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Vermont Nonresident Employee Tax | Adjusting the Withholding Percentage

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Available on: Patriot Payroll (Basic and Full Service). Applies to Vermont employers with nonresident employees.

If you have an employee who is a Vermont nonresident (an employee who lives in another state but works in Vermont) and that employee works in both Vermont and another state during the same pay period, you may need to enter a nonresident withholding percentage to ensure Patriot calculates Vermont state income tax (SIT) only on the portion of pay earned in Vermont.

When Should You Use the Vermont Non-resident Percentage?

This setting applies when all three of the following are true:

  1. Your business is registered as a Vermont employer.
  2. The employee does not live in Vermont (they are a nonresident).
  3. The employee works in both Vermont and another state during the same pay period.

If an employee works exclusively in Vermont — even as a nonresident — leave this field blank. The blank default taxes their entire pay at Vermont resident rates, which is correct when 100% of their hours were worked in Vermont.

How the Vermont Nonresident Percentage Works

The Nonresident Percentage field tells Patriot what percentage of the employee’s pay was earned in Vermont during that pay period. Patriot uses this percentage to calculate Vermont SIT only on that portion of pay.

Example: An employee works 30 hours in Vermont and 10 hours in New Hampshire during a 40-hour pay period. Vermont hours ÷ total hours = 30 ÷ 40 = 75%. Enter 75 in the Nonresident Percentage field. Patriot will withhold Vermont state income tax on 75% of the employee’s wages for that pay period, and withhold no Vermont tax on the remaining 25%.

Important — Do not enter 0. Entering 0% in the Nonresident Percentage field results in zero Vermont tax being withheld for the pay period — it does not mean “use the default.” Leave the field blank to withhold Vermont tax on the employee’s full pay. Only enter a number if you need to reduce Vermont withholding below 100%.

For more information on Vermont nonresident income tax withholding rules, see the State of Vermont website.

How to Enter or Update the Nonresident Percentage

  1. Go to Payroll > Employees > Employee List
  2. Click the employee name
  3. Click the Taxes tab
  4. Click Edit
  5. Under State Withholding, find the Nonresident Percentage field
  6. Enter the percentage of Vermont hours worked during the pay period (for example, enter 75 for 75%).
  7. Click Save

Limitations and Ongoing Maintenance

  • The percentage may need to change each pay period. If the employee’s Vermont/non-Vermont work split varies from pay period to pay period, you must update this field before each payroll run to reflect the correct ratio for that period.
  • Patriot does not calculate this percentage automatically. You are responsible for tracking Vermont hours vs. total hours and entering the correct percentage. Patriot applies whatever value is in the field at the time payroll is run.

Multi-state withholding for the other state is handled separately. Entering a Vermont nonresident percentage reduces Vermont withholding — it does not automatically add withholding for the employee’s home state or other work state. Set up the employee’s withholding for any other applicable states separately in their tax settings.

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