Reserving vanilla for later, combine all ingredients in a heavy 3-quart saucepan over medium heat. Stir until sugar is dissolved and butter is melted.
Reduce heat and cook, stirring occasionally, until candy reaches 240 degrees. Then begin to stir constantly until it reaches the firm ball stage (246-248).
Remove from heat immediately and let stand 2 minutes.
Stir in vanilla.
Pour into a lightly greased 9" square pan (Pam not recommended). Let cool and firm in room temperature air until set, about 3 hours. Cut into 3/4" strips and then cut each strip into about 10 pieces.
Wrap caramels in waxed paper and store in refrigerator for longer shelf life.