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Connecticut Sales Tax Guide

By Cristina Garza

Connecticut is a teeny state that packs a big punch🥊! While it’s the third smallest state by area, it has the fourth highest population density. In addition to being home to many insurance companies, it is the invention place of the all-time classic American sandwich, the hamburger🍔! Connecticut is truly a beautiful and thriving state to reside and do business in.

If you are growing a small business in Connecticut, you’ll need to ensure your business complies with myriad sales tax laws and policies. No worry! We have put together this handy-dandy guide so that you can be better prepared to meet all tax requirements for a business in Connecticut.

After reading this guide, you will know the answers to some of the most common questions:

  • How to contact the Connecticut Department of Revenue Services.
  • How to be prepared for your call with the Connecticut Department of Revenue Services.
  • When to charge sales tax in Connecticut.
  • What goods, products, and services are taxable in Connecticut.
  • When you establish a sales tax nexus with the state of Connecticut, and the nuances of various thresholds.
  • How to register for a sales tax license in Connecticut.
  • How to collect sales tax in Connecticut.
  • How to file and pay sales tax in Connecticut.

If, after reading, you still have any questions to help you determine your tax sales obligations in Connecticut and how to fulfill them, we are here for your small business bookkeeping needs!

 

 

Connecticut Sales Tax Contacts

 

Connecticut Sales Tax Contacts

✅ Do you need to contact the Connecticut Department of Revenue Services?

✅ Are you unsure if you should visit, call them, or contact them through their website?

✅ Do you wonder what information you should have ready before you contact them?

 

If you answered “Yes” to these questions, we have just the information you need! :)

You can reach the Connecticut Department of Revenue Services by phone at 860-297-5962.

Alternatively, you may also send a message through the Secure Mailbox on the Connecticut TSC Website or visit one of their field offices. If you are looking for help quickly, we highly suggest you call rather than send a message or wait in line.

When you call the Connecticut Department of Revenue Services, you want to have some information on hand. It will save time to have the following information easily accessible before you call:

  • Taxpayer Name
  • EIN
  • Sales & Use Tax ID Number

If you are calling on behalf of an individual or a business, or having a third party you must have a Connecticut Power of Attorney signed before you call or else you risk wasting your time. And before you fill out the form, you actually need to contact the Department of Revenue Services to get a specific person to send it to.

If you have any more questions, please feel free to contact us so we can assist you with your sales tax needs.

 

 

Connecticut  Sales Tax Registration

 

Connecticut Sales Tax Registration

 

Are you a new business selling tangible items in the state of Connecticut? If yes, you are going to need to register your business so that you can pay your sales (aka sales tax) on time.

Luckily, there is no reason to worry as you only need to do this once and we’re about to fully prepare you. As long as there are no major changes (such as a change in ownership or structure) to your business, you will not be required to renew or make changes to your sales tax permit.

We are going to detail the steps below so you are ready to register for your sales license.

Here we go! Don’t forget...

Preparation is key.

Let’s get started!

 

How do I register to collect sales tax in Connecticut?

You can apply or register for a Connecticut sales and use tax permit by visiting the Connecticut Department of Revenue Services and following the instructions provided.

You have two options when signing a new business up for a Connecticut sales tax permit:

  1. Complete the REG-1 Application (PDF) and return it to any local tax office.
  2. Complete the form online here.

We highly recommend that you use the online form as it will allow your business to get up and running as quickly as possible and with less potential for errors in the form.

 

 

What information do I need to register for a Connecticut sales tax permit?

Great question!

Before you sign up for Connecticut Connecticut sales tax permit you want to have the following information easily accessible:

  • Business name
  • Business entity type
  • Description of business activities
  • Date business activities began or will begin
  • Business address and mailing address
  • Business contact information
  • NAICS code that best matches the business
  • Federal Employer Identification Number (FEIN)
  • List of business officers, partners, managing members, and/or trustees

Don’t forget! Preparation is key. When you have all this information ready, you can go online and register for your permit at the Connecticut Department of Revenue Services Taxpayer Service Center website.

