DRS: Q&A on the Connecticut Sales and Use Taxes

 

Q&A on the Connecticut Sales and Use Taxes


Amending a Sales and Use Tax Return

Building Contractors

Buying an Existing Business

Changing the name of my Business

Changing the address of the Business

Changing the Business Structure

Closing my Business

Completing the Return

Computer and Data Processing Services - Reporting the 1% tax

Consignment Sales and Common Registers

Coupons, Scan Cards, Cash Equivalents, Promotional Items & Rebates

Copy of a Previously Filed Return

Do I have to file a return if no tax is due?

Donations made by my business

Due Date of the Sales and Use Tax Return

Exemptions from Sales or Use Tax

Forms - Obtaining a Sales Tax Return

Late Filing - Penalty and Interest and Penalty Waivers

Lost Permit- How do I Get a Replacement?

Making sales on the Internet - Do I have to collect CT sales tax?

Manufacturing

Mailing Address for Sales and Use Tax Return

Obtaining a Sales Tax Permit

Resale Certificates

Resale Number - How do I get one?

Services that are Subject to Sales or Use Tax

Shipping Charges

Use Tax     

  


 Amending a Sales and Use Tax Return

 

Q. I made a mistake on my last return that resulted in my sending in too much sales tax.  May I deduct my overpayment on the credit line of my next return?

A. No.  You must file an amended return.  The Department will review the amended return and will issue you a cash refund (if you request) or a credit memo if an overpayment for the prior period is approved.  If you are mailed a credit memo, you may deduct that amount from the next sales tax return you file. You should attach a copy of the credit memo to the return.

Buying an Existing Business

Q. I am buying a business.  Can I use the old owner's sales tax permit?

A. You may not use the permit that was issued to the previous owner.  You must apply for a permit before you begin to make sales.  If you are buying an existing business, you should also obtain a Connecticut tax clearance to protect you from becoming liable for the seller's unpaid taxes.

Completing the Return

 

Q. How do I report "tax included" sales on the return?

A. You must report the gross receipts from the sale of goods (on Line 1) and from the sales of taxable services (on Line 3) after deducting the tax.  Multiply the total gross receipts including the tax by by 94.3% (.943) or divide the total gross receipts by 1.06.  Enter the result on Line 1 (for goods) or Line 3 (for services).

Q. May I deduct my business expenses on the sales tax return?

A. On the sales tax return you must report the gross receipts from all of your sales and remit the tax due on the gross receipts.  The only deductions you are permitted to take on the sales tax returns are deductions for sales that are exempt from sales tax. To take deductions for those sales, you must complete the appropriate deduction lines on the back of the sales tax return.  You are not permitted to deduct the expenses of doing business on the sales tax return.  When you file your federal income tax return, you will be able to deduct business expenses when you complete Schedule C of federal Form 1040.

Q. I paid tax when I purchased the goods that I resold. May I deduct the tax I paid on these goods when I file the sales tax return?

A. The purpose of a sales and use tax return is to report your gross sales and to pay the tax that you collected or should have collected from your customer.  You may not deduct any expenses related to the sale including but not limited to tax you paid on goods or services.  If you make purchases of goods or services that you will resell in the regular course of business, you should purchase those goods without paying sales tax by issuing a Connecticut resale certificate to your supplier.  See IP 2000 (14) with information on making sales for resale.

Q. Do I need to attach copies of resale certificates or exemption certificates to the return?

A. No, do not send copies with your return.  You must save all certificates with your tax records.  If you are audited and do not have properly completed exemption or resale certificates on file to explain why you did not charge tax, you will be held liable to pay the tax, penalties and interest. 

Q. Do I have to include sales made outside of Connecticut on Form OS-114?

A. Include all sales, including sales made out-of-state on Lines 1-3.  If some sales were not subject to Connecticut sales tax because title to the goods transferred outside of Connecticut, you will also use Lines 33-35 to report the out-of-state sales as deductions from total gross receipts.  

