Hiring your first employee in Vermont

What do you have to register for before your first payroll?

Vermont half combines, and the half that combines is the important half. You sign up once on myVTax, but the Department of Taxes says plainly that sales and use, meals and rooms, and withholding each need their own business tax account, so one signup does not mean one account. What the withholding account does carry is three separate payroll levies on a single quarterly return, Form WHT-436: Vermont income tax withheld, the Child Care Contribution payroll tax, and the Health Care Fund Contribution Assessment. Nobody opens a child care account or a health care account, because both ride the withholding account, and both are easy to miss for exactly that reason. Unemployment insurance is a different agency entirely, with its own registration, its own account number and its own quarterly report to the Department of Labor, and new hire reports go there too. Workers compensation is a fourth errand with no state account at all, because you buy a policy from a licensed carrier. Budget for two registrations and one insurance purchase, and expect four things to pay.

Does Vermont require income tax withholding?

Yes. You register with the Vermont Department of Taxes, before you pay wages subject to vermont withholding; the 2026 employer guide says that if you pay wages subject to vermont income tax withholding you must register with the department of taxes for a withholding account.

The test is federal-first: a payment is subject to Vermont withholding if it is subject to federal withholding and it goes either to a Vermont resident, wherever the work is done, or to a nonresident for services performed in Vermont. For a nonresident who splits a pay period between Vermont and somewhere else you compute the tax on the whole payment and then multiply by the ratio of Vermont hours to total hours, and the guide works the example: $48.00 of withholding on a 40 hour period, 16 of those hours in Vermont, gives $19.20. For a resident paid for work done elsewhere you compute on the full payment and reduce by the tax withheld for the state where the work happened. Employees complete Form W-4VT; if they give you only a federal W-4 you may use it, but increase Vermont withholding by 30 percent of any extra federal amount. Registration itself is free, on myVTax or by Form BR-400, and the Department sets your filing frequency from your annual withholding totals. Two extras ride this account and are the ones out-of-state employers miss. First, the Child Care Contribution: since 1 July 2024 the employer owes a 0.44 percent payroll tax, that is 0.0044, on all wages subject to Vermont withholding, and may choose to deduct at most a quarter of it, 0.11 percent, from the employee. It is paid on the same schedule as withholding, on Part III of Form WHT-436, and the guide is explicit that wages for work physically performed outside Vermont and paid by an out-of-state employer are not subject to it, including where you withhold Vermont tax voluntarily as a courtesy to a Vermont resident. Second, the Health Care Fund Contribution Assessment, described under paid leave and disability below, is reported on Part IV of the same return. Form WHT-434, the annual reconciliation, is due 31 January.

What unemployment insurance does Vermont charge a new employer?

A new Vermont employer pays 1% on the first $15,400 each employee earns, so roughly $154 per employee in the first year. The Department of Labor states that beginning 1 July 2026 the new employer rate for most employers is one percent, and that state tax is payable on the first $15,400 of each employee's wages in a calendar year. The two dates are not a typo and this is the Vermont quirk worth planning around: the taxable wage base changes on 1 January, and the wage base press release is explicit that $15,400 is effective 1 January 2026, an increase of $600 over 2025, while the rate schedule and the new employer rate change on 1 July. So a Vermont payroll can see two separate resets in one year. One percent is not universal. An out-of-state, that is foreign, corporation classified in NAICS 236 construction of buildings, 237 heavy and civil engineering, or 238 specialty trade contractors, is instead given the industry average rate: 1.9 percent, 4.0 percent and 2.7 percent respectively on the rate page we read. You keep the new employer rate until you have earned an experience rating, which needs at least one complete calendar year of benefit liability, after which the rate is recalculated annually on a rolling three-year benefit ratio across twenty-one rate classes. Vermont publishes five rate schedules and picks one each 1 July from the trust fund balance; the page we read sets out all five, including the 0.4 to 5.4 percent range of Schedule 1 and the 1.3 to 8.4 percent range of Schedule 5, but does not say which is currently in force, so treat one percent as the floor of what a new employer might pay rather than a ceiling. Liability itself comes from the statute: you are an employer once you pay $1,500 or more of wages in any calendar quarter in the current or preceding year, or employ at least one person for some part of a day in each of twenty different calendar weeks in that period, and once you cross either line you are subject for the whole calendar year. Quarterly wage and contribution reports, Form C-101, must be filed electronically, and the statute charges a $100 administrative penalty for each report that misses its due date.

