Vermont LLC Taxes: The Complete Filing Guide (2025)
Running an LLC in Vermont means dealing with taxes at federal, state, and sometimes local levels. This guide simplifies everything you need to know to stay compliant and avoid surprises, from income tax and sales tax to city-specific requirements.
Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes.
Vermont LLC Tax Basics
Navigating your Vermont LLC tax obligations doesn’t have to be complicated. We’ll walk you through the essentials of pass-through taxation, explain Vermont’s specific requirements, and highlight strategies to stay compliant and organized. This guide covers everything from federal income taxes to city-specific requirements and filing deadlines.
Use the links below to jump directly to the section you need:
- Vermont LLC Taxes at a Glance
- Understanding LLC Taxation Basics
- Federal Tax Obligations
- Vermont State Taxes
- Local Tax Considerations
- Tax Calendar and Filing Tips
- Tax Strategies for Vermont LLCs
- Forms and Resources
Vermont LLC Taxes at a Glance
| Tax Type | Rate | Filing Deadline | Forms Required |
|---|---|---|---|
| Federal Income Tax | 10-37% (personal brackets) | April 15, 2025 | Form 1040 + Schedule C or Schedule E/K-1 |
| Self-Employment Tax | 15.3% | April 15, 2025 | Schedule SE |
| Vermont Income Tax | 3.35–8.75% | April 15, 2025 | Form IN-111 |
| Vermont Business Entity Tax | $250 minimum | March 15, 2025 | Form BI‑471 or BI‑476 |
| Vermont Corporate Income Tax | 6%-8.5% | April 15, 2025 | Form CO-411 |
| Federal Payroll Taxes (If Employees) | 7.65% employer + 7.65% employee (FICA) | Quarterly (April 30, July 31, October 31, January 31) | Form 941 |
| Vermont Unemployment Tax (If Employees) | 0.4%-8.4%, (new employers: 1.0%) | Quarterly | Form C-101 |
| Federal Unemployment (FUTA) | 6% on first $7,000 per employee (0.6% after credits) | January 31, 2026 (annual) | Form 940 |
| Sales & Use Tax | 6% (+ up to 1% local option tax) | Monthly, quarterly, or annually based on sales volume | Filed online |
| Annual Report | $45 fee | March 31, 2025 | Filed online |
Understanding LLC Taxation Basics
How Vermont LLCs Are Taxed By Default
Your Vermont LLC doesn’t pay taxes itself. Instead, profits flow through to you and your members, who report them on personal tax returns. This is called pass-through taxation.
Here’s how it works:
- Your LLC earns income from business activities
- The LLC itself files no tax return (unless you elect otherwise)
- Profits “pass through” to members based on ownership percentage
- Each member reports their share on their personal tax return
- Members pay tax at their individual income tax rates
What this means for you: Unlike corporations, your business profits are only taxed once, which typically saves money.
Time-Saving Tip: If you’re uncertain about your LLC’s tax classification, a tax professional can review your LLC’s tax setup in 30 minutes and help you choose the most tax-efficient option.
Tax Classification Options
While pass-through taxation is the default, your Vermont LLC can choose alternative tax treatments:
Default LLC Tax Status:
- Single-member LLC: Taxed as a sole proprietorship
- Multi-member LLC: Taxed as a partnership
Optional Tax Classifications:
- S Corporation: Can reduce self-employment taxes by paying “reasonable salaries”
- C Corporation: LLC pays corporate tax on profits, members pay personal tax on distributions (creates double taxation)
Not sure which tax classification is right for your business? Schedule a free consultation with 1-800Accountant.
Federal Tax Obligations
Income Tax
As a Vermont LLC owner, you’ll report your share of business profits on your personal tax return using:
- Form 1040 + Schedule C (single-member LLCs)
- Form 1040 + Schedule E + Schedule K-1 (multi-member LLCs)
Federal income tax rates range from 10% to 37% based on your tax bracket (actual brackets will depend on inflation adjustments and any tax law changes).
Simply Put: Whatever money your business makes (after expenses) gets added to your personal tax return, just like income from a job.
Self-Employment Tax
LLC members actively involved in the business must pay self-employment tax of 15.3% (covering Social Security and Medicare) on their share of LLC profits.
Key points:
- Applies to net earnings of $400 or more
- Calculated on Schedule SE
- You can deduct 50% of the self-employment tax as an “above-the-line” deduction, which lowers your adjusted gross income
What happens if I miss this payment? The IRS charges penalties of 0.5% per month plus interest. However, first-time mistakes can often qualify for penalty abatement if you have a clean compliance history.
