§ 9741. Sales not covered
Retail sales and use of the following shall be exempt from the tax on retail sales
imposed under section 9771 of this title and the use tax imposed under section 9773 of this title:
(1) Sales not within the taxing power of this State under the Constitution of the United
States.
(2) Drugs intended for human use, durable medical equipment, mobility enhancing equipment,
and prosthetic devices and supplies, including blood, blood plasma, insulin, and medical
oxygen, used in diagnosis or treatment intended to alleviate human suffering or to
correct, in whole or in part, human physical disabilities; provided, however, that
toothbrushes, floss, and similar items of nominal value given by dentists and hygienists
to patients during treatment are supplies used in treatment to alleviate human suffering
or to correct, in whole or part, human physical disabilities and are exempt under
this subdivision.
(3) Agriculture feeds, seed, plants, baler twine, silage bags, agricultural wrap, sheets
of plastic for bunker covers, liming materials, breeding and other livestock, semen
breeding fees, baby chicks, turkey poults, agriculture chemicals other than pesticides,
and bedding; and fertilizers and pesticides for use and consumption directly in the
production for sale of tangible personal property on farms, including stock, dairy,
poultry, fruit and truck farms, orchards, nurseries, or in greenhouses or other similar
structures used primarily for the raising of agricultural or horticultural commodities
for sale.
(4) Casual sales.
(5), (6) [Repealed.]
(7)(A) Except as provided in subdivision (B) of this subdivision (7), sales of:
(i) motor fuels taxed or exempted under 23 V.S.A. chapter 28;
(ii) dyed diesel used to power machinery described in subdivision (51) of this section;
and
(iii) dyed diesel used to propel a vehicle off the highways of the State.
(B) Aviation jet fuel and natural gas used to propel a motor vehicle shall be taxed under
this chapter with the proceeds to be allocated to the Transportation Fund in accordance
with 19 V.S.A. § 11.
(8) [Repealed.]
(9) Rents for rooms taxed under chapter 225 of this title and the transactions exempted
therefrom.
(10) Sales of meals or alcoholic beverages taxed or exempted under chapter 225 of this
title, except alcoholic beverages under subdivision 9202(10)(D)(v) or (11)(B)(i) of
this title, or any alcoholic beverages served for immediate consumption.
(11) [Repealed.]
(12) Motor vehicle purchases and use taxed under chapter 219 of this title and the transactions
exempted therefrom that are listed in section 8911 of this title. Provided, however, that notwithstanding subdivision 8911(5) of this title, construction, earthmoving, logging, and motorized equipment that has not been registered
as a motor vehicle is subject to tax under this chapter, and further provided that
power take off and other auxiliary equipment on motor vehicles, whether attached prior
to or subsequent to registration, is not exempt under this section. Motor vehicle
parts purchased by a dealer registered under the provisions of 23 V.S.A. §§ 451-468 shall be exempt from the tax under this chapter when used to recondition a used motor
vehicle owned by the dealer in its inventory for resale.
(13) Sales of food and food ingredients sold for human consumption off the premises where
sold, and sales of eligible foods that are purchased with benefits under the Supplemental
Nutrition Assistance Program or any successor program, consistent with federal law.
(14)(A) Tangible personal property that becomes an ingredient or component part of or is consumed
or destroyed or loses its identity in the manufacture of tangible personal property
for sale.
(B) Machinery and equipment used in or consumed as an integral or essential part of an
integrated production operation by a manufacturing or processing plant or facility
engaged in the manufacture of tangible personal property for sale, or in the manufacture
of other machinery or equipment, parts, or supplies for use in the manufacturing process.
For the purposes of this subdivision (14), “manufacture” includes extraction of mineral
deposits, the entire printing and bookmaking process, and the entire publication process.
(C) As used in this subdivision (14):
(i) “Integrated production operation” means an integrated series of operations at a manufacturing
or processing plant or facility to process, transform, or convert tangible personal
property by physical, chemical, or other means into a different form, composition,
or character from that in which it originally existed. Integrated production operations
begin when raw material is first changed physically, chemically, or otherwise in form,
composition, or character, including being removed from storage or introduced for
this manipulation, and end when the product is placed in initial packaging and shall
include production line operations, including initial packaging operations, and waste,
pollution, and environmental control operations.