Computer and Data Processing Services - Reporting the 1% tax

Q. How do I report the 1% tax on computer and data processing services on the Sales and Use Tax Return?

A. Report the total gross receipts of the sale on Line 3 of Form OS-114, Sales and Use Tax Return.  Then follow the instructions for Line 74 of the return: multiply the gross receipts of the computer and data processing services entered on Line 3 by .8333 and enter the result on Line 74.  That amount is added to any other deductions on the back of the return. The total is carried forward to Line 8 on the front of the return and subtracted from the total gross receipts on Line 7.  The balance on Line 9 is multiplied by 6%.  By reducing the gross receipts of computer and data processing services by .8333, the effective tax rate is 1%.

Consignment Sales and Common Registers

 

Q. I have a booth at an antique shop with many dealers. The shop makes the sales and collects the tax.  Do I have to file a return?

A. Yes, Both the shop and the vendors must file Form OS-114, Sales and Use Tax Return.  The shop must include all sales as gross receipts on Form OS-114, Line 1, and pay the sales tax on behalf of the vendors.  Each vendor must include the gross receipts from the sales made on its behalf through the shop on Form OS-114, Line 1, and deduct those sales on the back of the return using Line A, Other Adjustments – Sales of Goods.  Each vendor must include on Line A the statement “Sales made and tax collected by (name of shop and the shop’s Connecticut Tax Registration Number).”  The shops and the vendors are held jointly and severally liable for the payment of sales tax. For more information, review IP 2001(18), Common Register Sales and Consignment Sales.

Q. I run a consignment shop and sell goods for other people and charge them a commission on the sale.  How do I report the sales and the commission?

A. The consignee must report gross receipts from the sales of goods on Form OS-114, Line 1.  The consignee also reports the gross receipts from the commission or fee on Line 3 of the return as a taxable sales agent service.  If the gross receipts from the commission or fee are not taxable, the consignee must deduct it on Line C, Other Adjustments – Labor and Services, and describe why the commission or fee is not taxable (such as being for the sale of a work of art).  For more information and an example of how to charge and report the sales, review IP 2001(18), Common Register Sales and Consignment Sales.

Q. I bring goods to a consignment shop.  Do I have to report the sales made by the consignment shop?

A. If you are in the business of making sales, you must also report the sale of the goods on Form OS-114, Line 1, but then must deduct it on the back of the return on Line A, Other Adjustments – Sales of Goods.  The consignor must include on Line A the statement “Sales made and tax collected by (name of consignee and the consignee’s Connecticut Tax Registration Number).”  For more information and an example of how to charge and report the sales, review IP 2001(18), Common Register Sales and Consignment Sales.

Coupons

 

Q. If my customer uses a coupon when making a purchase, do I charge sales tax on the price before or after subtracting the coupon?

A. Sales and use taxes must be calculated on the sales price net of all price reductions from coupons. Any additional value assigned by the retailer, such as to double or triple the coupon, is also excludable from the sales price.  For example, if the price of the item was $5.00 and the customer presented a $.50 coupon, sales tax would apply to the net price, $4.50.  Policy Statement 98(1.1) provides complete information on taxation of coupons, scan cards, cash equivalents, promotional items and rebates.

Q. If the manufacturer offers a rebate on the product, do I subtract the rebate amount before calculating the tax?

A. Retailers must collect tax on the full sales price paid for tangible personal property or taxable services, even though the purchaser may later obtain a cash rebate from the manufacturer or other third party. The terms sales price and gross receipts are defined in Conn. Gen. Stat. §12-407(8) and (9) to include "the total amount for which tangible personal property is sold . . . or the total amount received for any service rendered . . . or the total amount of payment or periodic payments received for leasing or rental of tangible personal property . . . ." Because the initial purchase of the item and the honoring of a rebate claim by the manufacturer are two separate and distinct transactions, the rebate does not reduce the sales price paid for the item. Policy Statement 98(1.1) provides complete information on taxation of coupons, scan cards, cash equivalents, promotional items and rebates.

Do I have to file a Return if No Tax is Due?

