What Vermont expects from a new trade business

Registration, not a license, once a home job tops $10,000

Vermont has no general contractor license with an exam. What it has is residential contractor registration through the Office of Professional Regulation. Register before contracting with a homeowner on residential work over $10,000, labor and materials together. That covers building, demolition, renovation, repair, painting, paving and roofing on up to four units.

Fees are $75 for an individual or $250 for a business, paid at application and at renewal every two years. You must carry at least $1,000,000 per occurrence and $2,000,000 aggregate in liability insurance. An employee of a registered business, an engineer, an architect, or a tradesperson licensed by the Department of Public Safety working within that license is exempt.

Over $10,000, you also need a written contract before taking a deposit or starting. It has to spell out the price terms, start and completion dates, services and materials, and how changes get approved. With a maximum price, the down payment is capped at one-half of the labor or one-half of the materials, whichever is greater.

Electricians and plumbers answer to separate boards at the Division of Fire Safety, which also handles other trade certifications. The statute says electrical work in a building with no more than two dwelling units needs no electrician license. Ask before you rely on that, because a work notice and inspection can still apply. A construction attorney can look over your contract.

Source: VT Office of Professional Regulation, Residential Contractors · 26 V.S.A. chapter 106 · VT Division of Fire Safety, Electricians · VT Division of Fire Safety, Plumbing · 26 V.S.A. 910

Who to call: an attorney near you

No employee count here, and the state can stop your job

Vermont sets no minimum headcount in the sections that require coverage: employers have to secure comp for their employees. Skip it and the commissioner can assess up to $100 a day for the first seven days and up to $150 a day after that, and issue a stop-work order until you're insured.

With the Commissioner's approval, a corporation or LLC can exclude up to four officers, managers or members. If they all do and the business has no employees, it doesn't have to buy a policy.

Watch how you use subs. The definition of employer reaches someone who is virtually running the job even when an independent contractor is the direct employer. A sole proprietor only falls outside employee status if they pass a list of tests, including a written agreement. An insurance agent who writes contractors can check your paperwork against it.

Source: 21 V.S.A. 601 · 21 V.S.A. 687 · 21 V.S.A. 692

Who to call: an insurance agent near you

Getting paid: the clock runs from when payment was due

Vermont's contractor lien works differently from most states:

• Direct with the owner: you have a lien under your contract, written or not.
• Sub or supplier: you get a lien by giving the owner or their agent written notice that you claim one, including the date payment is due if you know it. It only reaches what's still unpaid on the contract when they receive it, so send it early.
• File: record a signed memorandum with the town clerk within 180 days of when payment came due for your last labor or materials.
• Sue: start your action and attach the property within 180 days of filing, or 180 days from when payment comes due if it wasn't yet due at filing.
• Record the judgment: within five months after judgment, record a certified copy in the town where the property sits. Then you can foreclose as you would a mortgage.

A clause that waives your lien before you do the work doesn't hold up. These rules also apply to a homestead.

Written contract terms that set your payment date move these deadlines, so have a construction attorney look at yours.

Source: 9 V.S.A. 1921 · 9 V.S.A. 1923 · 9 V.S.A. 1924 · 9 V.S.A. 1925 · 9 V.S.A. 1927

Who to call: an attorney near you

You pay the 6% when you buy the materials

Vermont's law counts materials and supplies you buy to build on or repair real property as a retail sale to you. So you pay the 6% at the counter. If you didn't pay Vermont tax when you bought, such as from out of state, you owe 6% use tax to the state yourself. Installation charges aren't part of the sales price, so keep your labor charge honest and separate on the job.

The Department of Taxes' contractor page covers electrical, plumbing, HVAC, carpentry, roofing, plastering, foundations, landscaping and painting. A manufacturer or retailer can elect different treatment. If you sell goods without installing them, you collect tax on those sales.

For how a job should read on your customer's bill, ask the Department of Taxes. A CPA who works with contractors can help too.

Source: VT Dept. of Taxes, Contractors · 32 V.S.A. 9701 · 32 V.S.A. 9771 · 32 V.S.A. 9773

Who to call: a CPA or tax pro near you

Cheap to form, with a $250 tax that surprises partners

Forming a domestic LLC costs $155 with the Secretary of State. The annual report is $45, due within three months of your fiscal year end, March 31 on a calendar year. Skip it and the state can terminate the LLC.

The surprise is the Business Entity Income Tax. LLCs taxed as a partnership or S-corp generally owe a $250 minimum a year, due with the return. A one-owner LLC filing on Schedule C doesn't. So an S-corp election adds this cost, and a CPA should count it when running your numbers.

Vermont also taxes pass-through income on your personal return, on graduated brackets that start at 3.35%, so plan for it when you set your tax reserve.

Source: 11 V.S.A. 4012 (fees) · VT Secretary of State fees · VT Dept. of Taxes, Business Entity Income Tax · 32 V.S.A. 5822 (income tax)

Who to call: a CPA or tax pro near you