(ii) “Manufacturing or processing business” means a business that utilizes an integrated
production operation to manufacture, process, fabricate, or finish items for wholesale
and retail distribution as part of what is commonly regarded by the general public
as an industrial manufacturing or processing operation or an agricultural commodity
processing operation. “Manufacturing or processing business” does not include nonindustrial
businesses whose operations are primarily retail and that produce or process tangible
personal property as an incidental part of conducting the retail business, such as
retailers who bake, cook, or prepare food products in the regular course of their
retail trade; the assembling of product by retailers for sale; grocery stores, meat
lockers, and meat markets that butcher or dress livestock or poultry in the regular
course of their retail trade; contractors who alter, service, repair, or improve real
property; and retail businesses that clean, service, or refurbish and repair tangible
personal property for its owner. The examples provided in this subdivision (ii) shall
not be construed as exclusive.
(iii) “Manufacturing or processing plant or facility” means a single, fixed location owned
or controlled by a manufacturing or processing business that consists of one or more
structures or buildings in a contiguous area where integrated production operations
are conducted to manufacture or process tangible personal property to be ultimately
sold at retail. A business may operate one or more manufacturing or processing plants
or facilities at different locations to manufacture or process a single product of
tangible personal property to be ultimately sold at retail.
(iv) “Primary” or “primarily” means more than 50 percent of the time.
(v) “Production line” means the assemblage of machinery and equipment at a manufacturing
or processing plant or facility where the actual transformation or processing of tangible
personal property occurs.
(D) For the purposes of this subdivision (14), machinery and equipment shall be deemed
to be used as an integral or essential part of an integrated production operation
when used during the integrated production operation:
(i) to transport, convey, handle, or store the property undergoing manufacturing or processing
at any point from the beginning of the production line until it is placed into initial
packaging;
(ii) to act upon, effect, promote, or otherwise facilitate a physical change to the property
undergoing manufacturing or processing;
(iii) to guide, control, or direct the movement of property undergoing manufacturing or
processing;
(iv) to test or measure materials, the property undergoing manufacturing or processing,
or the finished product during the manufacturer’s integrated production operations;
(v) to plan, manage, control, or record the receipt and flow of property while undergoing
manufacturing or processing;
(vi) to lubricate, control the operating of, or otherwise enable the functioning of other
production machinery and equipment and the continuation of production operations;
(vii) to transmit or transport electricity, gas, water, steam, or similar substances used
in production operations from the point of generation, if produced by the manufacturer
or processor at the plant site, to that manufacturer’s production operation or, if
purchased or delivered from off–site, from the point where the substance enters the
site of the plant or facility to that manufacturer’s production operations;
(viii) to package the property being manufactured or processed in any container or wrapping
in which such property is normally sold or transported, even if the machinery operates
after the point of initial packaging;
(ix) to cool, heat, filter, refine, or otherwise treat water, steam, acid, oil, solvents,
or other substances that are used in production operations;
(x) to provide and control an environment required to maintain certain levels of air quality,
humidity, or temperature in special and limited areas of the plant or facility where
such regulation of temperature or humidity is part of and essential to the production
process;
(xi) to treat, transport, or store waste or other byproducts of production operations at
the plant or facility and to clean manufacturing machinery and equipment;
(xii) to control pollution at the plant or facility where the pollution is produced by the
manufacturing or processing operation; or
(xiii) to inspect or conduct quality control on the product, even if the inspection or quality
control machinery operates after the point of initial packaging.
