Vermont Business Taxes for LLCs
What taxes does a Vermont LLC need to pay? This guide covers state income tax, the Business Entity Tax, sales tax, self-employment tax, and federal obligations for VT LLC owners.
Bizee Editorial Staff
Editorial Team
Vermont LLC tax facts at a glance
Filing fee: $125
Processing time: 3–5 business days (standard)
State agency: Vermont Secretary of State
Annual report due: Annually by April 1
State tax rate: 3.35%–8.75% personal income tax; 7% corporate income tax (if taxed as C Corp)
Vermont LLC tax overview
Vermont LLCs don't pay income tax at the business level. Instead, profits pass through to the owners, who report them on their personal returns and pay Vermont personal income tax, federal income tax, and self-employment tax. Vermont also imposes a Business Entity Tax and a 6% sales tax on taxable goods and services.
- Vermont personal income tax on your share of LLC profits (rates range from 3.35% to 8.75%)
- Federal income tax on your share of LLC profits
- Federal self-employment tax at 15.3% on net self-employment income
- Vermont Business Entity Tax — a flat $250 fee due every 2 years
- Vermont sales and use tax at 6% if your LLC sells taxable goods or services
- Payroll taxes if your LLC has employees
How Vermont taxes your LLC
By default, Vermont LLCs are taxed as pass-through entities — the business itself doesn't file a state income tax return or pay income tax. Profits flow to the owners, who report their share on their personal Vermont income tax returns and pay tax at individual rates.
Vermont's personal income tax rates run from 3.35% on the lowest bracket up to 8.75% on income above $213,150 (for single filers). Most LLC owners land somewhere in the middle, so it's worth running the numbers with a tax professional before year-end.
If your LLC elects to be taxed as a C Corporation, Vermont imposes a flat 7% corporate income tax on net income. An S Corporation election keeps pass-through treatment but adds Vermont's Business Entity Tax and requires owners to pay themselves a reasonable salary.
Vermont state taxes for LLCs
Vermont LLC owners pay state taxes through 4 main channels: personal income tax on pass-through profits, the Business Entity Tax, sales and use tax if applicable, and payroll withholding if they have employees. All filings go to the Vermont Department of Taxes.
Vermont personal income tax
LLC members report their share of business profits on Vermont Form IN-111 and pay personal income tax at rates between 3.35% and 8.75%. Vermont follows federal pass-through treatment, so whatever flows through on your federal Schedule K-1 or Schedule C also flows into your Vermont return.
Vermont Business Entity Tax
Vermont charges a $250 Business Entity Tax (BET) every 2 years. It's due on the anniversary of your LLC's formation and is paid to the Vermont Department of Taxes. This is a flat fee — it doesn't scale with your income. Missing it can put your LLC out of good standing with the state.
Vermont sales and use tax
Vermont's statewide sales tax rate is 6%. If your LLC sells taxable goods or certain services, you need to collect sales tax from customers and remit it to the Vermont Department of Taxes. Some localities add a small meals and rooms tax on top of the base rate. If you buy taxable items for business use without paying sales tax, use tax applies instead.
Federal taxes for Vermont LLC owners
Vermont LLC owners pay 2 main federal taxes: federal income tax on their share of business profits, and self-employment tax on net self-employment income. Both are reported on your personal federal return — the LLC itself doesn't file a federal income tax return unless it elects corporate taxation.
Federal income tax
Single-member LLC owners report business income on Schedule C of their federal Form 1040. Multi-member LLCs file a partnership return (Form 1065) and issue each member a Schedule K-1 showing their share of income. That income then flows onto each member's personal return and is taxed at federal individual rates.
Self-employment tax
If your net self-employment income exceeds $400 in a tax year, you owe federal self-employment tax at 15.3% — 12.4% for Social Security and 2.9% for Medicare. The tax applies to 92.35% of your net self-employment income, not the full amount. You can deduct half of what you pay as a business expense on your federal return, which reduces your taxable income.
Most LLC owners need to make quarterly estimated tax payments to cover both federal income tax and self-employment tax. Use IRS Form 1040-ES to calculate and submit those payments. Missing a quarterly payment can mean an underpayment penalty at year-end.
Payroll and employer taxes
If your Vermont LLC has employees, you take on payroll tax obligations at both the state and federal level. You'll need to withhold federal income tax, Social Security, and Medicare from employee wages, and remit the employer's matching share of Social Security and Medicare.
Vermont also requires employers to withhold Vermont income tax from employee wages and remit it to the Vermont Department of Taxes. You'll need to register as an employer with the Vermont Department of Labor and set up a withholding account. Vermont unemployment insurance (UI) tax applies as well — rates vary based on your industry and claims history.
Getting payroll right from the start matters. If you misclassify an employee as an independent contractor, your LLC can end up on the hook for back payroll taxes, unpaid Social Security and Medicare contributions, plus penalties and interest.
FAQ
Yes. Vermont has a 6% statewide sales tax on taxable goods and certain services. Some transactions — like meals and short-term lodging — carry additional local taxes on top of the base rate. If your LLC sells taxable products or services, you need to register with the Vermont Department of Taxes, collect sales tax from customers, and remit it on a regular filing schedule.
Vermont doesn't have a traditional franchise tax, but it does charge a $250 Business Entity Tax (BET) every 2 years. It's a flat fee — not based on income or revenue — and it applies to most LLCs registered in Vermont. It's due on the anniversary of your LLC's formation date and is paid to the Vermont Department of Taxes.
Yes, in most cases. If you expect to owe $500 or more in Vermont income tax for the year, you need to make quarterly estimated tax payments to the Vermont Department of Taxes. At the federal level, use IRS Form 1040-ES if you expect to owe $1,000 or more. Most LLC owners who don't have taxes withheld from a paycheck need to make both state and federal estimated payments.
Vermont's corporate income tax rate is 7% of net income. This applies to LLCs that have elected to be taxed as C Corporations. Most LLCs don't pay corporate income tax — they're taxed as pass-through entities by default, meaning profits flow to the owners and are taxed at individual rates. A tax professional can help you figure out whether a corporate election makes sense for your situation.
The federal self-employment tax rate is 15.3% — 12.4% for Social Security and 2.9% for Medicare. It applies to 92.35% of your net self-employment income, not the full amount. Vermont doesn't add a separate self-employment tax on top of this. You can deduct half of your self-employment tax payment as a business expense on your federal return.
Vermont recognizes the federal S Corporation election. An S Corp keeps pass-through treatment — profits flow to shareholders and are taxed at individual Vermont income tax rates. Vermont does require S Corps to file a Vermont Business Income Tax Return (Form BI-471). Owners who work in the business must pay themselves a reasonable salary, which is subject to payroll taxes. A tax professional can help you figure out whether an S Corp election saves money in your situation.
It depends on how your LLC is taxed. Single-member LLCs report income on the owner's Vermont Form IN-111 — no separate business return is required. Multi-member LLCs file Vermont Form BI-471 (Business Income Tax Return) as a partnership. LLCs taxed as C Corporations file Vermont Form CO-411. LLCs taxed as S Corporations also file Form BI-471. All returns are filed with the Vermont Department of Taxes.
