Should you collect sales tax in Connecticut?
Sales tax is levied on retail selling tangible personal property to your customers, including leasing or renting. However, you will collect the sales tax if you determine the nexus in Connecticut. A nexus is a presence that may come physically or economically.
A physical nexus is typically created when your business has a store, warehouse, or office in Connecticut. An economic nexus is intertwined when you cross paths with threshold limits as already stipulated by the state. These thresholds can be on revenue or some other transactional basis.
Let’s explore if your business has a Physical nexus in Connecticut.
A physical nexus is integrated when your business is engaged in the following in Connecticut:
- Selling tangible personal property in Connecticut.
- Maintaining, occupying, or using a place of business or an office in Connecticut.
- Employing or retaining any contractor, including an agent, representative, or salesman, by whatever name called, engaged in activities relating to selling, delivering, installing, or taking business orders.
- You have a stock of goods in Connecticut.
You may also refer to the Connecticut Revenue Department advisory to know more about business activities that may create a physical nexus within the state.
Constituting an Economic Nexus in Connecticut?
Suppose you are a remote seller (i.e., one who doesn’t have a physical presence in the state), and your business sales in Connecticut exceed $100,000 and made 200 or more transactions during the current or previous calendar year. In that case, you must comply with and register under sales tax rules.
Click here for official guidance.
How can you Register for Sales tax in Connecticut?
To get a sales tax permit in Connecticut, you must apply online at the Connecticut online portal (i.e., myconneCT). A fee of $100 is charged for new registration.
Additionally, before applying for a new tax account number, make sure you have the following information handy:
- FEIN and Social Security numbers of all officers, partners, or owners.
- Address details (physical and mailing).
- Business incorporation dates in Connecticut.
- Contact information.
- Nature of business.
Is your product or services liable to Sales tax in Connecticut?
Tangible Property: Sales tax in Connecticut is imposed primarily on the retail sale of tangible personal property, such as Furniture, giftware, toys, etc.
Services: Connecticut, sales tax is charged on many services, such as fitness center club fees, communication services, and credit card fees. For more information, click here.
Digital Product: Connecticut charge sales tax on digital products. So, if you sell digital products such as software, streaming services, e-books, etc., you need to collect the sales tax. Read here the guidance issued by the state on digital goods.
SAAS: SAAS is software that allows users to connect to the cloud and use it over an internet connection. It is taxable in Connecticut at the rate of 6.35%, however if it is for business use then the reduced rate of 1% will be applied. Click here for the guidance issued by the state on digital goods and software.
The state provides certain exemptions from the sales tax levy, such as food for home consumption, prescription drugs, manufacturing equipment, etc. To see what exemptions are covered, please click here.
How should you collect and calculate state taxes in Connecticut?
Collecting and computing accurate sales tax to be remitted to the state may involve stratospheric efforts, especially when you are not Connecticut-based. The sales tax is destination-based in Connecticut, which means you must collect taxes on tangible property sold to buyers based in Connecticut.
Complexities are involved where you have a business nexus, even if not in the state. Any default may lead to severe concerns, penalties, or fines by the state. That is what TaxDo is here for you! Our specialized sales tax calculator and professional services will simplify your job and lighten your compliance burden.
Connecticut has a base sales tax rate of 6.35% and no local tax rates.
Below is the simple formula you can use to calculate your sales tax collection on each merchandise sold:
Sales Tax collectible = Sale value * (6.35%)
Do you need to collect sales tax on Shipping Charges?
If non-taxable items are sold, shipping charges associated with such a sale are not subject to sales tax. However, when the sale includes taxable and non-taxable items, shipping charges need to be apportioned relatively between the taxable and non-taxable parts of the sale. Accordingly, sales tax applies to the taxable portion of the sale. Click here for the guidance issued by the state on shipping charges.
How should you file sales tax in Connecticut?
E-file: You can e-file your return using myconneCT. Businesses must complete and file Form OS‑114 to report all sales activity in Connecticut, even if no sales were made or no tax is due.
Payments and returns are also to be remitted. myconneCT is used to make online payments. The state accepts payments through checks, EFT, credit cards, etc. Visit the Connecticut Revenue Department website for more information, or contact us with any doubts.
Even if your sales tax liability is zero, you must file the return to avoid penalty or interest.
Filing frequencies and due dates
Based on your reported sales tax or estimated taxable sales, the Connecticut Department of Revenue assigns you a filing frequency, which can be Monthly, Quarterly or Yearly. Quarterly frequency is assigned when your annual sales tax collections are $1,001 to $4,000. You can file annually when your sales tax collections are below $1,000. In all other cases, you must file monthly.
According to your filing frequency, the due date for filing sales tax would be the last Day of the month following the relevant reporting period.
Note: If the due date is a holiday or weekend, the next business day will be considered the final due date. Use the Connecticut official website link to learn more about due dates and filing frequencies.
Are there any fines or penalties for default when filing or paying sales tax?
The state levies a penalty of 15% of sales tax due or $50, whichever is greater. You will also be charged interest on unpaid tax at the rate of 1% p.m. Go through the comprehensive guide of penalties and interest issues by the Connecticut Department of Revenue.
However, assigning your tax burden to TaxDo would not result in you paying any penalty or interest. We will adhere to the due dates.
Sales tax holiday in Connecticut
The Connecticut sales tax holiday applies to clothing and footwear items. It commences on 3rd Sunday of August and runs until following Saturday. For 2024, it will start on 18 August (12:01 a.m.) and end on 24 August (11:59 p.m.). For detailed information on the sales tax holiday, refer to the Connecticut Revenue Department advisory here.