Do you need workers compensation insurance in Vermont?

Yes, from your first employee. Vermont sets no headcount to reach, so there is no free window before coverage is required.

There is no free headcount. The Act tells employers to secure compensation for their employees, and defines an employee simply as an individual who has entered into the employment of an employer, so coverage is required from the first person you hire, full-time or part-time. The exclusions are narrow and each has a catch. Casual work not for the purpose of your trade or business is out, as is a family member living in your house, unless you put that person's wages in the payroll the premium is based on, in which case they count as an employee after all. Agricultural or farm employment is out only while your aggregate payroll stays under $10,000 in a calendar year. Domestic service in a private dwelling is out unless you tell the Commissioner you want in, and buying a policy counts as telling. A sole proprietor or partner of an unincorporated business is outside the Act for themselves only if all six statutory conditions are met, including a written contract that expressly says so. A corporation or LLC may, with the Commissioner's approval, elect to exclude up to four executive officers, managers or members; if every officer or member elects out and the business has no other employees, it need not buy coverage at all, but this excludes only those individuals and never anyone else found to be an employee. Going without is expensive: an administrative penalty of up to $100 a day for the first seven days and up to $150 a day after that, a mandatory stop-work order, a further penalty of up to $250 a day and up to $250 per employee per day once an order to insure has issued, a bar on state contracts for up to three years, and personal liability for the officers, majority shareholders or partners for an injured worker's benefits. Violating the stop-work order itself carries up to $5,000 civilly for a first offence, $10,000 after that, or a criminal fine of up to $10,000 and up to 180 days.

How quickly must you report a new hire in Vermont?

Within 10 calendar days of the first date of employment, which is the first day services are performed for compensation. Reports go to the Vermont Department of Labor.

Ten calendar days, not the federal twenty, and the clock starts on the first day services are performed for compensation rather than on the offer or the start date on paper. You report the employee's name, address, Social Security number and first date of employment along with your own name, address and federal employer identification number, through the Department of Labor's Employer e-Services portal or on a form it supplies or approves. Someone coming back after a separation of 60 or more consecutive days is a new hire again and must be reported again. Vermont defines employee by reference to chapter 24 of the Internal Revenue Code, so this is a wage-employee duty and the statute does not extend it to independent contractors the way Connecticut's does. There is no flat late penalty in the statute; the only money attached is that if the failure to report is the result of collusion between employer and employee, the employer owes the obligee the wages that should have been withheld, capped at $500. The data is shared with the Office of Child Support and used by the Department of Labor for unemployment insurance administration.

Does Vermont have paid family leave or state disability insurance?

No. Vermont runs no state paid family leave fund and no state disability insurance, so there is no payroll deduction of that kind and no extra account to open.

Vermont has no mandatory paid family and medical leave payroll contribution and no state temporary disability insurance fund, so there is no rate to withhold and no leave account to open. What Vermont has instead is a voluntary, opt-in, state-sponsored insurance product. The Vermont Family and Medical Leave Insurance Plan is a group insurance policy the State procured from The Hartford, and the Governor's own page frames it as giving access to paid leave without imposing a new mandatory tax. It rolled out in three phases: State employees from July 2023, private employers with two or more employees able to enrol from 15 February 2024 with benefits from 1 July 2024, and individuals, the self-employed and employers with fewer than two employees able to buy it from 2025. Because it is insurance and not a programme, the employer chooses whether to buy at all, and premiums can be paid entirely by the employer, split, or passed entirely to employees as a voluntary benefit, with six to 26 weeks of duration and 60 to 70 percent wage replacement to choose from. There is no published statewide contribution rate because the price is underwritten per employer, which is why the rate fields here are null rather than zero: zero would wrongly imply a mandatory programme that happens to cost nothing. Do not carry a California, New York or Connecticut leave deduction across to a Vermont employee. Two mandatory obligations sit in this space and are the ones that actually cost money. First, the Health Care Fund Contribution Assessment, a quarterly employer levy under 32 V.S.A. chapter 245 that most out-of-state employers have never heard of. If you had five or more full-time equivalent employees aged 18 or over in the previous quarter, you total the hours worked by your uncovered employees, capped at 520 hours each, divide by 520, round down, subtract four for the exempt FTEs, and pay the resulting number times the current premium. Form HC-1 revised October 2025 sets that premium at $301.99 per FTE for every quarter ending in 2026, against $296.89 for 2025 and $268.24 for 2024, so roughly $1,208 a year for each uncovered full-time equivalent above the first four. The statutory base was $158.77 and is re-indexed every year to the change in the second lowest cost silver plan premium, so it moves annually. Uncovered means an employee you offer nothing to, an employee not eligible for what you offer others, or an employee who declines your coverage and is on Medicaid, has nothing else, or bought an individual plan on the Vermont exchange. The trap is documentary: you must collect a Form HC-2 declaration from every employee not on your plan each year, and anyone with no declaration on file is treated as uncovered whether or not they actually are. It is reported on Part IV of Form WHT-436 and due on the 25th of the month after each quarter. Second, Vermont's Earned Sick Time Act is a genuine mandate rather than an insurance option: employees averaging at least 18 hours a week accrue one hour of paid sick time for every 52 hours worked, and an employer may cap use at 40 hours in a 12-month period.

