Vermont Computer, Software, and SaaS Tax Guide

Prepared by Sales Tax Helper

Table of Contents

1. Introduction
2. Nexus Considerations
3. General Rules and Compliance Considerations
4. Specific Exemptions
5. Sourcing Rules
6. Audit Considerations
7. Voluntary Disclosure Agreements (VDAs)
8. Conclusion
9. References & Resources

1. Introduction

For software companies, SaaS providers, and technology firms conducting business in Vermont, the state's sales and use tax rules present unique challenges. Vermont's approach to taxation of digital products and technology services has undergone significant changes, particularly regarding SaaS and cloud-based services. Effective July 1, 2024, Vermont began taxing prewritten software regardless of delivery method, which impacts how many technology companies must approach tax compliance in the state.

Vermont's tax treatment of software and technology-related services depends on multiple factors, including whether software is prewritten or custom, the method of delivery, and whether the services provided are classified as taxable or exempt professional services.

Purpose of This Guide

This guide is designed to help businesses navigate Vermont's sales and use tax rules related to software and technology services. It focuses on:

• Nexus Considerations: Understanding when businesses must register and collect
  Vermont sales tax due to physical or economic presence.
• Taxability of Software & Services: Clarifying the tax treatment of prewritten vs. custom
  software, cloud computing services, and related technology offerings.
• Sourcing Rules: Determining how and where transactions are taxed based on customer
  location and method of software delivery.
• Audit Considerations: Identifying common tax audit triggers and best practices for
  compliance.
• Voluntary Disclosure Agreements (VDAs): Explaining the process for businesses to
  rectify past noncompliance while mitigating penalties and limiting back-tax liability.

Why This Matters for Technology Companies

Vermont's sales tax laws impact software companies, SaaS providers, and technology firms in
multiple ways:

• Recent Legal Changes: With Vermont's taxation of prewritten software regardless of
  delivery method (effective July 1, 2024), SaaS providers must now collect and remit
  Vermont sales tax when previously they were exempt. For more information on these
  changes, see the Vermont Department of Taxes' page on Prewritten Computer Software.
• Sales Tax Obligations: Businesses that sell software or related services to Vermont
  customers may have a duty to collect and remit Vermont sales tax, depending on how the
  product is classified.
• Cloud Computing Complexity: Vermont now imposes sales tax on SaaS, though IaaS
  and PaaS remain exempt from sales tax. Misclassification of transactions can lead to tax
  liabilities.
• Compliance Risks: Failure to correctly assess and collect sales tax can result in
  significant penalties, interest, and extended audit exposure.

This guide will walk through Vermont's specific sales tax rules governing software, SaaS, and
technology-related services while referencing applicable statutes, administrative rules, and
Vermont Department of Taxes guidance. Throughout the guide, official Vermont Department of Taxes sources will be linked for further reference.

You're currently viewing a preview. To access the full guide and unlock tools designed to simplify your sales tax obligations, just create a free account.

Your free Sales Tax Helper account gives you:

• Full access to this and other expert-written guides
• Our Nexus Checker to assess your exposure across states
• State- and industry-specific insights and compliance tips
• Updates on new rules and best practices to stay ahead

No credit card required — just expert tools built to keep you compliant and confident.
Create your free account now to unlock the rest of this guide.