Vermont Sales Tax Audit Readiness Checklist
Introduction
A Vermont sales tax audit occurs when the Vermont Department of Taxes reviews business records to verify compliance with sales and use tax obligations, including taxable sales, reported exemptions, and accurate tax returns.
Audits are part of the state tax authority’s oversight process and may involve businesses with physical presence, economic nexus, remote sellers, or marketplace facilitator activity under
Vermont law. Understanding audit expectations helps reduce tax liabilities, organize supporting documents, and respond efficiently through a myVTax account.
What This Notice Means
An audit notice means the Department of Taxes intends to examine selected tax filings, sales tax returns, and supporting records to confirm Vermont sales and use tax was correctly collected, reported, and remitted.
The notice typically identifies audit periods, requested documentation, and submission deadlines tied to a specific tax account or Vermont Business Tax Account. An audit does not imply wrongdoing but signals a verification process under the Streamlined Sales and Use Tax
Agreement.
Why the State Sent This Notice
The Vermont Department of Taxes issues audit notices to confirm compliance with Vermont sales tax, use tax, and Local Option Tax requirements, which affect state budget funding and education property tax programs.
Triggers may include reporting discrepancies, exemption certificate usage, refund claims through Form REF-620, or sales patterns involving out-of-state sellers, remote sellers, or
Marketplace facilitator arrangements. Audits support consistent enforcement of tax registration and filing returns requirements.
What Happens If You Ignore This Notice
Ignoring an audit notice may result in estimated assessments based on available data, increased tax liabilities, and loss of opportunities to provide supporting documents or clarification.
Failure to respond can lead to formal assessments, interest accrual, and enforced tax payment collection through liens or escrow actions, even when exemptions or use tax credits may have applied.
Checklist: What to Do After Receiving This Notice
Step 1: Review the audit notice carefully
Identify the tax type, audit period, submission method, and deadlines listed by the Department of Taxes. Record the assigned auditor’s contact information and reference numbers for future communication.
Step 2: Create a centralized audit file
Establish a digital or physical folder for all correspondence, tax returns, and supporting documents. Maintain a running log of submissions, responses, and deadlines tied to the audit timeline.
Step 3: Confirm business registration details
Verify tax registration, Vermont seller’s permit status, and Business Tax Accounts through your myVTax account. Confirm filing frequency and any changes in physical presence or economic nexus during the audit period.
Step 4: Gather sales and return records
Assemble Vermont sales tax returns, Form SUT-451 filings, and related workpapers for each audited period. Include amended returns and explanations for any reporting changes.
Step 5: Prepare sales reconciliation schedules
Reconcile taxable sales, exempt sales, and tax collected between point-of-sale reports, general ledger entries, and bank deposits. Clearly document timing differences, returns, or adjustments affecting reported tax rate calculations.
Step 6: Organize exemption documentation
Identify all exemption certificates used, including Form B-2 or resale certificate equivalents accepted under Vermont law. Link each certificate to specific transactions and confirm good-faith acceptance within required timeframes.
Step 7: Review use tax exposure
Identify purchases where Vermont sales and use tax was not charged, including out-of-state vendor invoices. Confirm whether use tax was accrued and reported on applicable tax filings.
Step 8: Assemble purchase and expense records
Collect vendor invoices, fixed asset purchases, Agricultural Machinery, Forestry and Wood
Products Machinery, and items used for farming purposes or advanced wood boilers. Include documentation supporting exemptions based on emissions standards or efficiency standards.
Step 9: Follow submission instructions exactly
Submit records using the requested method, whether via portal upload, email, or mail. Provide an index listing documents by period and category to support efficient review.
- State enforcement notices and responses
- Sales tax audits, assessments, and collections
- Payroll & trust fund tax enforcement issues
- Penalty and interest reduction options
- Payment plans and state tax relief eligibility
- Representation before state tax agencies
Step 10: Maintain communication records
Track all auditor communications, including dates, requests, and responses. Confirm receipt of submissions and promptly clarify follow-up expectations.
Common Mistakes to Avoid
Businesses often miss deadlines or submit incomplete records, increasing audit duration and risk of unfavorable assessments. Disorganized submissions make it challenging to support taxable sales, exemption certificates, or applications for refund claims.
Another standard error involves misusing terms like 'resale certificate' instead of 'Vermont exemption certificate,' or assuming certificates expire automatically. Failure to document good-faith acceptance and retention periods weakens audit positions.
Frequently Asked Questions
Does an audit mean additional tax is owed?
No, an audit reviews accuracy and compliance. Additional tax is assessed only if discrepancies remain unresolved after examining supporting documents.
How long does a Vermont sales tax audit take?
Audit length varies by record quality, business size, and complexity. Field audits may involve onsite review followed by extended analysis and correspondence.
Can exempt sales be denied during an audit?
Yes, if exemption certificates are missing, incomplete, or not accepted in good faith. Proper documentation is critical for exemption support.
Are copies of records acceptable?
Acceptance depends on the auditor's instructions. Some situations may require original documents or specific formats outlined in the audit notice.
What happens after the audit concludes?
The Department of Taxes issues preliminary findings or an assessment, with the right to appeal.
Taxpayers generally have 60 days to appeal under Vermont guidance.
Can professional representation be used?
Yes, businesses may authorize representatives to communicate with the Department of Taxes.
Authorization must comply with Vermont requirements.
Closing
A Vermont sales tax audit is a structured review process designed to confirm compliance with
Vermont sales and use tax obligations, not to presume error or misconduct. Preparation, organization, and timely communication significantly influence audit outcomes.
By maintaining accurate tax returns, organized supporting documents, and proper exemption certificates, businesses reduce audit risk and protect against unnecessary tax liabilities.
Proactive engagement with the Department of Taxes helps ensure a clear, efficient resolution.
Facing State Enforcement Action?
If you’ve received a notice related to sales tax or payroll tax enforcement, and aren’t sure how to respond, our team can help you understand your options and next steps.
We help with:
20+ years experience • Same-day reviews available