Do you need a sales tax permit in Vermont?

Vermont charges nothing, and says so twice: registration is free and there is no charge for a license. The license is a separate object from the account, it authorises you to collect, and it must be displayed where customers can see it. If you have more than one Vermont location you keep one business tax account but each location needs its own license and files its own sales and use tax schedule, so register each site. The state rate is 6 percent, and about two dozen municipalities add a 1 percent local option tax, which takes the rate to 7 percent on sales delivered into them and forces you to file electronically. The Department publishes no bond or security deposit requirement for a sales tax registrant, so none is recorded here, which is a real difference from California and Texas where the permit is free but the deposit is not capped. Two things that catch new registrants: the sales and use account does not cover the meals and rooms tax, which is a separate account with its own registration, and Vermont use tax is due from you on anything taxable you buy for the business without tax charged, which is the most commonly assessed item on a small Vermont audit. Closing is a positive act done account by account in myVTax, or on Form B-2 on paper.

Does a marketplace like Amazon or Etsy handle the tax for you?

Vermont has required marketplace facilitators to collect and remit since 1 June 2019. The statute is short and unusually favourable to the small seller. The facilitator collects on retail sales made by marketplace sellers through the marketplace; the seller collects on its own Vermont sales made outside the marketplace. The facilitator must certify to its sellers that it will collect, and a marketplace seller that accepts that certification in good faith is directed to exclude sales made through the marketplace from its obligation as a vendor. That is broader wording than most states use, and it is the reason a seller that trades only through Amazon or Etsy is in a materially better position in Vermont than in, say, Connecticut, where marketplace sales still count toward the seller's own registration threshold. Keep the certification: it is what the exclusion hangs on. Note that the Department's own summary page describes only the collection duty and does not address whether facilitated sales count toward the $100,000 or 200 transaction test, so the statutory wording is the better guide, and a seller close to the line should ask the Department in writing rather than infer. A facilitator that gets the tax wrong because the seller gave it bad information can be relieved of liability, which means the seller's product and address data still matters.

If your sales drop, when can you stop collecting?

Vermont publishes no trailing nexus policy under that name, so this is read off the statutory definition of a vendor rather than off a guidance page, which is why the confidence is S rather than P. Under 32 V.S.A. section 9701(9)(F) a remote seller is a vendor if it has made at least $100,000 of sales into Vermont, or at least 200 individual sales transactions, during the 12-month period preceding the monthly period for which its liability is being determined. The test is therefore re-run every month against a rolling backward window, not once a year and not against a calendar year. The practical effect is a 12-month tail: once you stop qualifying, the obligation falls away on its own as the qualifying sales age out of the window, and there is no requirement to keep collecting for a fixed extra period beyond that. What does not fall away on its own is the registration. The account and the license stay live and returns stay due until you close the account in myVTax or file Form B-2, so dropping below the threshold and quietly stopping your filings is the way to accrue non-filer penalties on a business that no longer owes anything. Treat deregistration as a separate decision from the threshold test. Note also that the same subdivision requires regular, systematic or seasonal solicitation into Vermont alongside the dollar or transaction test, so the threshold alone is not the whole definition.