(E) “Machinery and equipment used as an integral or essential part of an integrated production
operation” does not mean:
(i) machinery and equipment used for nonproduction purposes, including machinery and equipment
used for plant security, fire prevention, first aid, accounting, administration, record
keeping, advertising, marketing, sales or other related activities, plant cleaning,
plant communications, and employee work scheduling;
(ii) machinery, equipment, and tools used primarily in maintaining and repairing any type
of machinery and equipment or the building and plant;
(iii) transportation, transmission, and distribution equipment not primarily used in a production,
warehousing, or material handling operation at the plant or facility, including the
means of conveyance of natural gas, electricity, oil, or water, and related equipment,
located outside the plant or facility;
(iv) office machines and equipment, including computers and related peripheral equipment,
not used directly and primarily to control or measure the manufacturing process;
(v) furniture and other furnishings;
(vi) buildings, other than exempt machinery and equipment that is permanently affixed to
or becomes a physical part of the building, and any other part of real estate that
is not otherwise exempt;
(vii) building fixtures that are not integral to the manufacturing operation, such as utility
systems for heating, ventilation, air conditioning, communications, plumbing, or electrical;
(viii) machinery and equipment used for general plant heating, cooling, and lighting; or
(ix) motor vehicles that are registered for operation on public highways.
(F) Subdivisions (D) and (E) of this subdivision (14) shall not be construed as exclusive
lists of the machinery and equipment that qualify or do not qualify as an integral
or essential part of an integrated production operation. When machinery or equipment
is used as an integral or essential part of production operations part of the time
and for nonproduction purposes at other times, the primary use of the machinery or
equipment shall determine the qualification of the machinery or equipment for the
exemption.
(15) Sales of newspapers and sales of tangible personal property that becomes an ingredient
or component part of, or is consumed or destroyed or loses its identity in the manufacture
of newspapers, whether sold or distributed without charge. A publication shall not
be considered a newspaper unless, on an average for the taxable year, at least 10
percent of its printed material consists of news of general or community interest,
community notices, editorial comment, or articles by different authors.
(16) Materials, containers, labels, sacks, cans, boxes, drums, or bags and other packing,
packaging, or shipping materials for use in packing, packaging, or shipping tangible
personal property by a manufacturer or distributor.
(17) Rentals of furniture in furnished apartments or houses for residential use.
(18) Fees and charges paid for admission to or use of federal, State, or municipal recreation
areas and facilities, including swimming pools.
(19) Rentals of coin-operated washing facilities for individual or personal use, including
car washes and laundries.
(20) Fees and charges for admission to nonprofit museums.
(21) Sales of equipment, supplies, and building materials made directly to volunteer fire
departments, volunteer ambulance companies, or volunteer rescue squads for official
use by the volunteer organizations.
(22) Funeral charges, including sales of tangible personal property such as caskets, vaults,
boxes, clothing, crematory urns, and other such funeral furnishings as are necessary
incidents of the funeral, but excluding the sale of flowers and other items sold as
an accommodation rather than as an integral part of the funeral service or preparation
therefor.
(23) [Repealed.]
(24) Tangible personal property purchased for use or consumption directly and exclusively,
except for isolated or occasional uses, in commercial, industrial, or agricultural
research or development in the experimental or laboratory sense. It shall be rebuttably
presumed that uses are not isolated or occasional if they total more than four percent
of the time the machinery or equipment is operated. Such research or development shall
not be deemed to include the ordinary testing or inspection of materials or products
for quality control, efficiency surveys, management studies, consumer surveys, advertising,
promotions, or research in connection with literary, historical, or similar projects.
(25) Sales of agricultural machinery and equipment for use and consumption predominately
in the production for sale of tangible personal property on farms, including stock,
dairy, poultry, fruit, and truck farms, orchards, nurseries, or in greenhouses or
other similar structures used primarily for the raising of agricultural or horticultural
commodities for sale. As used in this subdivision, the term “predominately” means
75 percent or more of the time the machinery or equipment is in use.
(26) Sales of electricity, oil, gas, and other fuels used in a residence for all domestic
use, including heating, but not including fuel sold at retail in free-standing containers,
or sold as part of a transaction where a free-standing container is exchanged without
a separate charge. Wood pellets sold to an individual on the vendor’s premises or
delivered to an individual’s residence shall be presumed to be purchased for residential
use and shall be exempt sales under this subdivision unless the vendor knew or ought
reasonably to have known that the wood pellets were not purchased for residential
use. A certificate of exemption shall not be required for exempt retail sales of wood
pellets to an individual. The Commissioner shall by rule determine that portion of
the sales attributable to domestic use where fuels are used for purposes in addition
to domestic use.
