax. Visitors pay a large share of the meals and lodging taxes, which partly explains why Vermont sets those rates higher than its general sales tax.
Recent changes for 2025 and 2026
- Corporate minimum tax restructured around gross receipts, up to $100,000.
- Single sales factor apportionment adopted.
- PTE election enacted for 2025.
- Child care contribution payroll tax introduced in 2024.
Is Vermont a good state for business?
Advantages
- Moderate 6% sales tax with clothing and groceries exempt
- Low formation and annual report fees
- Strong quality of life and tourism economy
- PTE election now available
Drawbacks
- High personal income tax rates beginning at middle incomes
- Corporate rate of 8.5% and new minimum tax
- High commercial property taxes
- Small labor market
Compliance checklist
- File Articles of Organization or Incorporation with the Secretary of State.
- Register with the Department of Taxes through myVTax for sales tax, withholding and income tax.
- Register with the Department of Labor for unemployment insurance if you hire.
- File the annual report each year.
- File Form CO-411, BI-471 or IN-111 each year.
Compare Vermont with its neighbors below or estimate your taxes in the United States calculator. See LLC taxes for more.