How to Start a Bed and Breakfast or Inn in Vermont: Health Department Lodging License ($130 to $1,000) and the 9% Rooms Tax
How to Start a Bed and Breakfast or Inn in Vermont: Health Department Lodging License ($130 to $1,000) and the 9% Rooms Tax
If you want to learn how to start a bed and breakfast business in Vermont, expect the paperwork to come from several directions. Vermont has no general state business license. Instead, you form your entity with the Secretary of State, get a lodging license from the Vermont Department of Health, clear a fire and building review, and open a Department of Taxes account for the rooms and meals taxes. This guide walks through those steps in the order most operators find workable.
What You Need Before You Start
Gather these items before you file anything. Most of the applications ask for the same information, and having it ready prevents restarts.
- A business name that ends with a required designator. For an LLC, that is Limited Liability Company (LLC or Ltd. Liability Co.) or Limited Company (LC or Ltd. Co.).
- A Vermont registered agent with a name, email address and physical address on file. The agent must be an individual Vermont resident or a business with a place of business in Vermont and authority to do business there.
- A floor plan showing every guest unit, bathroom, kitchen and common area, with the number of guest units counted clearly.
- Water test results for total coliform and E. coli if the property uses a private well. The results must be less than a year old.
- Wastewater permit documentation for the septic system or other wastewater disposal method.
- Your estimated renovation or construction valuation, if you are changing the building or opening a new one. The fire construction permit fee is based on this number.
- Your town's zoning contact information and a copy of any local bylaws that cover short-term lodging.
- A list of any food or alcohol you plan to serve, since that determines which additional licenses you need.
Step 1: Form Your Entity With the Secretary of State
Most B&B owners form a limited liability company, though some choose a corporation. Both are filed through the Vermont Secretary of State, Business Services Division. The online filing system is the Online Business Service Center at bizfilings.vermont.gov. Online filings are normally processed in less than one business day, and the Secretary of State lists no expedited fee. Mailed filings take 7 to 10 business days, so online filing is the practical choice if your opening date is fixed.
If you need time to settle on a name, you can reserve it for $25 for an LLC using an Application for Reserved Name. A reservation lasts 120 days and can be renewed. The fee for a corporation reservation is $40.
Your entity costs and deadlines are:
| Item | Amount or deadline |
|---|---|
| LLC filing (Articles of Organization) | $155 |
| Corporation filing (Articles of Incorporation) | $155 |
| LLC annual report | $45, due by March 31 for a calendar-year LLC |
| Corporation annual report | $60, due by March 15 for a calendar-year corporation |
| Statement of Change of registered agent (LLC) | $35 |
| Statement of Change of registered agent (corporation) | $25 |
A missed annual report terminates the entity. It can be reinstated, but Vermont does not use administrative dissolution, so do not treat the deadline as a formality. Mark it on your calendar when you file.
Pass-through entities, including LLCs taxed as partnerships and S corporations, owe a minimum annual entity tax of $250, paid with Form BI-471 or BI-476. A single-member LLC that is disregarded for tax purposes does not owe this tax. Whether your LLC is disregarded depends on your federal tax election, so confirm that with a CPA before assuming either way.
Step 2: Confirm Zoning With Your Town
Vermont has 14 counties, but counties have no licensing or zoning role. Your town, city or village controls zoning and local permits, and the rules differ widely from one municipality to the next. Some towns allow a B&B in a residential zone with a simple permit, while others treat an inn as a commercial use with parking, signage and occupancy requirements.
Call or visit the zoning administrator before you sign a purchase and sale agreement or commit to a renovation budget. Ask three specific questions: whether a B&B is a permitted use in the zone, whether a site plan or conditional use approval is required, and whether the town imposes its own lodging or meals tax. Several towns, including Stowe, Killington, Dover, Manchester, Ludlow, Stratton, Wilmington, Winhall, Woodstock and Londonderry, levy local meals, rooms and alcohol taxes. Elmore, Putney and Wardsboro levy a local rooms tax only. Burlington and Rutland City collect their own local taxes.
One exception matters for farm operators. A farm stay is a statutory term protected from local prohibition under 24 V.S.A. 4412(11). If you are running accessory lodging on a working farm, cite that statute when you talk to your zoning administrator, and still get the written determination.
Step 3: Get the Department of Health Lodging License
Hotels, motels, inns and bed and breakfasts need a Vermont Department of Health lodging license under 18 V.S.A. 4351 when they offer three or more guest units. A property with fewer than three guest units also needs the license if it prepares food for guests. Apply at least 30 days before you plan to take your first guest. The Department of Health issues the license, not a local health office.
The annual fee depends on the number of guest units:
| Guest units | Annual license fee |
|---|---|
| 1 to 10 | $130 |
| 11 to 20 | $185 |
| 21 to 50 | $250 |
| 51 to 200 | $390 |
| Over 200 | $1,000 |
Licenses renew every year under 18 V.S.A. 4354, so budget for the renewal as a recurring cost, not a one-time startup expense. Confirm the current application form and submission method on the Department of Health website before you file, since the forms and processing steps may change.
If your guests are served anything beyond prepackaged items, whole fruit or coffee, you also need a separate food license. Its fee follows the restaurant seat-count ladder, which runs from $105 to $1,000. The number of seats you plan to offer at breakfast or other meals will determine where you land on that ladder, so count seats honestly and confirm the tier with the Department of Health.