Employment Taxes
If your LLC has employees, you must:
- Withhold federal income tax
- Pay and withhold FICA taxes (7.65% each for employer and employee)
- Pay federal unemployment tax (FUTA)
- File quarterly employment tax returns (Form 941)
- Provide W-2 forms annually
Estimated completion time: 2-3 hours per quarter (significantly less with payroll software or professional help)
Estimated Tax Payments
Because no tax is withheld from your LLC profits, you’ll likely need to make quarterly estimated tax payments using Form 1040-ES. These payments cover both income and self-employment taxes on your share of the business income. Missing deadlines or underpaying can lead to IRS penalties, even if you pay in full later.
Working with an accountant can help ensure accurate calculations, on-time payments, and a smarter overall tax strategy.
Key deadlines:
- April 15
- June 16
- September 15
- January 15
Pro Tip: Set calendar reminders 15 days before each deadline. This gives you time to prepare without the last-minute rush that leads to mistakes.
Vermont State Taxes
Vermont Income Tax
Vermont has a personal income tax rate ranging from 3.35% to 8.75% that applies to your LLC’s profits on your personal return.
Filing requirements:
- Use Vermont Form IN-111
- Due April 15, 2025
- Vermont follows federal adjusted gross income as a starting point
Bottom Line: For every $1,000 your LLC earns, you can expect to pay anywhere from $33.50 to $87.50 in Vermont state income tax (in addition to federal taxes).
Vermont Business Entity Tax (BET)
If your LLC is taxed as a partnership or S corporation and does business in Vermont, it will need to pay the state’s Business Entity Tax each year.
FIling requirements:
- $250 minimum fee
- Required even if the LLC has no profits or tax liability
- Use Form BI‑471 (or Form BI‑476 if all members are Vermont residents)
- File online through myVTax
- Due March 15, 2025
Vermont Corporate Income Tax
If your LLC is taxed as a C corporation, it will need to pay Vermont’s 6% to 8.5% corporate income tax and file an annual return with the Department of Taxes.
Filing requirements:
- Minimum tax: $100 to $100,000 (depending on Vermont gross receipts)
- File using Form CO-411
- Due April 15, 2025
- Due quarterly for corporations with over $500 in expected tax liability
Sales and Use Tax
If your Vermont LLC sells physical products or certain services:
- Collect 6% sales tax on taxable sales (some cities may add an extra 1%)
- Register for a sales and use tax account with the Vermont Department of Taxes
- File and pay collected taxes monthly, quarterly, or annually based on sales volume
- Due dates vary based on filing frequency
60-Second Check: Do I Need to Collect Sales Tax?
- Do you sell physical products in Vermont? → If yes, collect tax
- Do you sell digital products? → Generally not taxable
- Do you provide services? → Most services are exempt
- Do you sell online to Vermont customers? → If yes, collect tax
Services typically exempt from sales tax include:
- Professional services (legal, accounting)
- Personal services (haircuts, fitness training)
- Medical services
Products typically subject to sales tax include:
- Tangible personal property
- Prepared food
- Some digital products
Payroll Taxes
If you have employees in Vermont, you will be responsible for two types of payroll taxes.
Unemployment Insurance (UI) Tax
- Register with the Vermont Department of Labor
- Rate is 1.0% for most new employers (0.4%-8.4% afterwards)
- Applies to the first $14,800 in wages per employee
- Due quarterly using Vermont Form C-101
Withholding Tax
- Register with the Vermont Department of Taxes
- Rate based on Form W‑4VT (submitted by employee) and the state’s withholding tables
- Due monthly, quarterly, or annually, depending on your assigned filing frequency
Annual Report Filing
While not a tax, your Vermont LLC must file an annual report to stay in good standing with the state.
- Due March 31 each year
- $45 filing fee
- Filed with the Vermont Secretary of State
- Required even if there are no changes to your business information
Calendar Alert: Set a reminder for March 15 to ensure you don’t miss this easy but required filing.
Local Tax Considerations
Local Option Sales Taxes
Vermont allows certain cities and towns to impose a 1% local option sales tax on top of the state’s 6% rate.