Q. Do I need to file a return if I made no sales for the period?

A. You must file a sales and use tax return for every reporting period, even if you did not make any sales during that period or if you made sales that were not subject to tax.   If you did not make any sales, you will complete the return and enter “0” on each line. If you made sales and were not required to collect the tax, you must enter your total sales on Lines 1-3 and then use the proper deduction line(s) on the back of the return to explain why you did not collect the tax.   We encourage you to file your return online using Fast-File, our simple, secure and free, Internet filing system for sales tax, withholding tax and room occupancy tax returns.  Visit our Fast-File webpage for more information.

Q. I didn’t charge any tax because my sales were not taxable (or because the buyer had a sales tax exemption), can I just put all "0's" on the return and sign it?

A. No.  You must show the total gross receipts of all of your sales on Lines 1-3 and the complete the proper deduction lines on the back of the return to show why tax was not charged.  You must also retain in your records proper documentation showing the sale was exempt from tax.  For example, if your gross receipts from sales of goods was $10,000 for the period, report the $10,000 on Line 1.  If $5,000 of the sales was exempt from tax because you shipped the goods directly to the buyer in another state, enter $5,000 on Line 33 "out-of-state - sales of goods".  If the remaining $5,000 in goods was sold to a nonprofit organization, enter $5,000 on Line 40, "charitable or religious organizations - sales of goods".  (Be sure you maintain records documenting all exempt sales.)

Q. Inventory from My Business, Do I Owe Sales or Use Tax?

A.Generally, when an item is removed from a retailer's inventory and the item is given away for no charge to the customer, the retailer is required to assess a 6% Connecticut use tax. The tax is based on the retailer's purchase price for that item. However, a legislative change that became effective October 1, 2000 created the following use tax exemption for retailers:

Use tax does not apply to items held for resale that retailers remove from inventory and donate to the United States or its agencies; Connecticut, its political subdivisions or their agencies; or any I.R.C. §501(c)(3) organization.Forms - Obtaining a Sales Tax Return.

Q. How do I get a form to send in the sales tax I collected?

A. You must obtain a Connecticut Sales Tax Permit before you begin making sales of goods or taxable services. Once you have the permit, the Department will mail you returns every three months to report the sales you made and the tax you collected during the previous calendar quarter.   You may also use the Department's Fast-File system to file and pay your tax online.

Q. I did not receive a sales tax form in the mail for this quarter.  How do I get a form?

A. If you changed your mailing address or to be sure that we have your correct address, be sure to call or write to the Registration Unit to report the change.  You may call during business hours at 860-297-4874.  You may also use the Department's Fast-File system to file and pay your tax online.  You may also download Form OS-114, Sales and Use Tax Return from our website or order one from the Forms Unit (anytime) at 860-297-4753.

Late Filing - Penalty and Interest

Q. How much do I owe for penalty and interest if I file after the due date and I owe tax?

A. The penalty is 15% of the tax due or $50 whichever is greater. Interest is charged at the rate of 1% per month or fraction of a month from the due date until the tax is paid in full.  For example, if you owe $300 in tax and you file the return two weeks after the due date, the penalty will be $50 and the interest will be $3.  

Q. I filed my return late but I do not owe any tax?  What is the penalty?

A. There is no penalty on a late-filed sales and use tax return if no tax is due.

Q. I filed late but I have a good reason.  Can the penalty and interest be waived?

A. You may be able to have your penalty waived if the failure file or pay tax on time was due to a reasonable cause. Interest cannot be waived. Before a penalty waiver can be granted, all tax and interest must be paid. All requests must include: 

  • A clear and complete written explanation;

  • The business name and Connecticut Tax Registration Number;

  • The taxable filing period; and

  • Documentation supporting your explanation.

Attach your request to the front of your tax return or mail separately with a copy of your tax return to:

Department of Revenue Services

Penalty Review Committee

PO Box 5089

Hartford CT 06102-5089

Mailing Address for Sales and Use Tax Return

 

Mail the return to:

Department of Revenue Services

PO Box 5030

Hartford, CT 06102-5030

Resale Certificates

Q. Can I use a resale certificate to buy goods that I will sell outside of Connecticut?

A. Yes.  As long as you have a Connecticut Sales Tax Permit and you intend to resell the goods you purchase in the regular course of your business, you may use a Connecticut resale certificate even if the goods will be sold out of state.  Please review our publication, Notice to Retailers on Sales and Use Tax Resale Certificates for information on the proper use of resale certificates.

