Vermont sales tax on invoices (2026 guide)

Vermont charges a 6% sales tax on retail sales of tangible personal property. A growing number of towns add a 1% local option sales tax, so the rate in those places is 7%.

For freelancers, the big Vermont rule is about software. Since July 1, 2024, all prewritten software is taxable, including software accessed remotely over the internet, while custom software written for one customer is not. If you build, resell or customize software, how you write the invoice matters.

Vermont sales tax rates

The local option tax is destination-based: it depends on where the buyer takes possession of the item or where it's delivered, not where your business is. The Department lists the towns that impose it, including Burlington, Manchester and Williston, and the list keeps changing. Several towns, including Bristol, Morristown, Swanton and Vergennes, started on July 1, 2026. Use the Department's Local Option Tax Finder to check an address.

Work out the local tax as 1% of the taxable sale, not 1% of the state tax. Vermont's meals, rooms and alcohol taxes are separate taxes with their own rates, and towns can add a 1% local option to those too.

Once you know the combined rate, our sales tax calculator works out the tax and the total for you.

What's taxable in Vermont?

Vermont generally taxes retail sales of tangible personal property, which is anything that can be seen, weighed, measured, felt or touched. The Department's list of taxable transactions also includes:

• prewritten software, digital downloads and internet purchases, however they're delivered or accessed,
• fabrication charges and certain labor charges,
• delivery charges on taxable items, even when listed separately on the invoice,
• telecommunications services,
• entertainment, recreation and amusement admission charges, and
• rentals and leases of tangible personal property.

Most professional services (consulting, design, writing and the like) don't involve a sale of tangible personal property and aren't on that list.

Software: prewritten vs. custom

The Department's software guidance draws these lines:

• Prewritten software is taxable, whether it's sold on storage media, downloaded or accessed remotely.
• Custom software, designed for a specific customer, is not taxable.
• If you customize prewritten software and give the customer a reasonable, separately stated charge for the modification, that charge isn't treated as prewritten software and is exempt.
• Development and technical support services are not subject to sales tax.

Registering to collect Vermont sales tax

You need a Sales and Use Tax account and license before you make taxable sales. You apply for a business tax account with Form BR-400, Application for Business Tax Account, and file returns through the Department's myVTax system. If you have sales subject to local option tax, you must file electronically. You report sales tax on the accrual basis: tax is charged at the time of sale and reported even if the customer hasn't paid you yet. File a return for every due date, even when you owe nothing (unless you're an authorized "occasional" filer).

Out-of-state sellers must register and collect if they made at least $100,000 in sales or 200 individual transactions into Vermont during the preceding 12-month period.

What a Vermont sales tax invoice should show

• your business name and address,
• the customer's name and address,
• a unique invoice number and invoice date,
• each item or service with its price,
• custom development or modification work on its own line, separate from any prewritten software,
• sales tax as a separate line, with the rate (6% or 7%), and
• the total due.

In Invoice Native, tick Tax only on the taxable lines, such as a resold software license, and leave custom development untaxed.

Resale and exemption certificates

Businesses buying to resell, and certain nonprofits, give you Form S-3, Vermont Sales Tax Exemption Certificate for Purchases for Resale, by Exempt Organizations, and by Direct Pay Permit. Manufacturers use Form S-3M and buyers of exempt fuel or electricity use Form S-3F.

The Department's rules for certificates:

• You must receive the certificate at the time of sale, and it must be signed, dated and completed.
• Keep certificates for at least three years from the date of the last sale they cover.
• Buyers (including nonprofits) must have their own Vermont sales and use tax account and license before using an exemption certificate.

See how to invoice a tax-exempt customer.

A worked example

Say you're a developer and you deliver a project to a client in Burlington, which has the 1% local option tax (7% combined). Your invoice has two lines:

• $3,000 for custom software you wrote for this client (not taxable), and
• $600 for a prewritten software license you resell to the client (taxable).

The tax is $600 × 7% = $42.00: $36.00 state tax (6%) and $6.00 local option tax (1%). The invoice total is $3,000 + $600 + $42 = $3,642.00.

Selling to customers in other states

If you ship goods or deliver taxable services to customers in another state, that state's rules may apply instead of Vermont's. Since the Supreme Court's 2018 decision in South Dakota v. Wayfair, states can require out-of-state sellers to register and collect their sales tax once sales into the state pass a threshold the state sets. If you sell across state lines regularly, check the thresholds and registration rules of each state you sell into, and use that state's rate on those invoices.

Common mistakes on Vermont invoices

• Treating remotely accessed software as tax-free. That changed on July 1, 2024.
• Bundling custom work with prewritten software instead of stating it separately.
• Using your own town's local option rate instead of the delivery location's.
• Leaving delivery charges untaxed on taxable items.
• Skipping zero returns. Vermont expects a return for every due date.

Quick checklist for Vermont invoices

• ✅ Sales and use tax account and license before your first taxable sale
• ✅ 6% state plus 1% where the delivery town has a local option tax
• ✅ Custom work and prewritten software on separate lines
• ✅ Sales tax on its own line
• ✅ Form S-3 certificates received at the time of sale and kept three years