(27) Sales of electricity, oil, gas, and other fuels used directly and exclusively for
farming purposes.
(28) Sales of films where the films are acquired exclusively for the purpose of charging
admission to see such films and where such admission is subject to the tax imposed
by subdivision 9771(4) of this title.
(29) Aircraft, but not drones, sold to a person that holds itself out to the general public
as engaging in air commerce, for use primarily in the carriage of persons or property
for compensation or hire; and parts, machinery, and equipment to be installed in any
aircraft, other than drones.
(30) Railroad rolling stock, including depreciable parts, machinery, and equipment to be
installed as a capital asset in such rolling stock, sold for use primarily in the
carriage of persons or property. As used in this section, “railroad rolling stock”
shall include locomotives, cabooses, boxcars, tank cars, flatbed cars, maintenance
of way equipment, and all other wheeled vehicles used on rails or tracks.
(31) Ferryboats, including depreciable parts, machinery, and equipment to be installed
as a capital asset in such ferryboat, sold to a person who holds himself or herself
out to the general public as engaging in water commerce, for use primarily in the
carriage of persons or property for compensation or hire.
(32) Forty percent of the receipts from sales of mobile homes, as defined in 9 V.S.A. § 2601, and modular housing, when they are sold as tangible personal property.
(33) Sales of the flag of the United States to and by veterans’ organizations exempt under
26 U.S.C. § 501(c)(19).
(34) Sales of electricity, oil, gas, and other fuels used directly or indirectly in manufacturing
tangible personal property for sale.
(35) Charges made when tangible property is transferred as part of a personal services
transaction or a transfer of intangible property rights, as long as the focus of the
transaction is the provision of services or the transfer of intangible property rights
and not the transfer of tangible personal property; no separate charge is made for
the transfer of tangible personal property; and the value of the tangible personal
property transferred, including the value of services added to the tangible personal
property transferred, is less than 10 percent of the total charge for the transaction.
When the focus of the transaction is the transfer of tangible personal property, all
receipts from the sale are taxable, including receipts from separately stated charges
for services to produce the property, unless the receipts are otherwise exempt under
this chapter.
(36) Charges by an advertising agency for the transfer of title or possession of or right
to use advertising materials when the transfer is made in conjunction with the delivery
of advertising services. This exemption does not extend to charges by any business
other than an advertising agency or to charges by any person for printing, imprinting,
copying, or reproducing advertising materials.
(37) Charges for documents, the sole purpose of which is to record or memorialize professional
services rendered, such as charges for briefs, memoranda, agreements, and wills prepared
by lawyers; charges for tax returns and reports produced by accountants; charges for
drawings produced by architects; or charges for insurance policies.
(38) Tax on the sale or use of a tracked vehicle shall not exceed $1,100.00 adjusted as
follows: as of July 1 of each even-numbered year, the Commissioner shall adjust the
most recent unrounded cap amount by the cumulative inflation index for the prior two
calendar years under the consumer price index for urban consumer all items, and round
that amount to the nearest $10.00, and shall publish this rounded amount as the new
cap.
(39) Sales of building materials within any three consecutive years in excess of $1,000,000.00
in purchase value used in the construction, renovation, or expansion of facilities
that are used exclusively, except for isolated or occasional uses, for the manufacture
of tangible personal property for sale.
(40) [Repealed.]
(41) Charges for wholesale transactions between telecommunications service providers where
the service is a component part of a service provided to an end user. This exemption
includes network access charges and interconnection charges paid to a local exchange
carrier.
(42) [Repealed.]
(43) Sales of scrap materials generated in the course of construction or demolition and
diverted from waste disposal at the construction or demolition job site, provided
that the sale is not by the generator and is by a person who received the materials
from the generator with no payment.
(44) Tangible personal property to be incorporated in a rail line in connection with the
construction, maintenance, repair, improvement, or reconstruction of the rail line.
(45) Clothing, but clothing shall not include clothing accessories or equipment, protective
equipment, or sport or recreational equipment.