Q. As a Connecticut retailer, may I accept a resale certificate from an out of state business who comes into Connecticut to pick up the goods?

A. As long as the buyer is a retailer in another state who is in the business of selling the goods in the regular course of business, the out-of-state buyer may purchase goods on resale in Connecticut.  The out-of-state buyer must complete the Connecticut Resale Certificate and include the tax identification number from his or her state of business, or, if none, the Federal Employer Identification Number.  In addition, the buyer must attach to the resale certificate proof that he or she is engaged in business, including a location and telephone number. This could be:

  • A brochure
  • Business stationery
  • A business card

Finally, the buyer should attach a statement to the resale certificate stating that the issuer is not required to have a Connecticut Sales and Use Tax Permit because it is not making sales in Connecticut or making sales that are otherwise subject to Connecticut sales and use taxes.

Making Sales on the Internet - Do I need to collect Connecticut Sales Tax?

If you are located in Connecticut and will be reselling goods on the Internet, you must obtain a Connecticut Sales and Use Tax Permit. You are required to complete Form REG-1 Business Taxes Registration with the Department and pay the $50 registration fee to obtain a Sales and Use Tax Permit. For more information, review Applying for a Sales Tax Permit

Connecticut sales tax applies to the sale of taxable goods if the title to the goods transfers to the buyer in Connecticut. In the case of sales made over the Internet, you must charge Connecticut sales tax on any taxable items that are shipped to a Connecticut address. Items ordered over the Internet and shipped by the seller directly to an address outside of Connecticut are not subject to Connecticut sales tax and are considered "out of state sales".

Once you register, you must file sales tax returns for each reporting period, even if you do not make any sales or do not collect any tax.  Review the rules on our webpage, Filing Timely Returns.

Resale Number - How do I get one?

 

Q. I am going into business and when I went to buy inventory for my store, the supplier said I need a resale number.  How do I get one?

A. In order to obtain a resale number, you must obtain a Connecticut Sales Tax Permit.  The number on the Sales Tax Permit is your "resale number".  You will use that number when you buy goods that you intend to resell in the regular course of your business.  You will write that number and other information about your business on a Connecticut resale certificate that you will issue to your supplier.  Please review our publication on the proper use of the Connecticut Resale Certificate.

Shipping Charges 

Q. Should I charge sales tax on the charge for shipping goods to my customers?

A.  Shipping and delivery charges (including charges for U.S. postage) made by a retailer to a customer are subject to sales and use taxes when provided in connection with the sales of taxable tangible personal property or services. The tax applies even if the charges are separately stated and applies regardless of whether the shipping or delivery is provided by the seller or by a third party.  No tax is due on shipping and delivery charges in connection with any sale that is not subject to sales or use tax.  Shipping or delivery charges related to sales for resale or sales of exempt items are not taxable.  Likewise, charges for mailing or delivery services are not subject to tax if they are made in connection with the sale of nontaxable services.  

Use Tax

Q. What is the use tax?

A.  If a business purchases taxable goods or services for use in a trade or business (such as office furniture, computers, and supplies) and the seller does not charge Connecticut sales tax, it must report purchases subject to the use tax on Form OS-114, Connecticut Sales and Use Tax Return, for the period in which the purchases are made. Items that are purchased for resale and are subsequently taken out of inventory by the business and either used by the business or given away are subject to sales and use taxes.  If an item purchased in another state already was subject to that state’s sales tax, credit for the tax may generally be taken when computing the Connecticut use tax.  Common purchases that are subject to use tax would be supplies or equipment purchased by Internet or mail order sales since the vendor is rarely required to collect sales tax. The Q&A on Use Tax for Businesses and Professions explains the use tax in more detail.