Vermont's two employer payroll taxes exist nowhere else
Vermont charges employers two payroll taxes you will not have met anywhere else. The Child Care Contribution takes 0.44% of wages from every employer that withholds Vermont income tax — from the first dollar, with no small-employer exemption, and no more than a quarter of it can be passed to staff. The Health Care Fund Contribution Assessment then bills you each quarter for every full-time-equivalent employee you do not offer health coverage to, beyond the first four. Both are Vermont-only. This page is what they cost and when they start.
Vermont's sales tax is simple, its towns levy no income tax, and there is no general state business licence. If you never hire anyone, this is one of the more straightforward states in the region and the rest of your obligations fit on a postcard.
The moment you put someone on payroll, two state-level charges attach that have no equivalent in any other state — and unlike most payroll levies, neither of them waits for you to reach a headcount. The Child Care Contribution starts with the first dollar of wages you withhold Vermont income tax on.
- Sales tax
- 6% state + 0% or 1% — the local option tax, adopted by roughly 35 municipalities local · typically 6%, or 7% in a local option town
- Local income tax
- None
- State business licence
- Not required statewide
- Workers' comp from
- 1 employee
- Formation approved in
- Filed with the Secretary of State's Corporations Division; the published turnaround was not confirmed in this pass
- First 90 days, all in
- $220–$1,000 · $155 of it to the state
Official portals: Vermont Secretary of State — Corporations Division · Vermont Department of Taxes — Sales and Use Tax: Getting Started · Vermont Department of Taxes — Child Care Contribution (employer payroll). Figures checked September 2026; the portal always wins.
0.44% of payroll, and you keep three quarters of the bill
The Child Care Contribution is a 0.44% payroll tax on every employer required to remit Vermont income tax withholding. There is no threshold, no exemption for small employers and no phase-in. If you withhold, you owe.
You may deduct no more than a quarter of it — 0.11% — from employees. The remaining 0.33% is the business's own cost, which makes this a genuine employer tax rather than an administrative pass-through of the sort Connecticut and Rhode Island run.
Total contribution: $1,320 a year. The most that can be recovered from staff is 0.11% of the same wages — $330 — leaving $990 as the employer's own cost. That is roughly a quarter of a percent on top of every salary, forever, and it belongs in the loaded cost of a hire alongside the federal employer share.
If you are self-employed rather than an employer, it still reaches you, in a different shape: 0.11% of net self-employment income, with no cap. A sole trader with a good year pays it on the whole of that year.
Put both versions in the model before you decide between hiring and contracting — the runway calculator is where a 0.44% line stops being invisible.
A quarterly bill for the people you don't insure
The Health Care Fund Contribution Assessment is charged per uncovered full-time equivalent employee, per quarter — uncovered meaning you do not offer them health coverage. The first four uncovered full-time equivalents are exempt, so a genuinely small employer usually owes nothing.
Two features make it awkward rather than expensive. First, the rate is a fixed dollar amount per uncovered FTE per quarter, reset each year to track the second-lowest-cost silver plan on the Vermont Health Benefit Exchange — so it moves with insurance prices rather than with anything about your business. The 2026 dollar figure is published on Form HC-1, and we could not confirm it in our last check; take it from the current form rather than from any secondary source, including this one.
Second, and this is the one that catches people: you file the return even in a quarter when you owe nothing. Four returns a year for a business that has never owed a penny of it is exactly the kind of obligation that lapses quietly.
The easy part: one point of variation, statewide
Vermont's local option tax is capped at 1% and cannot be stacked, so the worst combined sales tax rate anywhere in the state is 7% — and only about 35 of Vermont's municipalities levy it at all. You can quote one price statewide and be wrong by at most a point, which is a different world from the county-by-county patchwork immediately across the border in New York.
Where Vermont does add rates, it adds them itself rather than leaving it to towns.
| What's being sold | Standard | In a local option town |
|---|---|---|
| General goods and taxable services | 6% | 7% |
| Meals | 9% | 10% |
| Rooms | 9% | 10% |
| Alcoholic beverages | 10% | 11% |
| Motor vehicle sale or rental | Separate purchase and use tax | Local option does not apply |
The Vermont Business Tax Account you file all this against is free, opened through myVTax. On the entity itself, formation is $155, the annual report is $45 with a window running between January 1 and March 31, and the business entity income tax has a $250 minimum a year for multi-member LLCs — a single-member LLC is exempt from it. The comparison against every other state is on the LLC hub.
One honest gap: workers' compensation is required from the first employee with no small-employer headcount exemption, but the precise statutory exemptions — for owners, executive officers, LLC members, agricultural and domestic work — could not be confirmed against the Department of Labor's own pages in our last check. If you are an owner wondering whether you must cover yourself, ask the Vermont Department of Labor rather than assuming the answer matches the state you moved from.
Common questions
What is the Vermont Child Care Contribution?
A 0.44% payroll tax on every employer required to remit Vermont income tax withholding. It applies from the first dollar of wages with no small-employer exemption, and no more than a quarter of it — 0.11% — may be withheld from employees, so at least 0.33% is the business's own cost. Self-employed Vermonters pay it as a 0.11% tax on net self-employment income, with no cap.
Who owes the Health Care Fund Contribution Assessment?
An employer with uncovered full-time-equivalent employees — people you do not offer health coverage to — beyond the first four, which are exempt. It is charged quarterly as a fixed dollar amount per uncovered FTE, reset each year to track the second-lowest-cost silver plan on the Vermont Health Benefit Exchange. The current dollar figure is on Form HC-1.
Do I have to file the HCFCA return if I owe nothing?
Yes. The return is required each quarter even when the assessment is zero, which is why it is so often the filing a small employer lets lapse.
What is the sales tax rate in Vermont?
6%, or 7% in one of the roughly 35 municipalities that have adopted the 1% local option tax — that 1% is the cap and it cannot be stacked. Vermont sets its own higher rates for hospitality: meals and rooms at 9% and alcoholic beverages at 10%, each a point higher in a local option town. The local option does not apply to the sale or rental of motor vehicles, which carry a separate purchase and use tax.
Is there a local income tax in Vermont?
No. No Vermont town levies an income tax. Municipalities that want their own revenue adopt the 1% local option tax on sales, meals, rooms and alcohol instead. The payroll levies that do bite — the Child Care Contribution and the Health Care Fund Contribution Assessment — are state taxes, not local ones.
Does a Vermont LLC pay a minimum tax?
A multi-member LLC has a $250 minimum business entity income tax each year; a single-member LLC is exempt from it. On top of that the annual report is $45, filed between 1 January and 31 March.
Two payroll taxes, priced before you make the offer.
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