How to Register for a Sales tax Permit in Vermont

Doing business on your own can be a daunting task, but if you put your back into it the results often turn out to be very positive. Days of grinding, long hours and hard work can be substituted with the freedom to come to work whenever you want, however you want, for as long as you want. It also gives you the chance to spend more time with your family and friends instead of plugging away at your desk long into the night to come home when everyone is asleep, knowing that you will probably have to leave first thing in the morning before everyone wakes up.

These are the problems successful entrepreneurs do not have to face. Even though business owners are often portrayed as people overwhelmed with work and responsibilities, the truth is that, after you reach a certain point in your business, you do find yourself with more free time and a lighter workload. So if you do everything right, the long hours and intense preparation needed to set up your business will pay off, and maybe even a lot sooner than you would expect.

For the purpose of this article, we will focus on the process of setting up your business in the state of Vermont and applying for a sales tax permit. But, before we get into that, it has to be said that this should serve as a guide but is not an official document.

Preparing to Register a Business in Vermont

Before you can reap the rewards of your hard work, before you can reach financial freedom, there is some preparatory work that needs to be done. Every entrepreneur wants to reach that point when they can step back and look at the company they built from scratch and enjoy the product they’ve created. Especially if you enter a market or start a business with something you love, or if you manage to turn your passion into a business. This not only means that you will find it easier to put in long hours for something you love, but the results will also be a lot different, the products of your work are not the products of something you’ve been forced to do, but something you enjoyed doing.

To reach that stage, first you need to look at yourself. Essentially, every business decision will have to come from you and you have to make sure you are up to the task. Ask yourself why are you starting your own business. Are you simply tired of working for someone else, bringing your work home, not having time to do anything else? Do you simply aim to achieve financial gain? Sometimes these can be the wrong reasons and you may be led to overlook the important factors in this decision. You have to have a clear answer to the question of why you want to start your own business, and if it is because you enjoy what you plan on doing, the better. But even the markets and products you love might not be the right choice. Often the most attractive markets are the most competitive ones, leaving you very limited space for maneuvering. If you are only starting up, this only means you will have a hard time staying afloat very long.

To avoid this, make sure you set your foundations right. First, work on yourself. Work on your skills and use every bit of experience you gathered as an employee. Use every avenue you are familiar with to maximize the resources you have at your disposal at the start. So if you’ve been working in retail, make sure you use the best sources available.

Most importantly, build your own business plan. A strong business plan is the largest block in your foundation. This will be your roadmap to business development and for funds acquisition, should you decide to look for additional funding from other sources. This is why it is advised to team up with an attorney, a business advisor or a business professional who will be able to help you in the process of the development of your business plan. Not only do they know the ins and outs of a business plan development, but the resources and experience they provide will allow thorough research of the market you plan on entering. You could conduct this research on your own, but the results might not be as detailed as those provided by a professional.

Why would you research the market? Simply, you have to put your company into various scenarios and based on the findings of that research you will be able to tell whether your business model is sustainable for the current market conditions. It will show you whether your preferred market is already crowded and oversupplied or is it one of those niche, undersupplied market where the competition is not as severe.

In general, it is advisable to look for such niche markets if you are only starting up, because you can focus on honing your skill in managing the company, in sourcing the products, and in your customer services since the demand in such markets is healthy and gives you room to learn.

A business plan will also show you the potential costs you might have, and also project your income and revenue in different markets scenarios. This will help you set targets and help you focus on following a right, calculated path.

But this is not all. As we mentioned, a business plan is essential if you are looking to secure additional funding. No banks, investment companies or any other financial institutions would even consider investing in your business if you do not present them with a strong business plan, let alone with only an idea and no business plan at all.

So once you have completed the market research and you are familiar with the market conditions, your business plan is in place and you know what your business moves will have to be to succeed, it is time to look at the legal requirements of your business. This includes registering the business with relevant authorities in the state of Vermont and applying for all the right permits.

Registering a New Business in Vermont

Registering a business in the state of Vermont starts with the office of the Vermont of Secretary of State. The first step, according to the Secretary of State, is to register your business name in order to secure protection of your sole rights to your business name in Vermont and to acquire a license to do business in the state under that registered business name.