Does Vermont charge a tax on revenue rather than profit?

Vermont has no general gross receipts tax in the mould of Washington's business and occupation tax or Ohio's commercial activity tax. It does, however, use gross receipts in the one place that catches an expanding company by surprise, which is the corporate minimum tax. A C corporation, including an LLC that elects to be taxed as one, pays the greater of the graduated net income tax, 6 percent to 8.5 percent with the top bracket starting at $25,000 of Vermont-allocated income, or a minimum annual tax set by a bracket of Vermont gross receipts: $100 under $500,000, $500 from $500,000 to $1 million, $2,000 from $1 million to $5 million, $6,000 from $5 million to $300 million, and $100,000 above $300 million. A loss-making company with $6 million of Vermont sales therefore owes $6,000 whether or not it made a penny, and the number is driven by receipts rather than profit. That is not a gross receipts tax and hasTax is correctly false, but it is the figure most likely to be missed. Two narrow genuine gross receipts taxes exist and are worth knowing only if you are in those trades: the fuel tax charges 0.75 percent of gross receipts on retail sales of natural gas and coal and 0.5 percent on retail sales of electricity, alongside a flat 2 cents per gallon on heating oil, propane, kerosene and other dyed diesel delivered in Vermont, all filed monthly on Form FGR-615 with a separate petroleum distributor licensing fee. Telecommunications providers face a separate Universal Service Charge. S corporations, partnerships and LLCs that have not elected corporate treatment are outside the corporate minimum and fall under the business income tax instead.

Do you have to register your out-of-state company in Vermont?

Vermont charges the same $155 to both: a foreign LLC files an Application for Certificate of Authority under 11 V.S.A. section 4112 for $155, and a foreign business corporation files the same-named application under 11A V.S.A. section 15.03 for $155. The divergence is in the years afterwards, and it is large. The annual report is $170 for a foreign LLC but $250 for a foreign corporation, against $45 and $60 respectively for their domestic equivalents, so being the out-of-state entity costs roughly four times as much every year for the rest of the registration's life. Getting out is cheap either way: $25 for an LLC's certificate of cancellation and $25 for a corporation's certificate of withdrawal.

Vermont sets no deadline in days, but its definition of transacting business is one of the broadest in the country and is the thing to read before deciding you do not need to register. For LLCs, 11 V.S.A. section 4113 says doing business means each act, power or privilege exercised or enjoyed in the State, and then lists the usual safe harbours: maintaining or settling a proceeding, internal affairs meetings, bank accounts, selling through independent contractors, soliciting orders that require acceptance outside Vermont, owning property, an isolated transaction, and transacting business in interstate commerce. Note what is not on that list, in Vermont or anywhere else: having an employee working in the state. Hiring one Vermont resident will normally take you past the safe harbours. The penalty is unusual in that it is real money rather than the usual procedural bar alone. Both the LLC and the corporation statutes charge a civil penalty of $50 for each day you transact business without a certificate of authority, capped at $10,000 per year, plus an amount equal to all the fees you would have paid over that period, plus any other penalties imposed by law. On top of that you cannot maintain a proceeding or raise a counterclaim, crossclaim or affirmative defence in a Vermont court until you register, and you are deemed to have appointed the Secretary of State as your agent for service. What is not affected is the validity of your contracts, your ability to defend a suit brought against you, or, for an LLC, the personal liability of members and managers. For corporations the Attorney General can sue to collect the penalties and to enjoin you from doing business in the state. Registering with the Secretary of State is a separate step from your Department of Taxes and Department of Labor accounts and registers you for no tax at all, and Vermont requires a separate annual renewal with the Secretary of State even though tax accounts are not renewed.

Where these figures come from

Every number on this page was read on Vermont's own agency pages, its statute, or a current-year official form, and this record was last reviewed on 2026-09-08. Where a state's explainer page disagreed with its statute or its current form, we followed the statute or the form and said so in the relevant section, because a state's consumer-facing pages are often the last thing updated when a figure changes.

Anything we could not confirm on a primary source is left blank rather than estimated. A missing figure on this page means we could not verify it, not that it is zero.

This is general information, not legal or tax advice. Rules change and your circumstances matter. Confirm anything you are about to act on with the agency named beside it.