If your small business is in Connecticut, or if you’re ready to begin making sales into the state, you need to learn about the state tax regulations and whether you must collect tax from your Connecticut customers to meet business tax compliance guidelines. The laws concerning these issues in Connecticut are like those in other states, but some specifics vary from one place to another, so you need to make sure you’re up to date on all Connecticut sales tax laws before you start making sales.
There are no local taxes in Connecticut, so the only rate you’ll have to worry about for most sales of taxable goods and services is the state tax of 6.35%. A special rate of 7.75% applies to sales of motor vehicles valued at over $50,000, and a 1% tax is assessed on sales of computer and data processing services. Some meals and drinks are also subject to a special rate of 7.35%.
If you’re selling any other type of tangible personal property, you’ll have to collect at the uniform state tax rate no matter what part of Connecticut your customers are in. Connecticut is also a destination-based state, so that tax rate applies to purchases made in person at a brick-and-mortar store located in Connecticut or on goods shipped to an address in the state, whether the seller is based in Connecticut or simply has a nexus there.
Only small businesses with a physical or economic nexus, or significant presence, in Connecticut are responsible for collecting and remitting sales tax on purchases made by Connecticut customers. However, the definition of “doing business” in the state is presented by Connecticut statute as applying broadly, with specific stipulations including:
If you meet any of these requirements, you’ll have to register with the state to collect sales tax for full tax compliance. There is also a provision for online sellers, commonly referred to as an Amazon Law, that requires an out-of-state company that makes sales through affiliates located in Connecticut, and that has over $2,000 in gross receipts from those sales to register to collect sales tax as well.
Connecticut established economic nexus rules following the Wayfair Supreme Court decision as well, requiring businesses that reach a certain threshold in the 12 months preceding September 30th to collect and remit sales tax. These thresholds are 200 or more retail sales in the state and having at least $100,000 in gross sales in the state. Connecticut economic nexus rules also have marketplace facilitator requirements of $250,000 or more in gross sales through a marketplace in a calendar year.
Most sales of tangible personal property and many services provided in Connecticut are subject to sales taxes. Groceries are exempt, as they are in most places, along with medical equipment and prescription drugs. Other exemptions include:
View a full list of exemptions on the Department of Revenue Services website. Non-prescription drugs were previously exempt, but that statute was repealed in 2011. Shipping and handling charges are taxable if the item being shipped is also taxable, and this is true regardless of how the charges are listed on the receipt or invoice.
Most services are also taxable in Connecticut, but certain organizations and individuals may obtain exemption certificates based on their specific circumstances. Nonprofits are eligible to receive a waiver at this point, although removing that provision has recently been proposed in the state legislature.
You can register for a Connecticut sales tax permit online, or you may do so in person at one of the Department of Finance’s local field offices. Upon submitting your application, you will receive a temporary permit to use until you receive your permanent one. There is a $100 application fee, and permits must be renewed every five years. There is no renewal fee if your account is active and in good standing at the time of the renewal.
Filing must be done online using the Taxpayer Service Center (TSC) on the Connecticut Department of Revenue’s website or over the phone through the Business TeleFile System. If you are late filing your return, you’ll need to use the online service, as the TeleFile system won’t work.
Sales tax returns and payments are due on the last day of the month following the close of the period in question. If this date falls on a weekend or holiday, filing and payment by the following business day are acceptable. Most new sellers will be assigned a quarterly filing frequency, although this can be adjusted up or down based on the volume of the sales you make over the course of the year.
For instance, if your total sales tax liability for the previous 12-month period is less than $1,000, you will be notified in writing that you may file annually instead of quarterly. On the other hand, if your total business tax liability for the previous 12-month period is more than $4,000, you will receive a notification that you must file monthly instead.
|January – March (Q1)||April 30|
|April – June (Q2)||July 31|
|July – September (Q3)||October 31|
|October – December (Q4)||January 31|
If you file annually, your returns and payments are due by January 31 of the following year. Zero returns are required in Connecticut, so even if you made no taxable sales in each period, you must still file a return as long as you hold a valid Connecticut sales tax permit.
Late filing and payment will incur penalties, with a fee of 2% of the total tax due assessed to payments made less than five days late. A fee of 5% of the tax due is added when returns or payments are between five and 15 days late, and 10% is charged for returns or payments more than 15 days late. In addition, interest on tax due accrues at a rate of 1% per month for as long as it’s delinquent. There is also a failure to comply penalty added to your tax bill if you pay by check rather than through EFT as instructed.
Complying with Connecticut sales and use tax regulations is somewhat easier than it is in other states thanks to the fact that there’s only one applicable tax rate. However, it can still be a lot to keep track of, particularly if Connecticut isn’t the only state you make sales in. Tracking your taxable sales, filing returns on time, and making sure all payments are collected at the proper rates based on location is essential, but it also vastly complicates your small business operations.
Fortunately, you can take advantage of TaxTools, tax calculator software specifically designed to help you manage your collection and remittance of sales tax in multiple states and through various eCommerce platforms. TaxTools tax calculator keeps track of any applicable changes to state sales tax laws, provides up-to-date reports on your taxable sales, makes sure your returns are filed on time, and quickly calculates the proper sales tax rate for every sale you make.
This software is compatible with many ecommerce platforms, so the only change you’ll notice will be how much more streamlined your business processes are. If you’d like to learn more about how TaxTools can benefit you, click here to sign up for a free trial today.
Last updated June 2022