Connecticut, like most other states in the US, has a sales tax that is imposed on most goods and services sold within the state. The Connecticut sales tax is administered by the Department of Revenue Services (DRS), and individuals and businesses alike need to understand how it works and how it affects them. In this article, we will explore the basics of Connecticut sales tax, including what it is, how it is calculated, and what goods and services are subject to it.
What is Connecticut Sales Tax?
Connecticut sales tax is a tax on the sale, lease, rental, or use of tangible personal property and some services within the state. The current Connecticut state sales tax rate is 6.35%, which is calculated on the total sales price of the item or service being sold. This rate includes both the state sales tax rate of 6.35% and any local sales tax rates that may apply in a particular area.
Sales and Use Tax
In addition to the state sales tax, Connecticut also has a use tax. The use tax is imposed on the use, storage, or consumption of tangible personal property and certain services that were not subject to sales tax when they were purchased.
The use tax rate is also 6.35% and is calculated on the purchase price of the item or service. This tax is typically paid by individuals or businesses who purchase goods or services from out-of-state vendors that do not collect Connecticut sales tax at the time of purchase.
Taxes on Digital Goods
With the rise of digital goods and services, many states, including Connecticut, have started to impose taxes on these items as well. Connecticut sales tax applies to digital goods and services, including e-books, music and video downloads, and streaming services. The tax rate for digital goods and services is the same as the state sales tax rate of 6.35%.
Connecticut Sales Tax Rates
While the current Connecticut sales tax rate is 6.35%, the total sales tax rate can vary depending on the location of the sale. Some localities in Connecticut impose their own sales tax on top of the state sales tax rate. For example, the sales tax rate in Bridgeport, CT is 6.35% + 1%, making the total sales tax rate 7.35%. It is important to know the local sales tax rates when making purchases in different parts of Connecticut, as they can affect the total price of goods and services.
Motor Vehicle Sales Tax
In Connecticut, motor vehicle sales are subject to both the state sales tax and a separate motor vehicle sales tax. The state sales tax rate on motor vehicles is the same as the general sales tax rate of 6.35%. In addition to the state sales tax, motor vehicle sales are also subject to a 7.75% motor vehicle sales tax. This tax is based on the total purchase price of the vehicle and is due at the time of registration.
Connecticut Income Tax
While sales tax is a major source of revenue for the state of Connecticut, it is not the only tax that individuals and businesses are subject to. Connecticut also imposes an income tax on its residents and certain non-residents who earn income in the state. The Connecticut income tax is a progressive tax, which means that higher-income earners pay a higher tax rate than lower-income earners. The current income tax rates in Connecticut range from 3% to 6.99%.
Filing Connecticut Sales and Use Tax Returns
Businesses that sell taxable goods and services in Connecticut are required to register with the Department of Revenue Services and obtain a sales and use tax permit. These businesses must collect sales tax from their customers and remit it to the DRS regularly. Typically, sales tax returns are due monthly, quarterly, or annually depending on the business's sales volume. Use tax returns are also required for businesses that purchase taxable items or services from out-of-state vendors that did not collect Connecticut sales tax at the time of purchase.
Individuals who make purchases of taxable goods or services from vendors who did not collect Connecticut sales tax at the time of purchase are also required to remit use tax to the DRS. Use tax can be reported and paid on the individual's state income tax return or through a separate use tax return.
The DRS provides businesses and individuals with various resources to help them comply with Connecticut sales and use tax laws. These resources include publications, forms, and online filing systems. Businesses and individuals who fail to comply with Connecticut sales and use tax laws may be subject to penalties and interest.
Connecticut sales tax is a complex system that affects businesses and individuals throughout the state. It is important to understand the basics of how Connecticut sales tax works, including what goods and services are subject to tax, how tax rates are calculated, and how to file sales and use tax returns. By staying informed about Connecticut sales tax laws and regulations, businesses and individuals can ensure that they are complying with the law and avoiding penalties and interest.