The Vermont Department of Taxes has provided updated guidance on the application of sales and use tax to contractors. The updated fact sheet states that generally, contractors should not charge sales tax to the customer when performing real property improvements. The contractor should pay tax on the tangible personal property at the time of purchase. However, there is an exception when the person acting as a contractor is primarily a retailer or manufacturer and has elected to be treated as a retailer. A retailer or manufacturer that occasionally acts as a contractor when installing property that they sell is allowed to formally elect to be treated as a retailer. If a retailer or manufacturer makes this election, they would not pay sales tax to the wholesaler or use tax. Instead, they are required to charge and collect sales tax from the end customer.
To make the election, complete and submit Form SUT-459, Election by Manufacturer or Retailer Occasionally Acting as a Contractor. An election must be filed with the Department at least 30 days before the retailer or manufacturer changes their tax collection practices. If this election is made, it is binding for five years. After five years, the Department may be contacted to change the status, or the retailer or manufacturer can continue with the election. If the Department isn’t contacted, the election will remain in place. Note that if you are primarily (more than 50% of your business) a retailer or manufacturer, you will be treated as a contractor when purchasing materials and supplies for real property improvements. “Treated as a contractor” means that you are required to pay sales tax to a wholesaler for materials at the time of purchase or pay use tax when installing materials or supplies from your inventory. (Fact Sheet No. FS-1112, Vermont Department of Taxes, February 2020)