(46) Tangible personal property to be incorporated into:
(A) a net metering system as defined in 30 V.S.A. § 8002;
(B) a home or business energy system on a premises not connected to the electric distribution
system of a utility regulated under Title 30 and that otherwise meets the requirements
of 30 V.S.A. § 8002(16)(A), (C), and (D); or
(C) a hot water heating system that converts solar energy into thermal energy used to
heat water, but limited to that property directly necessary for and used to capture,
convert, or store solar energy for this purpose.
(47) [Repealed.]
(48) Sales of tangible personal property sold by an auctioneer licensed under 26 V.S.A. chapter 89, including any buyer’s premium charged by the auctioneer, that are conducted on the
premises of the owner of the property, provided that no other person’s property is
sold on the auction premises and provided that the property was obtained by the owner,
through purchase or otherwise, for his or her own use.
(49) Clean high carbon bulking agents, as that term is used in the Agency of Natural Resources’
Solid Waste Management Rules, used for commercial or on-farm composting, and food
residuals used for commercial or on-farm composting or on-farm energy production.
(50) Compost, animal manure, manipulated animal manure, and planting mix when any of these
items are sold in bulk. As used in this section, the term “sold in bulk” shall mean
sold in a form that is not prepackaged, or sold in a packaged form in volumes greater
than one cubic yard.
(51) The following machinery, including repair parts, used for timber cutting, timber removal,
and processing of timber or other solid wood forest products intended to be sold ultimately
at retail: skidders with grapple and cable; feller bunchers; cut-to-length processors;
forwarders; delimbers; loader slashers; log loaders; whole-tree chippers; stationary
screening systems; firewood processors, elevators, and screens; and when sold for
use on any machinery listed under this subdivision, traction enhancement accessories,
tire chains, track systems, and winch cables. The Department of Taxes shall publish
guidance relating to the application of this exemption.
[Subdivision (52) repealed effective July 1, 2027.]
(52) Advanced wood boilers, as defined in section 9701 of this title.
(53) Prescription drugs intended for animal use, and durable medical equipment and prosthetics
intended for animal use, and veterinary supplies intended for animal use. As used
in this subdivision, “prescription drugs intended for animal use” means a drug dispensed
only by or upon the lawful written order of a licensed veterinarian, and “veterinary
supplies” means tangible personal property therapeutic in nature, not normally used
absent illness or injury, and not intended for repeated usage.
(54) Sales of recyclable paper carryout bags to customers pursuant to 10 V.S.A. § 6693, provided that sales of recyclable paper carryout bags to stores and food service
establishments as defined under 10 V.S.A. § 6691 shall not be exempt under this subdivision and shall not be considered sales for
resale under subdivision 9701(5) of this title.
(55) Cannabis and cannabis products, as defined under 7 V.S.A. § 831, sold by any dispensary as authorized under 7 V.S.A. chapter 37 or any retailer licensed with a medical-use endorsement as authorized under 7 V.S.A. chapter 33, provided that the cannabis or cannabis product is sold only to registered qualifying
patients directly or through their registered caregivers. A retailer that sells cannabis
or cannabis products that are exempt from tax pursuant to this subdivision shall retain
information pertaining to each exempt transaction as required by the Commissioner
of Taxes.
