Who must collect Connecticut sales tax?

Businesses with nexus in Connecticut—established by physical presence or sufficient economic activity—must register, collect, and remit sales tax on taxable sales to customers in the state.

What documentation do I need for exempt sales?

Obtain and retain properly completed exemption or resale certificates for exempt transactions, along with invoices and records supporting the tax treatment to substantiate exemptions during audits.

Connecticut Sales Tax: Rates, Rules & Guidelines for Collecting It

A how-to for businesses on rate information, taxable status of goods and services, registration, filing returns and remote seller programs.

Personal knowledge of how sales tax is computed and collected by the Department is germane to any business which sells goods or taxable services in Connecticut. In this guideline, we guide you step by step on the basics: what the rates are now and their subparts, how taxable or exempt status works normally, your process to register and collect while keeping records to file and remit essentials; plus everything so you can fulfill your responsibilities while following best practices.

Connecticut sales tax details

The Connecticut (CT) state sales tax rate is 6.35%.

Connecticut Sales Tax Across the State

In Connecticut, certain items may be exempt from the sales tax to all consumers, not just tax-exempt purchasers. The state rate is applied universally across the state, but there are also excise taxes and special local levies on specific categories such as lodging or rental cars. Utilize the correct Connecticut sales tax calculation in an instant, respecting current municipal rules and category exemptions.

What is taxable in Connecticut

Most sales of tangible personal property are taxable unless a specific exemption applies. Most electronics, furniture and prepared food are taxable. Many services - such as those to become a real estate salesperson, musician for hire or airplane ride-sharing service - also are charged a sales tax on the consumer. There are some goods and services that have a special tax treatment, such as most over-the-counter drugs (except homeopathic products, which are exempt as of July 2005), food for human consumption and vehicle sales for resale if the seller has a valid resale certificate. Classification can make a difference: the same transaction might be exempt if it qualifies as falling under a resale or manufacturing exemption, or otherwise taxable if it is sold at retail.

Exemptions and special rules

Exemptions lessen the amount of tax you are required to collect. Common exemptions are sales for resale, some manufacturing machinery and equipment, and a few items specifically prescribed by state statute (Example: certain medical devices). And sometimes there are temporary exemptions or alterations to rates set by statute. Vendors must verify the appropriateness of exemptions in each instance and retain for their records any applicable exemption certificates. If a buyer claims an exemption, get a valid exemption certificate and keep it with your records to justify tax-free status.

Nexus and remote sales

If a business has enough of a connection, or nexus, to Connecticut, it must collect and remit sales taxes in the state. Nexus can exist based on physical presence — as in employees, offices or inventory in the state— or it can be created via economic activity through remote sales. Economic nexus standards mean that companies with a specified amount of sales into Connecticut could be subject to registration and collection obligations, even in the absence of physical presence. Check whether your business has a Connecticut nexus and if so, register to collect & pay over tax.

Registration and collecting tax

If you need to charge customers Connecticut Sales Tax, then register for a sales tax permit from the state of Connecticut. Once registered, you need to charge tax at the time of sale (though, depending on the accounting that would be required - you may want to show it separately on invoice) must issue receipts when tax is charged and show how much was collected. For exemption sales, obtain and keep a completed exemption certificate as well as confirming it is valid. For those returns billed to customers who reside out of state, be clear on when use tax is applicable and if you have an obligation to collect it.

Filing frequency and remittance

Once you are registered, you will be required to report sales tax in the filing frequency that was assigned (monthly, quarterly or annually), and there is generally a designation based on your expected amount of sales tax due. When returns are due, file on time and pay the tax you collect on time to avoid penalties and interest. Some businesses may be required to make estimated payments or file electronic returns; see account notices for filing instructions and deadlines prev.

Recordkeeping and documentation

Keep accurate, legible records of all sales, exempt transactions, resale certificates and taxes collected. Comprehensive records assist in defending tax positions during audits and help to make the taxing authority filing process more efficient. Maintain copies of invoices, purchase receipts, exemption certificates and monthly reconciliation reports for the length of time required by Connecticut law.

The main mistakes and ways to avoid them

Errors occur when wrong products or services are classified, exemption certificates go uncollected and nexus triggers for remote sales get overlooked. Avoid these mistakes by regularly reviewing product taxability, training employees on obtaining the correct documentation and tracking sales thresholds that may trigger nexus. When pricing, consider the final price to the customer and ensure tax is included in it; tell customers if prices listed are inclusive or exclusive of sales tax.

Dealing with audits, penalties and voluntary disclosure

Should the state tax agency audit your business, don’t delay in responding or submitting any requested documents (you may wish to seek advice from a tax attorney regarding more complex issues). The penalties and interest can accumulate quickly for filing late or not paying the tax. If you find under-collection in the past, consider voluntary disclosure programs that could control penalties and put you on a schedule to fix your past noncompliance.

How to comply when collecting facilities from patients

Establish nexus: examine physical presence and volume of sales to existing and potential customers. 2. Registration: must be registered for and apply for a sales tax permit before collecting tax. 3. Determine what is taxable: classify goods and services accurately. 4. Gather paperwork: receive resale and exemption certificates when necessary. 5. Set up pricing and checkout: start charging the right rates for tax, be transparent about tax. 6. File and pay: File per assigned filing frequency; submit payments on time. 7. Keep records: keep invoices, certificates and reconciliations for audit.

Conclusion

The process of collecting and filing sales tax in Connecticut can be a bit complicated for businesses selling products within the state. Correctly classifying sales, keeping solid records, staying informed of nexus standards and filing on time help businesses limit the risk and stay compliant. If in doubt on the nuances of certain exemptions, complex transactions, or nexus issues, consult with a knowledgeable tax advisor to ensure proper treatment and avoid potential missteps.

Connecticut sales tax can be easily managed by following the right processes. Treat sales tax as a business necessity: make scheduled reviews, train your staff and stay updated for any rule changes in order to safeguard your company and customers.