Water and Wastewater Requirements
If the property uses a private well, the lodging application needs total coliform and E. coli test results that are less than a year old. Plan the water test early, because a result that is 13 months old will not satisfy the requirement and you will have to test again. Also gather your wastewater permit documentation. If you are buying an existing inn, ask the seller for both documents before closing, since replacing a failing septic system can change your opening date by months.
Step 4: Clear the Fire and Building Review
Vermont treats a building where people rent overnight accommodations as a public building under 20 V.S.A. 2730. That means a new lodging property, or an existing building that is changing to lodging use, needs a construction permit from the Division of Fire Safety before work begins. The fee is $8.00 per $1,000 of valuation, with a minimum of $50 and a maximum of $185,000.
When the building is ready, the Division of Fire Safety also inspects it for a change of use or ownership. That inspection costs $125 under 20 V.S.A. 2731. If you buy a building that is already licensed for lodging, ask whether the prior owner's inspection can be relied on or whether a new inspection is required. Confirm that with the Division of Fire Safety, because the answer depends on whether the use and layout changed.
Build the permit timeline into your renovation schedule. Inspectors look at egress, smoke and carbon monoxide detection, and fire separation between units. Correcting these items after the fact costs more than designing them in from the start.
Step 5: Register for Taxes With the Department of Taxes
Vermont's 6% sales tax applies to goods and a short list of items, and it reaches almost no services. A B&B's core revenue, the room rate, is not subject to the sales tax. Instead, it falls under the rooms tax, and food and drink fall under the meals tax. Open a business tax account with the Department of Taxes at tax.vermont.gov/business/register before you take your first booking. A business that collects rooms or meals tax, or withholds payroll tax, must register for a business tax account.
Here is how the main taxes apply to a bed and breakfast:
- Rooms tax: 9%, or 10% in a town that adds the 1% local option rooms tax. Short-term rentals owe the 9% rooms tax plus a 3% surcharge, so confirm with the Department of Taxes how that surcharge applies to your property before you set your rates.
- Meals tax: 9% on food served, 10% on alcohol, plus 1% in towns with the local option meals tax. Prepared food, coffee, bakery items eaten on the spot and catering all fall under this tax.
- Permanent residents: A guest who stays 30 or more consecutive days is a permanent resident and is not charged rooms tax for that stay. Keep records of stay length from the first night.
If your guests buy items from you that you intend to resell, such as local maple products or gift items, the buyer gives you Form S-3 for the resale exemption. The exemption is documented with Form S-3 from the buyer, not with your sales tax account number, so keep those forms on file.
Pass-through owners should also remember the $250 minimum entity tax from Step 1. Business owners who have employees must register for withholding through the same Department of Taxes account.
Step 6: Decide on Food and Alcohol Early
Food and alcohol decisions drive your licensing costs more than almost any other choice. A continental breakfast of prepackaged items, whole fruit and coffee may keep you out of the separate food license, but a cooked breakfast usually does not. Decide your breakfast menu before you finalize the kitchen design, because the Department of Health and the Division of Fire Safety will review it.
If you plan to serve wine, beer or spirits, check with the Department of Liquor and Lottery before you advertise the service. Alcohol increases the meals tax rate to 10%, and some towns add their own alcohol tax, so price your menu with that in mind.
Common Mistakes to Avoid
- Assuming a small Airbnb-style rental needs no license. Units under three guest units with no prepared food do not fall under the lodging license. But you still owe rooms tax on those stays, so register with the Department of Taxes regardless.
- Calling the local health office. The lodging license comes from the Vermont Department of Health. Calling the wrong office wastes time at the start.
- Filing the entity before checking zoning. A town can refuse a use permit after you have already formed the LLC and signed a lease or purchase. Confirm zoning first.
- Waiting to test the well. Water results that are older than a year will not satisfy the requirement, and a lab schedule can slow your timeline.
- Missing the annual report. A missed report terminates the entity. Put the March 31 LLC or March 15 corporation deadline on your calendar the day you file.
- Ignoring the local tax. If your town levies a local rooms or meals tax, you owe it on top of the state tax. Check the town list before you set rates.
What Results to Expect
Your first year is usually a licensing, renovation and marketing year, and the revenue picture depends heavily on location, season, room count and pricing. Vermont's tourism and outdoor recreation economy is a major part of the state's business base, and the Census counted 96 bed and breakfast establishments with 740 employees in 2023, compared with 220 hotels and motels employing 11,110 people. Those numbers show that B&Bs are an established segment, but they do not predict what any one property will earn.
Plan on the costs in this guide being the start of your spending, not the end. Many owners find that the fire permit, renovation and tax setup take longer than expected. A realistic plan allows for a few months between your first filing and your first booking, and it may help to ask the Vermont Small Business Development Center for guidance on financial projections. You can reach it at vtsbdc.org.
Key Resources
- Vermont Secretary of State, Business Services Division: sos.vermont.gov/business-services
- Business entity search: bizfilings.vermont.gov/business/businesssearch
- Vermont Department of Taxes: tax.vermont.gov
- Vermont Small Business Development Center: vtsbdc.org
- SBA resources for Vermont: sba.gov/district/vermont
Important Disclaimer
This article is informational content, not legal or tax advice. Fees, deadlines and rules change, so confirm every figure with the agency named before you file or pay. Because an LLC or corporation, a lodging license and a rooms tax account each carry long-term obligations, speak with a qualified Vermont attorney and a CPA before you commit to a property, a tax election or a financing arrangement.