Q&A on the Connecticut Sales and Use Taxes
Amending a Sales and Use Tax Return
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?
Mailing Address for Sales and Use Tax Return
Obtaining a Sales Tax Permit
Resale Number - How do I get one?
Services that are Subject to Sales or Use Tax
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.
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.
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.
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%.
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.
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.
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. If I Donate 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.