Cities with local option sales taxes include:
- Burlington
- Williston
- Brattleboro
- Manchester
- Middlebury
- Killington
- Dozens of other localities
Filing requirements:
- Local option sales taxes are filed automatically with your state Sales and Use Tax return
- You do not need to file any separate forms or returns for local taxes
Property Taxes
If your LLC owns real property in Vermont:
- Rates vary by locality
- Assessed annually
- May qualify for various exemptions based on business type
- Personal property tax may apply to business equipment
Tax Calendar and Filing Tips
Key Deadlines for Vermont LLCs
January:
- January 15: Final estimated tax payment for previous year
- January 31: Vermont quarterly UI tax report due
- January 31: Issue W-2s/1099s to employees/contractors
- January 31: Fourth quarter federal payroll tax payment due
March:
- March 15: Vermont Business Entity Tax (BET) return due
- March 31: Vermont LLC Annual Report due
April:
- April 15: Personal tax returns due
- April 15: Federal income and self-employment tax returns due
- April 15: First quarter estimated tax payment due
- April 30: Vermont quarterly UI tax report due
- April 30: First quarter federal payroll tax payment due
June:
- June 16: Second quarter estimated tax due
July:
- July 31: Vermont quarterly UI tax report due
- July 31: Second quarter federal payroll tax payment due
September:
- September 15: Third quarter estimated tax payment due
October:
- October 31: Vermont quarterly UI tax report due
- October 31: Third quarter federal payroll tax payment due
Record-Keeping Checklist
Keep these records for at least seven years:
- Business income records (invoices, receipts)
- Expense receipts and documentation
- Bank and credit card statements
- Asset purchase and improvement records
- Vehicle mileage logs
- Home office documentation
- Payroll records
- Previous tax returns
Tax Strategies for Vermont LLCs
S Corporation Election Benefits
Converting your LLC to an S Corporation for tax purposes can save on self-employment taxes:
- File Form 2553 with the IRS
- Pay yourself a “reasonable salary” subject to employment taxes
- Take remaining profits as distributions exempt from self-employment tax
Example: An LLC making $100,000 in profit pays 15.3% self-employment tax on the entire amount. As an S Corp, if $60,000 is a reasonable salary and $40,000 is taken as distributions, only the $60,000 is subject to employment taxes.
Potential Savings: In this example, you’d save about $6,120 in self-employment taxes.
Business Expense Deductions
Common deductions Vermont LLC owners often overlook:
- Home office deduction
- Business mileage (70¢ per mile for 2025)
- Health insurance premiums
- Retirement plan contributions
- Professional development expenses
- Business meals (50% deductible)
Forms and Resources
Federal Tax Forms
- Schedule C: Profit or Loss From Business (sole proprietors)
- Form 1065: U.S. Return of Partnership Income
- Schedule K-1: Partner’s Share of Income, Deductions, Credits
- Form 1120-S: U.S. Income Tax Return for an S Corporation
- Form 2553: Election by a Small Business Corporation (S Corp)
- Form 8832: Entity Classification Election
Vermont Tax Forms
- Form IN-111: Vermont Income Tax Return
- Form C-101: Employer’s Quarterly Wage & Contribution Report
- Form BI‑471/BI‑476: Vermont Business Entity (BET) Tax Return
Helpful Resources
Vermont LLC Taxes FAQs
Yes, you need a Vermont business tax account if your LLC sells taxable goods or services, rents rooms, sells meals or alcohol, or hires employees. You must register for a separate account for each tax type. You can register online with the Vermont Department of Taxes.
Vermont is considered a high-tax state, as it has high rates of income, sales, and property taxes. Vermont ranks 43rd overall on the 2024 State Business Tax Climate Index published by the Tax Foundation. Vermont also has a progressive income tax system with four brackets and a top rate of 8.75%.
However, there are other benefits to doing business in Vermont. Learn more with our How to Start an LLC in Vermont guide.
Yes, Vermont taxes out-of-state income, which residents must report on their tax return. They can receive a credit for tax paid to another state to avoid double taxation, ensuring Vermont receives its share of state income tax.
For a general overview of state taxes, visit our LLC Taxes guide.
The amount of taxes that Vermont takes out depends on your income, filing status, and deductions. For example, a single filer with a $50,000 annual income and no deductions would pay about $6,300 in federal, state, and local taxes, which is about 12.6% of their income.
Need Professional Help? While this guide covers the essentials, tax laws are complex and constantly changing. Schedule a free consultation with 1-800Accountant to ensure your Vermont LLC remains fully compliant while minimizing your tax burden.