 

How much does it cost to register for a Connecticut Connecticut sales tax permit?

The cost to register a new business entity in Connecticut is a one-time $100 fee. Barring any outstanding penalties or issues, it will automatically renew every two years in perpetuity.

 

Do I need a Federal Tax ID Number or EIN to register for A Connecticut Connecticut sales tax permit?

This is required only if the business type requires it, Connecticut makes no special requirement. In most cases, you will need one, and you can easily register for a Federal EIN here.

If you don’t already have one and need to get an EIN, it’s a painless and quick process :).

 

Which agencies in Connecticut do I need to additionally register with?

You may need to apply to some of the following agencies:

This can require a bit of thinking and some investigation on your end; since every business is unique, there are different rules, regulations, and laws that may apply.

We suggest contacting to the Connecticut Department of Revenue Services to verify which government agencies you will be required to register with.

 

*****

 

You’re set!

You are now prepared to register for your Connecticut sales tax permit in Connecticut.

Let’s summarize where we reviewed:

  • Register online at the Connecticut Department of Revenue Services website.
  • Have all the required information easily accessible before registering online.
  • Acquire a tax ID or EIN before registering for a Connecticut sales tax permit.
  • Look into what other agencies you may have to additionally register with.

Registering for your Connecticut sales tax permit will be stress free as long as you are prepared. We recommend organizing all the essential information in a folder, preferably using a system like Box.com (we give it to you for free when you work with us!) or Dropbox.

 

  

Connecticut  Sales Tax FAQ

 

 

Connecticut Sales Tax FAQ

By now, you may have already contacted the Connecticut Department of Revenue Services and applied for a Connecticut sales tax permit.

Once you have a license to collect and remit sales taxes in Connecticut, you will probably be asking yourself two questions:

  • When do I charge a sales tax in Connecticut?
  • What goods and services are subject to sales taxes in Connecticut?

We are going to go over some common questions that our clients have asked. We believe these questions will help you appreciate the nuances of taxable goods so you can be confident in fulfilling your tax obligations.

Let’s start with the first question…

 

What goods and services are considered taxable in Connecticut?

As a new business, you want to keep in mind that both products and services can be subject to sales tax. In Connecticut, all tangible property changing hands is taxable, except for exempt items.

Luckily Connecticut has a single state-wide tax rate (6.35% as of 6/6/2019) and no separate rates for various municipalities, which dramatically simplifies things. There are, however, a few special rates for various types of goods or services, for instance:

  • Computer and Data processing services are taxed at 1%
  • Luxury goods have a special 7.75% tax rate
  • Car rentals are taxed at 9.35%

 

The bottom line is …

Your business is liable for taxes on any non-exempt transactions.

*****

 

Let’s now review some of our clients’ frequently asked questions:

  • Is Connecticut an Origin or Destination sales tax State?
  • What creates a sales tax nexus in Connecticut?
  • What is the economic threshold in Connecticut?
  • Does Amazon have fulfillment centers in Connecticut?
  • Does Connecticut have a Click-Thru Nexus?

To better understand your tax obligations, new businesses need to consider how they are doing business and the type of relationships they have with buyers and any third parties to their transactions.

Let’s discuss some questions that will help you understand the nature of your own business and the subsequent tax implications.

 

Is Connecticut an origin or destination sales tax state?

Connecticut is a Destination-Based sales tax state, but with no specific variance at the city or county level. As such, sellers need to charge a single sales tax rate when selling goods to someone located in Connecticut.

 

Protip: Charge Connecticut Sales Tax based on the location of the buyer.

 

What creates a tax nexus with the state of Connecticut?

Having nexus, also known as "sufficient business presence,” with Connecticut means your business has established a taxing connection with a state. When this happens, you are required to collect and remit sales tax in Connecticut because you created a sales tax Nexus.

Even if your business maintains its main headquarters in another state, you may still have to charge and pay sales tax to the Connecticut Department of Revenue Services even if you never step foot in Connecticut.

So, how do you create a sales tax Nexus in Connecticut?