(56) Menstrual products. As used in this subdivision, “menstrual products” means tampons,
panty liners, menstrual cups, menstrual napkins, and other similar tangible personal
property designed for use in connection with the human menstrual cycle but does not
include “grooming and hygiene products” as defined in this chapter. (Added 1969, No. 144, § 1, eff. June 1, 1969; amended 1969, No. 263 (Adj. Sess.), § 2, eff. April 6, 1970; 1973, No. 270 (Adj. Sess.), §§ 3-5; 1975, No. 156 (Adj. Sess.), § 2; 1975, No. 243 (Adj. Sess.), § 10(c), eff. May 1, 1976; 1977, No. 62, §§ 1, 2; 1977, No. 86, §§ 2-5; 1977, No. 135 (Adj. Sess.); 1979, No. 105 (Adj. Sess.) § 40; 1981, No. 13, eff. date, see note below; 1981, No. 87, § 21; 1981, No. 172 (Adj. Sess.), § 11d, eff. April 20, 1982; 1985, No. 88, § 1, eff. June 1, 1985; 1985, No. 135 (Adj. Sess.), §§ 1, 2, eff. April 24, 1986; 1985, No. 168 (Adj. Sess.), eff. May 7, 1986; 1985, No. 207 (Adj. Sess.), § 2; 1987, No. 82, § 10, eff. June 9, 1987; 1987, No. 113, § 2, eff. June 26, 1987; 1987, No. 184 (Adj. Sess.), eff. April 1, 1988; 1989, No. 32; 1989, No. 133 (Adj. Sess.), § 1, eff. April 5, 1990; 1989, No. 174 (Adj. Sess.); 1991, No. 32, §§ 13, 27, eff. June 1, 1991; 1991, No. 148 (Adj. Sess.), § 1, eff. May 4, 1992; 1993, No. 89, §§ 14c, 14d, eff. July 1, 1996; 1995, No. 29, § 27, eff. July 1, 1996; 1995, No. 86 (Adj. Sess.), § 3, eff. March 28, 1996; 1997, No. 50, § 45, eff. June 26, 1997; 1997, No. 60, § 72a, eff. June 26, 1997; 1997, No. 60, § 79; 1997, No. 71 (Adj. Sess.), §§ 50-52; 1997, No. 76 (Adj. Sess.), § 1, eff. March 30, 1998; 1997, No. 156 (Adj. Sess.), § 21, eff. April 29, 1998; 1999, No. 49, §§ 34, 34a, 64, 74, 92-94, eff. June 2, 1999; 2001, No. 54, § 1; 2001, No. 138 (Adj. Sess.), § 5, eff. June 21, 2002; 2001, No. 140 (Adj. Sess.), § 35, eff. June 21, 2002; 2001, No. 144 (Adj. Sess.), § 12, eff. January 1, 2003; 2001, No. 145 (Adj. Sess.), § 6, eff. June 21, 2002; 2003, No. 68, § 58, eff. date, see note below; 2003, No. 121 (Adj. Sess.), § 88, eff. June 8, 2004; 2003, No. 152 (Adj. Sess.), § 17, eff. date, see note below; 2005, No. 75, §§ 2, 2b, 22; 2005, No. 184 (Adj. Sess.), § 4; 2007, No. 81, § 7, eff. June 11, 2007, § 7a, eff. July 1, 2011; 2007, No. 164 (Adj. Sess.), § 34; 2011, No. 45, § 36g; 2011, No. 143 (Adj. Sess.), § 49, eff. May 24, 2011; 2011, No. 143 (Adj. Sess.), § 54, eff. Jan. 1, 2012; 2011, No. 143 (Adj. Sess.), § 54a; 2011, No. 153 (Adj. Sess.), § 42, eff. July 1, 2013; 2013, No. 73, § 45, eff. June 5, 2013; 2013, No. 99 (Adj. Sess.), § 9, eff. Jan. 1, 2017; 2013, No. 174 (Adj. Sess.), §§ 36, 46, 49; 2013, No. 200 (Adj. Sess.), § 22; 2015, No. 57, § 92; 2015, No. 100 (Adj. Sess.), § 1; 2015, No. 144 (Adj. Sess.), § 12; 2015, No. 157 (Adj. Sess.), § H.9, eff. Jan. 1, 2017; 2017, No. 73, § 19, eff. Sept. 1, 2017; 2017, No. 75, § 17; 2017, No. 77, § 9; 2017, No. 194 (Adj. Sess.), § 26; 2019, No. 29, § 1, eff. May 23, 2019; 2019, No. 46, § 5; 2019, No. 51, § 39, eff. June 10, 2019; 2019, No. 150 (Adj. Sess.), § 6, eff. July 13, 2020; 2019, No. 164 (Adj. Sess.), § 16, eff. March 1, 2022; 2021, No. 54, § 21, eff. June 3, 2021; 2021, No. 73, § 11a; 2021, No. 179 (Adj. Sess.), § 27, eff. July 1, 2022; 2021, No. 179 (Adj. Sess.), § 27b, eff. June 7, 2022; 2023, No. 72, § 3, eff. June 19, 2023; 2023, No. 166 (Adj. Sess.), § 14, eff. June 10, 2024.)