Once the name registration is complete, you should turn to the business type or legal entity type choice. This is dictated by your requirements and the number of partners that plan on joining to run the business as well as the scale of the operation. This, in turn, will dictate your liability protection and tax obligations.

But let us first look into the legal entity types available in the state of Vermont. The Secretary of State office focuses its attention on the corporations first, which are the business structures owned by shareholders, and businesses that provide a high level of liability protection. You may register your corporation online or by mail. The online filing takes less than one business day and is the preferred option, but if you would like to download all the documents, fill them out and mail them to the office, you can find all the forms and instructions here.

Next on the list of the entity types is the Limited Liability Company (LLC), which has the same liability protection as a corporation, but has the easy setup and tax obligations of partnerships, combining the best of both worlds. Again, the registration can be completed online or by mailing the filled out forms to the Secretary of State office.

Next come the partnerships, of which there are several kinds. Which one you choose depends on your liability protection preferences and your organizational structure. Limited Liability Partnerships, as the name indicates, offer limited liability to partners in the company. This means the partners are protected from the businesses’ debts and liabilities similar to shareholders in a corporation. In Limited Partnerships, general partners have all the management obligations and are liable for the businesses’ debts while limited partners do not have any managerial tasks within the company and are liable only up to the portion of their investment in the company. General Partnerships are also formed by two or more individuals joining forces to conduct a business; however, in this case, all partners share equal control, or according to the partnership agreement, as well as liabilities.

The most simple structure of all is the sole proprietorship, which does not require any formal filing with the Secretary of State unless you plan on doing business under a name other than your own. In that case, you should register a trade name online or by filing adequate forms with the Secretary of State.

Once the entity type is selected and you have registered your name, your next step is registering with the Internal Revenue Service (IRS) and applying for a Federal Employer Identification Number (EIN) which can be completed online.

With all this completed, it is time to turn to the most complex part of the registration process, registering with the Vermont Department of Taxes and applying for a sales tax permit. What a sales tax permit is, and why and whether you may need one is discussed below.

Vermont Sales Tax Permit

Taxes can certainly be a complex process and the Vermont Department of Taxes urges consultation with tax professionals due to the nature of tax laws and its potential for change.

But in general, the vast majority of businesses operating in the state of Vermont have to register with the Department of Taxes. Actually, when registering with the Secretary of State, you will be provided with options to register for a business tax account with the Department of Taxes.

What interest us for the purpose of this article is the sales tax, which, if you plan on doing retail, or perhaps purchasing cheap wholesale merchandise to resell, you will be eligible for. Although there are exemptions that we will look into later, Vermont Sales Tax, to the rate of 6 percent, is charged on retail sales of tangible personal property. But why would you be eligible for the sales tax, you might ask, if you do retail? This is because you are classified as a vendor, and therefore have a sales tax nexus. This means you are selling tangible property in the state, you either have an office or a place of business in the state and a representative in the state, among other things that constitute a sales tax nexus in Vermont.

Now that you have determined that you actually need a sales tax permit, you should complete the registration process. This process can be completed online or by downloading the form BR-400 and mailing it to the address provided in the Contact Details section below.

When registering for a sales tax permit you will be required to provide personal identification information and your business identification information as well as the North American Industry Classification System (NAICS) code. The registration is free of charge and, once you obtain your sales tax permit, you will not have to renew it again.

Sales Tax Exemptions in Vermont

As mentioned above, although retail businesses are required to obtain a sales tax permit, there are exemptions enabling you to make tax free purchases. There are a number of reasons for purchases to be tax exempt, such as purchases for resale. The resale certificate (Form S-3) can be downloaded and has to be completed and signed before providing it to the vendor. The resale certificate has to be provided prior or at the time of the sale, but there is a period of 90 days after the sale is made during which the vendor has to obtain the certificate. Once obtained, a resale certificate has to be kept on file for a period of at least three years in case of an audit. If you plan on making a number of purchases or frequent purchases from one vendor you can provide a ‘Multiple Purchase’ exemption certificate

Contact Details

Department of Taxes

133 State Street Montpelier
VT 05633
Phone: 802-828-2505

Office of the Secretary of State – Main Office

128 State Street
Montpelier, Vermont 05633-1101
Phone: 802-828-2363 or 800-439-8683

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