 

 A business establishes a nexus in Connecticut by:

  • having a business location in Connecticut;
  • having property stored in Connecticut;
  • employing any person in Connecticut;
  • contracting with a salesperson or other agent in Connecticut;
  • leasing equipment used in Connecticut;
  • performing services in Connecticut;
  • licensing the use of intangible property in Connecticut, or transporting property in Connecticut using the taxpayer’s vehicles.

Let’s talk a bit more specifically about where your goods are stored such as in the instance of an Amazon warehouse.

 

Does Amazon have fulfillment centers in Connecticut?

 

Yes, there are two Amazon fulfillment centers in Connecticut:

  • 801 Day Hill Rd, Windsor CT 06095
  • 409 Washington Ave, North Haven CT 06473

 

You want to know this if you sell your products on Amazon or are recognized as an Amazon FBA (Fulfillment by Amazon). When Amazon stores your products in one of its fulfillment centers in any state including Connecticut, it triggers a sales tax requirement.

 

Does Connecticut have economic nexus?

Yes, Connecticut is one of thirty states that have an economic nexus threshold at which point out of state businesses must register and pay taxes. The thresholds for Connecticut are either 200 transactions or sales totaling over $250,000.

 

Does Connecticut have click-through nexus?

Yes, Connecticut does have Click-Through Nexus.

This impacts affiliate marketers, let’s look at how:

 

Click Through Nexus

 

A business hires an affiliate marketer in the state of Connecticut, who may hire sales representatives in Connecticut to help promote your products. The marketer and the sales representatives do not directly sell the products. They only advertise them. Your products never actually pass through their hands. Even though they do not directly sell your products, your business creates a sales tax Nexus that is specifically known as Click-Through Nexus.

How?

 

A Click-Through Nexus is established in Connecticut if:

  • Your business used any in-state entity (individual or business) to refer your products or services to customers. An example would be an affiliate marketer.
  • Your business compensated this entity (located/based in Connecticut) either directly or indirectly for their service, which was referring customers to your company by website link or other methods of advertising or referral. An example would be a commission paid to the marketer and/or sales representatives.
  • The cumulative sales from all the affiliate referrals combined (that are based in Connecticut) exceeded the state threshold. Once you hit the predetermined amount, you have created a nexus relationship moving forward.

PROTIP: It is not the location of the affiliate marketer that necessary matters, but rather the location of the sales representatives the marketer employs and the overall combined sales exceeding the predetermined threshold from their referrals. As the retailer, your business is ultimately responsible for collecting and remitting Connecticut Sales Taxes, a requirement triggered by establishing a Click-Through Nexus with the state of Connecticut.

*****

Collecting sales taxes in the state of Connecticut needn’t be painful. Just remember to get your license set up and make sure that you pay your taxes on time to avoid penalties and interest.

Before we conclude this topic, there’s a related question our clients regularly ask…

 

Is Connecticut a streamlined sales tax state?

Nope! Not yet, anyhow. Connecticut does not participate in the Streamlined sales tax (STT) program, which makes collecting and remitting sales taxes even easier for businesses.

Fingers crossed that they join forces with this organization in the future.

 

*****

It’s time to wrap it up.

  1. Know when to charge sales tax in Connecticut.
  2. Know if your business creates a sales tax Nexus.

 

Manage your tax needs more effectively by keeping this guide handy.

You and your business can be better-equipped to avoid situations like paying fines, paying back taxes that you did know you had to pay in the first place, or facing an audit by the tax authorities in Connecticut.

 

  

Collecting Sales Tax in Connecticut

If you are a business that has established a nexus with Connecticut, you are required to collect sales tax in Connecticut. Knowing this is just half the battle. Now, we are going to help you with the next half of the battle: how to navigate the process of collecting taxes.

Next we are going to review some common questions our clients have asked regarding their Connecticut Sales Tax obligations.

  • How do I collect Connecticut Sales Tax?
  • Who is eligible for Connecticut Sales Tax exemptions?
  • What should I do if my customer is exempt from sales tax in Connecticut?
  • What happens if I lose a Connecticut nontaxable transaction certificate?

