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The Ultimate Guide To Connecticut Sales Tax

Welcome to our handy guide on Connecticut sales tax. We'll walk you through everything you need to know, from the specific sales tax rates in different counties and cities across Connecticut to answering some of the most common questions. Plus, we'll guide you on how to efficiently collect and file your sales tax in Connecticut.

Sales Tax Rate

6.35%

Local Rate?

No

Website

Connecticut Department of Revenue Services

Sales Threshold

$100,000

Tax Line

(860) 297-5962

Transactions Threshold

200

What is Nexus?

You'll need to collect sales tax in Connecticut if you have nexus there. There are two main ways that sellers can be tied to a state when it comes to nexus: physical, or economic.

Physical nexus means having enough tangible presence, or activity in a state to merit paying sales tax in that state.

Economic nexus means passing a states' economic threshold, for total revenue, or the number of transactions in that state.

Calculating Nexus in Connecticut

What Sparks Sales Tax Nexus in Connecticut?

Picture sales tax nexus like a handshake between your business and Connecticut. It’s all about your presence and connections in the state.

Physical Nexus

This one's straightforward. If your business has a physical presence in Connecticut – like a store, office, or warehouse, or even an employee – you've got physical nexus. It's like leaving your mark in Connecticut, saying "I'm here and selling!"

Economic Nexus

Here's where things get a bit more modern. If your online sales in Connecticut hit a certain level, even if you're miles away, you're in the economic nexus zone. This came into play after a big Supreme Court case in 2018. In Connecticut, you've got economic nexus if:
  • You have gross receipts of over $100,000 from sales in Connecticut in a 12-month period.
  • Your business has 200 or moreseparate transactions in the state in the last calendar year.

Affiliate Nexus

If you have an affiliate, like a subsidiary or parent company, rocking it in Connecticut, you might have affiliate nexus. It's like having a family member in the state, creating a connection for you. Affiliate nexus in Connecticut includes shared ownership, common branding, shared employees, or inventory.

Click-Through Nexus

This is all about online connections. If you have agreements with Connecticut residents (like affiliate marketing) that bring in more than $250,000 in sales from referrals over four quarters, you've got click-through nexus. Think of it as having a digital promoter in the state.

Marketplace Nexus

Running a marketplace like Amazon or Etsy? If you’re making big sales in Connecticut – over $250,000 and more than 200 transactions – you’re in the marketplace nexus realm. This means you’ve got to collect sales tax on behalf of sellers, even if they’re not based in Connecticut.
Did you know logo

This is one of my favorite fun facts: Diaper cakes in Connecticut are considered clothing and are tax-free. It’s the only state where diapers can be both practical and fashionable.

Sales Tax Registration in Connecticut

How to Register for Sales Tax in Connecticut

There are two paths you can take to set up your Connecticut sales tax account:

Online: The digital highway! Registering online through the Connecticut Department of Revenue Services (DRS) website is quick and easy. You'll just need to create an account and provide some key details about your business, like your name, address, and tax identification number.

Mail: Prefer the scenic route? You can also register by mail. Just fill out the Sales and Use Tax Registration Application (Form REG-1), available for download on the DRS website, and pop it in the mail.

Once registered, you'll receive a special sales tax registration number. This number is like your backstage pass – you'll use it for all your sales tax filings and you'll need to display it proudly at your place of business.

Cost of Registering for a Connecticut Sales Tax License

To get your Connecticut sales tax license, there's a $100 fee, which is non-refundable. But don't worry, some are exempt from this fee, like governments, religious organizations, nonprofits, and educational institutions. If you're not sure if you're exempt, just give the DRS a shout.

Do You Need an EIN for a Connecticut Sales Tax License?

Absolutely! To register for your Connecticut sales tax license, you'll need a Federal Tax ID number, also known as an Employer Identification Number (EIN). Think of it as your business's unique ID in the vast world of federal taxation. The IRS uses this EIN to keep an eye on your tax dealings. It's pretty much the social security number for your business! So make sure you've got this number ready as you start your sales tax registration adventure.

Additional Connecticut Agencies You Might Need to Register With

Stepping into the Connecticut business landscape? You might need to make stops at a few other agencies:Connecticut Secretary of the State: If you're setting up as an LLC, corporation, partnership, or non-profit, this is your first stop. It's like getting your passport ready for your business journey!

Connecticut Department of Labor: Hiring employees? You'll need to chat with these folks about unemployment insurance tax.

Connecticut Department of Revenue Services: You might have already crossed paths with them for sales tax, but they're also your go-to for business income tax.

Connecticut State Insurance Department: Offering insurance to your employees? This department will help you navigate the requirements.

Guide to collecting sales tax in Connecticut

How to Collect Sales Tax in Connecticut

Collecting sales tax in Connecticut is a crucial step in your business journey. Here's how you can set up your Connecticut sales tax account:

Online Registration: Head to the Connecticut Department of Revenue Services (DRS) website. Click on "Businesses," then "Sales and Use Tax," and "Register for a Sales Tax Account." Follow the on-screen instructions to complete your registration.

