Vermont Contractor Taxes and Licensing: What You Need to Know

Vermont contractors who build materials into real property pay the 6% sales tax when they buy them and should not charge sales tax to the customer; the department says the cost of service isn't taxable. Since April 1, 2023, contractors must register with the Office of Professional Regulation before taking homeowner jobs over $10,000.

What's unusual about Vermont for contractors?

Vermont is one of the few states that tells contractors outright what to write on the invoice. The Department of Taxes says you "cannot itemize the sales tax" on a real property job, but you may print this line: "The contractor has paid all applicable Vermont taxes on materials used for this job." That statement does real work. It tells the customer why there's no tax line and shows you paid at the supply house.

The second quirk is licensing. Vermont has no general contractor license. Instead, Act 182 of 2022 created a residential contractor registration run by the Office of Professional Regulation (OPR), required since April 1, 2023. OPR's FAQ notes the registry is about fraud, not workmanship, and it comes with contract rules that shape how you write bids.

Is contractor labor taxable in Vermont?

No, when the work improves real property. The department says that when contractors build tangible personal property into buildings, structures and landscapes, they should not charge sales tax, should pay tax on the materials at purchase, and "the cost of service is not subject to sales tax." The sales tax rate is 6%. Some towns add a 1% local option tax, which businesses collect and remit to the department.

Vermont's list of real property improvements is broad. It names electrical, plumbing, HVAC, carpentry, roofing, plastering, foundations, landscaping and painting, and says improvements and repairs to septic systems, parking lots and driveways count too. So a repair isn't pulled into a different tax bucket the way it is in some states. Compare the models in sales tax on labor vs. materials.

There's one opt-out. A business that is primarily a retailer or manufacturer (more than 50% of the business) and only occasionally installs what it sells can elect to be treated as a retailer on Form SUT-459. It then charges sales tax to the customer instead of paying it to the wholesaler. The election must be filed at least 30 days before you change practices and is binding for five years. A business that's mostly contracting can't elect.

What about materials, equipment and use tax in Vermont?

If you didn't pay the 6% at purchase, you owe use tax directly, on the same schedule as sales tax, using Form SUT-451. The department's page says local option tax doesn't apply to use tax. Read more in use tax for contractors.

• Equipment: always taxable when bought, rented or leased for use in Vermont, even on exempt jobs. Ladders, saws, nail guns, crane and excavator rentals, and blueprints all count.
• Exempt projects: building materials for structures owned by the state, the federal government, 501(c)(3) organizations or local development corporations aren't taxed. Get Form S-3C, Certificate of Exemption. Leased buildings don't qualify.
• Out-of-state contractors: owe use tax the same way. Equipment brought in for under six months can be taxed on fair rental value.
• Vermont crews working out of state: materials bought from Vermont vendors are still taxed. But use tax isn't due on materials stored in Vermont 180 days or less for a job in a state with no sales tax, such as New Hampshire.
• Tracked vehicles: the sales tax on bulldozers and excavators is capped at $1,810 as of July 1, 2026.

Does Vermont require a contractor license?

Not a general one, but registration is mandatory above the threshold. Under 26 V.S.A. § 5501, you must register with OPR before contracting with a homeowner for residential construction worth more than $10,000, including labor and materials. Residential means a building with four or fewer dwelling units. OPR lists renovation, repair, painting, paving, roofing, weatherization and heating, plumbing, solar and electrical work.

What registration involves, per OPR: $75 for individuals with no employees or $250 for businesses with employees, proof of liability insurance of $1,000,000 per occurrence and $2,000,000 aggregate, and a promise to use written contracts. Contracts must state the price basis, estimated start and finish dates, scope and materials, and how change orders get approved. Subcontractors hired by another contractor don't register, and neither do tradespeople licensed by the Department of Public Safety working within their license. Commercial-only contractors don't register unless they take a qualifying residential job.

Towns can still require permits, and OPR notes that it can't award damages or inspect quality. Check with your town before you start. More on how states differ: contractor license basics.

How much income tax does a Vermont contractor pay?

The latest schedules the department publishes are for tax year 2025. For single filers, rates are 3.35% up to $49,400, 6.60% to $119,700, 7.60% to $249,700 and 8.75% above that. Joint filers hit the 6.60% bracket at $82,500 and the top rate at $304,000. If your adjusted gross income tops $150,000, your tax is the greater of the schedule amount or 3% of AGI (less U.S. obligation interest).

• Pass-through entities: S corps, partnerships and LLCs filing Form BI-471 generally owe a $250 minimum entity tax, and they make nonresident withholding payments for out-of-state owners. We didn't find an elective pass-through entity tax on the department's business income page, so ask your CPA.
• C corporations: 6% on the first $10,000, 7% to $25,000, and 8.5% above that, with a minimum tax that starts at $100 for under $500,000 of Vermont gross receipts and rises with receipts.
• Estimated payments: if you're self-employed, the department expects quarterly payments that total 100% of last year's tax or 90% of this year's. The 2026 dates were April 15, June 15 and September 15, 2026, and January 15, 2027.

Set aside money each month for both governments. See quarterly estimated taxes for contractors, or use the quarterly estimated tax calculator.

Do Vermont contractors have to carry workers' comp?

Yes, if you have employees. 21 V.S.A. § 687 says employers "shall secure compensation for their employees" through an insurer or approved self-insurance. The Department of Labor administers the program. A sole proprietor or partner of an unincorporated business is outside the law only when several conditions are met, including a written contract stating the person has no employees and hasn't hired other independent contractors.

Corporations and LLCs can ask the Commissioner to exclude up to four executive officers, managers or members. If everyone is excluded and there are no employees, the business doesn't need a policy. Watch the statutory employer rule in § 601: if you hire an uninsured sub to do work that's part of your business, you can end up responsible for their workers. Details: workers' compensation for contractors.