After reading this, you will be better equipped to determine when --and when not-- to collect sales tax in Connecticut.

 

How do I collect Connecticut sales tax?

Remember when we noted that Connecticut is a destination-based sales tax state? Further, we noted it’s a state where you don’t have to pay different rates for each city; a single rate applies state-wide. So unless a transaction or purchaser is exempt, you simply collect that rate (6.35% as of the time of this article’s writing) at the time of purchase.

 

What are the current Connecticut sales tax rates?

Since sales tax rates change frequently- and vary by what is being sold, We are going to refer you to check out the Connecticut Department of Revenue Services site here.

You always want to double check the sales tax rates.

 

What is exempt from Connecticut sales tax?

 

Copy of Georgia Tax Rates (3)-388459-edited

 

Here is a list of exemptions:

  • purchases for resale
  • most sales to or by the federal and Connecticut State governments, charitable organizations, tribal organization and certain other exempt organizations
  • sales of most food for home consumption
  • sales of prescription and nonprescription medicines.

 

For more information, see Transactions that are not subject to sales tax for more details.

 

Who are eligible for Connecticut sales tax exemptions?

At this point, you should know what products are exempt from sales tax in Connecticut. You also want to know who may be exempt.

Under Connecticut law, the type of buyer or the way the goods will be used can qualify can buyer for a sales tax exemption. A good example of this is a merchant purchasing goods for resale, aka a wholesaler.

Other common examples of an exempt buyer may include:

  • Government agencies
  • Non-profit organizations
  • Religious groups
  • Out-of-state buyers (should their business not have nexus in their home state).

Altogether, sales tax exemptions apply if the buyer falls under one of these categories.

See Exemption Certificates for sales tax for more in-depth information regarding who qualifies for an exemption.

 

What should I do if my customer is exempt from Sales Tax in Connecticut?

As a business owner, you will most likely have a buyer who qualifies for a sales tax exemption.

It is up to you to collect a Connecticut sales tax exemption certificate at the point of sale and to keep it on file.

Failure to produce the tax exemption certificate may result in the outstanding tax being passed on to the seller, based on the ordinary care standard which will hold the seller responsible if they failed to collect sales taxes when they knew they should have or if they knew the buyer’s exemption certificate was a fake.

Remember, you want to collect and file a copy of the certificate. Such certificates must be produced upon request in the event of an audit to justify tax-exempt sales.

 

What happens if I lose a Connecticut sales tax exemption certificate?

Oofta! This is a situation best to be avoided. If you are audited and cannot produce an exemption certificate for a buyer, you may be held responsible to pay all taxes on behalf of the buyer. This is a bad scene and can be avoided by taking care with your paperwork.

 

Does Connecticut have a sales tax holiday?

Yes! 🎉🎉🎉 There is a Back to School sales tax holiday where select items are exempt from sales tax in the third week of August.

 

*****

 

So, we have talked about who you need to collect sales taxes from, whether the goods you are selling are deemed taxable, what goods and services fall under tax exemptions, who is eligible for tax exemption certificates, and the process of collecting sales tax in Connecticut state.

Now that we’re this far into learning what goes into this process, it’s time to bring it on home!

   

 

Filing and Paying Sales Tax in Connecticut

 

Filing and Paying Sales Tax in Connecticut

It is time to talk about filing and paying your sales taxes in Connecticut. In this section, We are going to cover the following frequently asked questions from our clients:

  • When is Connecticut Sales Tax due?
  • What are the Connecticut Sales Tax thresholds?
  • What if a Connecticut Sales Tax filing date falls on a weekend or holiday?
  • How do I file a Connecticut Sales Tax Return?
  • How do I correct a Connecticut Sales Tax return?
  • What happens if I don’t collect sales tax?
  • What happens if I file or pay my sales tax return late?
  • Do I need to file a return if I don’t collect any sales tax in Connecticut?
  • If I close my business, do I need to file a final sales tax return?
  • Does the Connecticut Department of Revenue Services offer a discount for filing on time?

