Use Tax Letter to Vermont Taxpayers

The Vermont Department of Taxes has recently started an educational letter campaign to increase awareness and allow taxpayers an opportunity to pay use tax they owe.

Despite many Vermonters making purchases online or other places that do not charge sales tax on taxable items, use tax is not widely understood. Use tax is due when a seller does not charge the buyer Vermont Sales Tax on an item that is taxable in Vermont. Items sold over the internet, by mail, by phone, or bought out-of-state and used in Vermont generally are taxable. 

Most recently, the tax department sent a letter to all taxpayers who did not declare any use tax on their 2016 state tax return.  With this notice, the State is offering Vermonters an interest and penalty free period through October 31st  to pay any back use taxes owed.

Please note – if you did not have any purchases on which you did not pay sales tax, then you do not need to take any action.

If you think you owe use tax but you do not have records of your purchases available, the tax department’s website will help you estimate your liability. To do so visit, click “Pay Use Tax” and go through the steps until you see the option “help me calculate my use tax”. Basically, the site uses your AGI (Adjusted Gross Income) to calculate the tax based on the table. This is also an option on the tax return. For example, if your AGI is $95,000, the table calculates $190 of Use Tax which is assuming roughly $3,100 of purchases not subject to Use Tax.

As far as what this may mean for a next step from Vermont, at this point there is no indication that they will pursue this any further. This may be their first effort to get Vermonters to be aware that the state knows they have not reported Use Tax on their return and an FYI of new developments in reporting by vendors.

The letter refers to Act 73 which seems like an FYI that there may be reporting on your online purchases from vendors who do not collect sales tax. The relevant section (23) states the following:

Noncollecting vendors who make $100,000 or more of sales into Vermont in the previous calendar year must file with the Department of Taxes a copy of the notice sent to Vermont purchasers who have made $500 or more of purchases, stating the amount of purchases made from the noncollecting vendor in the previous calendar year. Failure to report to the Department will result in a $10 penalty per failure, unless the vendor can show reasonable cause. Sec. 23 (H.516) Act 73

As to the effective date of the reporting, the Act is not entirely clear but the earliest effective date is 1/1/16.

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