- What do I need to do before registering with DRS?
- What type of Business Entity will your business be?
- Are you buying an existing business or corporation?
- Who must register with DRS?
- What tax types do I need to register for with DRS?
- How much is my registration fee?
- Doing a craft fair/flea market?
- Ready to Register? How do I obtain a Sales Tax Permit?
- How long is the sales and use tax permit good for?
- What is the current Sales Tax Rate?
- Sales Tax Forms
- Sales Tax Guides
- Sales and Use Taxes Regulations
Informational CHECKLIST to aide you in creating your business entity.
- Identify all your licensing and registration requirements to start your business. Contact the Connecticut Business Hotline at the Connecticut Economic Resource Center by calling 800-392-2122.
- Federal Employer Identification Number (FEIN), if applicable this is issued by the Internal Revenue Service (IRS) - Find out if you need one
- Check the availability of the desired business entity name with the Connecticut Secretary of the State (SOTS)
- If purchasing a business BEFORE you buy it be sure to obtain a Tax Clearance Certificate, otherwise you may be liable for any tax obligations from the previous owner.
- Sole Proprietorship - owned and operated by one individual.
- Partnership - the relationship between two or more persons who join together to carry on a trade or business.
- Corporation - is an entity created under state law with a legal existence separate and apart from its shareholders.
- Limited Liability Companies (LLC) - including a single member limited liability company (SMLLC), is another entity created under state law with a legal existence separate and apart from its members.
- Non profit - any social, civil, religious, political subdivision or educational organization that has been federally recognized thus qualifying them to be exempt from Connecticut sales and use taxes. An organization that was issued a federal Determination Letter of exemption under Section 50l(c)(3) or (13) of the Internal Revenue Code is a ”qualifying organization” for the purposes of the exemption from sales and use taxes.
To avoid successor liability, the purchaser must obtain a Tax Clearance Certificate for sales and use taxes or admissions and dues tax, or both, before it purchases an existing business. The purchaser of the business should request a Tax Clearance Certificate between the time the purchaser commits to buy the business and the closing. The Department of Revenue Services (DRS) recommends that the purchaser request a Tax Clearance Certificate at least 90 days before the closing.
You must obtain a Sales and Use Tax Permit from the Department of Revenue Services (DRS) if you intend to engage in any of the following activities in Connecticut:
- Sale, rental, or lease of goods;
- Sale of a taxable service; or
- Operation of a hotel, motel, lodging house or bed and breakfast establishment.
- Sales and Use Taxes - If you sell goods or taxable services in Connecticut, you may be required by law to charge and collect Connecticut sales tax. Therefore register for Sales and Use Tax.
- Withholding Tax - If you employ one or more employees in your business, you may be required to register with DRS to withhold Connecticut income tax.
- Business Entity Tax - If you are a domestic or foreign entity such as (S-corp, LLP, Limited partnership, LLC) and/or are required to register or file a certificate of authority with the Secretary of the State is liable for the BET tax.
- Partnerships, LLCs, LLPs, and LPs -
- Corporations & S Corporations
- IFTA - (for Interstate Carriers)
- Other Business Taxes
Verified Contractors - Are treated just like resident contractors. There is no 5% holdback required by the prime or general contractor.
Steps to become verified:
- Register with DRS via REG-1 for all appropriate taxes - SUT & WTH, COR or BET and PSC;
- Submit Form AU-960, Non-Resident Contractor Request for Verified Contractor Status. If you have a 3 year filing history with DRS and no delinquencies, then just complete steps 1 & 2, otherwise go to Step 3;
- Submit AU-961, Verification Bond.
If verified, the contractor will receive a “Notice of Verified Status” which they would show to the general or prime contractor that hired them. The verification is for a 2 year period 1/1/14 through 12/31/15. Once verified, the out of state contractor wouldn’t need to file any other bonds for jobs commencing during the 2 year period. At the end of the 2 years they would submit another AU-960 requesting the next 2 years i.e. 1/1/16 through 12/31/17. The verification and bonding does not take the place of any tax returns that are due from the company.
- The prime or general contractor that hired an unverified subcontractor will withhold 5% of their contract. The unverified nonresident can request that the money be released by submitting Form AU-967 “Request for Certificate of Compliance”It must be signed by the Prime/General and the nonresident subcontractor and submitted within 90 days of the completion date.
- If Certificate of Compliance is issued DRS will instruct company holding back the 5% to release the withheld amount to the nonresident contractor.
- If Certificate of Compliance is denied or not requested within 90 days of the completion the company holding back the 5 % will remit the withheld amount on their own Sales & Use tax returns
- The 5% holdback does not take the place of any tax returns due from the unverified nonresident contractor.
You must obtain a Sales and Use Tax Permit from the Connecticut Department of Revenue Service if you will be selling at a flea market, craft show, trade show, antique show, fair, etc. in Connecticut even if you will only be making sales for one day. You must display the permit prominently in your booth or table. See our informational page on fairs/flea market sales.
To register you must complete Form REG-1, Business Taxes Registration Application.
- The registration fee is $100 one time permit fee.
Your Sales and Use Tax Permit expires every two years and is automatically renewed and mailed to you at no cost as long as your account is active. Your permit will not be renewed if you have any outstanding liabilities and you have not made arrangements to pay them. Be sure that we have your correct mailing address to ensure that you receive your renewal in a timely fashion.
There is one statewide sales tax rate. The general rate that applies to the retail sale, lease, or rental of most goods and taxable services is 6.35%.