Vermont has a graduated individual income tax, with rates ranging from 3.35 percent to 8.75 percent. Vermont also has a graduated corporate income tax, with rates ranging from 6.00 percent to 8.5 percent. Vermont has a 6.00 percent state sales tax rate, a max local sales tax rate of 1.00 percent, and an average combined state and local sales tax rate of 6.30 percent.
To calculate net pay from gross pay in Vermont, deduct all applicable taxes, including federal income tax, FICA taxes, and any state-specific taxes from the employee’s gross wages. While not technically a payroll tax, employers in Vermont are required to provide workers’ compensation insurance, which is an employment-related cost.
The Social Security tax rate is 6.2% of all earned income up to $128,400. The Vermont Department of Taxes issues guides each year that include withholding charts and tables to help employers calculate and withhold the right amount of tax.
Minimum Wage Considerations
The Green Mountain State uses a substantially higher minimum wage rate than the one required by the federal government in the Fair Labor Standards Act (FLSA). In fact, the state’s overall minimum wage rate is nearly double the federal rate, and its Tipped Minimum Wage rate is more than triple the rate of its federal counterpart.
Registration and Compliance
Additional taxes charged in Vermont beyond federal requirements include Personal Income Tax and State Unemployment Insurance. Tax rates in Vermont range from 0% to 8.4% for established businesses. The current taxable wage base is $7,000.
To pay state withholdings, register with the Vermont Department of Taxes. To pay unemployment insurance taxes, register with the Department of Labor. Using a payroll service can help ensure full compliance.