Mail Registration: Prefer the traditional way? Download the Sales and Use Tax Registration Application (Form REG-1) from the DRS website, fill it out, and send it over to the Connecticut Department of Revenue Services Sales and Use Tax Division, P.O. Box 2960, Hartford, CT 06102-2960.

Once registered, you'll receive a sales tax registration number. Make sure to use this number on all your sales tax filings and display it in your business location.

What Sales are Subject to Sales Tax in Connecticut?

In Connecticut, you'll need to collect sales tax on various items and services. Here's a quick rundown:
  • Tangible Personal Property: Items like electronics, books, and jewelry fall under this category.
  • Certain Services: Not all services are taxed, but many, including repair services and business consulting, are.
  • Food and Beverage Sales: Groceries are usually tax-free, but prepared meals and restaurant sales are taxable.
  • Digital Goods: This includes items like e-books and online films.
Remember, while this guide covers the basics, there are exceptions and nuances. For specific questions, the Connecticut Department of Revenue Services is your go-to resource.

Is Software as a Service (SaaS) Taxed in Connecticut?

Yes, SaaS is considered taxable in Connecticut, falling under the category of computer and data processing services, which are taxed at a reduced rate of 1%. This includes various types of SaaS such as CRM software, project management tools, and more.

What's Exempt from Connecticut Sales Tax?

In the world of Connecticut sales tax, not everything is taxable. Some of the exemptions include:
  • Certain Food Products: Groceries generally get a tax pass.
  • Prescription Medication: These are typically tax-exempt.
  • Clothing and Footwear: Items under $50 often enjoy a tax break.
  • Newspapers and Magazines: Stay informed without the tax.
  • Textbooks: Usually tax-free when sold by educational institutions.

Who's Eligible for Connecticut Sales Tax Exemptions?

In Connecticut, certain groups like charitable organizations and government agencies enjoy sales tax exemptions.

Handling Exempt Sales in Connecticut

If a customer is exempt from sales tax in Connecticut:
  • Verify their Exemption: Ask for a valid exemption certificate.
  • Keep Records: Maintain copies of the exemption certificates for at least three years.
  • Report Properly: Continue to report these sales on your tax return as exempt sales.

Lost a Connecticut Sales Tax Exemption Certificate?

If you lose a sales tax exemption certificate, don't panic! You can request a replacement from the Connecticut DRS. File Form CT-183 or call 860-297-2200. You can also visit a DRS office. Remember to keep a copy of any related purchase orders or invoices. If you’re a business, you might be eligible to claim a credit for exempt sales tax paid by filing Form CT-30.
Did you know logo

Connecticut taxes yoga instruction. It’s a little less zen when the tax bill comes.

Steps for Filing a Connecticut Sales Tax Return


Understanding when to file and pay sales tax in Connecticut is like knowing the rhythm of the tides. Here’s how it works:
  • Monthly Filers: If your business’s sales tax liability was $4,000 or more in the 12-month period ending June 30th, you're in the monthly filing club. Your returns are due on the last day of the month following your reporting period. For instance, your January sales tax return sails in by February 28th (or 29th in leap years).
  • Quarterly Filers: If your sales tax waves were a bit calmer, with less than $4,000 liability, you'll file quarterly. These returns are due on the last day of the month following the end of the quarter.
  • Annual Filers: For those with very light sales tax winds, if your liability was less than $1,000, you can file annually. Your annual return docks by January 31st of the following year.
Remember, being timely with your filings is the secret to smooth sailing in the world of sales tax!

What if a Connecticut Sales Tax Filing Date Falls on a Weekend or Holiday?

If your filing date lands on a weekend or holiday, don't worry! The State of Connecticut graciously extends your deadline to the next business day. It’s like getting a little extra wind in your sails!

Filing a Connecticut Sales Tax Return

Filing your sales tax return in Connecticut can be a breeze. You can either file online or send a paper return through the post.

Online: Visit the Connecticut Department of Revenue Services (DRS) website, log in, and select "File a Sales Tax Return."

By Mail:Prefer the traditional route? Download Form OS-114 from the DRS website, fill it out, and mail it to the Connecticut Department of Revenue Services, Sales Tax Unit, P.O. Box 2969, Hartford, CT 06104-2969.

Your return is due by the last day of the month following your reporting period.

Navigating the Penalties

In the world of sales tax, avoiding penalties is key to keeping your voyage smooth:
  • Failure to File Penalty: A $50 penalty applies for each month (or part of a month) your return is late, up to $500.
  • Underpayment Penalty: If you underpay your sales tax, there's a 1% monthly penalty on the underpaid amount.
  • Failure to Pay Electronically Penalty: If required to pay electronically and you don’t, you could face a 10% penalty, up to $2,500.

Connecticut Sales Tax Holidays

Connecticut offers two sales tax holidays each year, a bit like finding treasure islands:

Sales Tax Free Week in August: No sales tax on most clothing and footwear items under $100. In 2023, it's August 19-26.

Back-to-School Sales Tax Holiday in July: A break on sales tax for most school supplies under $50. In 2023, it's July 29-August 4.

During these holidays, you can enjoy a break from collecting sales tax on qualifying items, giving your customers more reasons to shop and celebrate.

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Top 5 Tips for Filing Sales Tax in Connecticut

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