By the time you finish reading this, you will feel confident enough to file and pay your Connecticut Sales Tax.

 

When is Connecticut sales tax due?

Connecticut sales tax payments are due on the last day of the month following the reporting period.

 

What are the Connecticut sales tax thresholds?

There are three thresholds you need to know.

 

Monthly Liability Threshold: $333.34 or higher average monthly tax liability

Quarterly Liability Threshold: $83.34 - $333.33 average monthly tax liability

Semi-annual Liability Threshold: $0 - $83.33 average monthly tax liability

 

Not sure how to determine your tax filing frequency?

You can review your eCommerce or Point of Sale Software to see the volume of sales you have generated.

Don't worry though! The state will let you know when your due dates change. :)

Watch your mail for a letter from the State of Connecticut so that you don't miss any deadlines.

 

What if a Connecticut sales tax filing date falls on a weekend or holiday?

The deadline is moved to the next business day, typically the Monday following the weekend or the day after the holiday. However, we always suggest filing before the holiday.

 

How do I file a Connecticut sales tax return?

Paper: Connecticut doesn’t offer a paper filing system for sales tax [huzzah!]

Electronic: File online at the DRS Taxpayer Service Center (TSC) and submit payment via EFT.

 

How do I correct a Connecticut sales tax return?

File an amended OS-114 on the TSC website as though you hadn’t already. The site is actually programmed to recognize a completed filing exists and asks to amend once you begin. Definitely you will want to verify that the correct amount paid with the original return is credited on line 11.

 

What happens if I don’t collect sales tax?

If you were required to collect sales taxes (nexus in Connecticut and selling taxable goods or services to taxable residents) and failed to do so for whatever reason, you will be held responsible for the tax due. Always collect sales tax at the point of sale. Attempting to collect after the fact will be time consuming and most likely unsuccessful.

 

Protip: You are still responsible for remitting sales taxes even if you failed to collect them.

 

What happens if I file or pay my sales tax return late?

The penalty for an electronically late filed and paid return is:

  • 2% of an EFT payment not more than 5 days late;
  • 5% of an EFT payment more than 5 days but not more than 15 days late; and
  • 10% of an EFT payment more than 15 days late.

 

Interest is charged at 1% per month or portion of a month from the due date. If you do not include the penalty and interest with your payment of tax, you will be billed. Paying by check will result in a failure to comply penalty for not paying electronically.

 

Do I need to file a return if I don’t collect any sales tax in Connecticut?

Yes, Connecticut requires businesses to file a “Zero-Tax” return if they don't have any sales during a taxing period.

 

If I close my business, do I need to file a final sales tax return?

Yes, Connecticut requires businesses to file a “Final sales tax” return when closing a business.

 

Does the Connecticut Department Of Revenue Services offer a discount for filing on time?

Sadly, there is no discount for filing and paying your taxes on time. Bummer.

 

*****

 

Now that we covered all our bases for filing and paying sales taxes in the state of Connecticut, you should feel more at ease about the process.

 

Some things to remember:

  • Due dates are important. If anything, file and pay your taxes early.
  • There are three payment plans for filing and paying your sales taxes depending on how much you collect in sales tax on average in a month.
  • You can file and pay your taxes electronically or by mail
  • If you need to amend a return, you must do so electronically.
  • If you don’t collect sales tax and you were supposed to, you (not the buyer) is liable to pay the sales tax to the state of Connecticut.
  • You will have to pay late fees if you fail to file your tax return on time and/or if you fail to make your tax payment on time.
  • Even if you collect no sales tax, you still need to file a return.
  • You need to file a “Final sales tax” when you close your business.

 

Now, you are ready to file and pay your sales tax in Connecticut. If you have any more questions, feel free to contact us.

 

📞 Book a Free Consultation Here

 


  


Please note: This blog is for informational purposes only and the information is accurate as of 6/6/2019. If you want legal advice on sales tax law for your business, please contact a Sales and Use Tax professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog possibly may be out of date by the time you review it.