On June 17, 2024, the Vermont legislature made a significant change by enacting legislation (Vt. H. 887) that repeals the sales and use tax exemption for prewritten computer software accessed remotely, which was originally enacted in 2015 with Act 51. The new law went into effect on July 1, 2024, amending the definition of tangible personal property to include prewritten computer software, regardless of the delivery method or access.
Pre-Written Software Sales Tax Obligations
This type of software, commonly referred to as cloud computing software, includes Software-as-a-Service (SaaS). Prior to the enactment of Vt. H. 887, Vermont only imposed sales and use tax on tangible personal property and a few specific services. The state treated cloud computing as a computer service or intangible transaction for sales and use tax purposes. However, prewritten computer software accessed through any other means has always been subject to sales and use tax, and this will continue to be the case.
Collecting and Reporting Sales Tax in Vermont
As a result of this new legislation, sellers of prewritten computer software with nexus in Vermont must now collect and report sales tax when actively selling in this state. Additionally, Vermont has economic nexus for sales and use tax, which means that sellers who exceed either $100,000 in gross sales or 200 transactions in Vermont in the current or previous calendar year are required to collect and remit Vermont sales and use tax.
Your Guide Forward
The new Vermont sales tax legislation requires businesses selling prewritten computer software to collect and remit sales tax. For compliance and to prevent the loss of unnecessary funds to the government with Vermont’s new sales tax law, businesses can work with a skilled team of tax professionals. Cherry Bekaert’s Sales & Use Tax team can review your sales reports to identify and remedy any potential errors or reporting mistakes. By taking this proactive approach, businesses can accurately report sales and maintain compliance with the new legislation.
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