This Informational Publication has been superseded by IP 92(6.1)
The following is a brief description of taxes payable by companies doing business in Connecticut.
The following taxes are among those administered by the Connecticut Department of Revenue Services: Corporation Business Tax, Sales and Use Taxes, Motor Vehicle Fuels Tax, Motor Carrier Road Tax and Income Tax. For further information or a registration application, contact Taxpayer Services at 1-800-382-9463 (toll-free within Connecticut) or 860-297-5962 (from anywhere).
CORPORATION BUSINESS TAX: The corporation business tax is a tax on the privilege of carrying on business in a corporate capacity. Each corporation's annual tax liability is the highest amount computed using each of the following two methods:
Net income base: Federal net income is modified by certain additions and subtractions to compute Connecticut net income. (Multistate corporations multiply their Connecticut net income by an apportionment fraction that is the average of the receipts, payroll and property ratios (with the receipts ratio double-weighted).) The Connecticut net income (or apportioned Connecticut net income for multistate corporations) is taxed at 11.5% rate. The tax is subject to a 20% surtax for income years beginning prior to 1992, 10% for the income year beginning in 1992; and no surtax thereafter.
Additional tax base: The Connecticut additional tax base is: (A) the average value of issued and outstanding capital stock, surplus and undivided profits and surplus reserves reduced by (B) the average value of any deficit carried on the balance sheet and holdings of stock of private (nongovernmental) corporations including treasury stock. (Multistate corporations multiply their Connecticut additional tax base by an apportionment fraction that is the average of the intangible personal property and tangible personal property ratios.) The Connecticut additional tax base (or apportioned Connecticut additional tax base for multistate corporations) is taxed at a rate of 3.1 mils ($0.0031) per dollar. The tax is subject to a 20% surtax for income years beginning prior to 1992 and 10% for the income year beginning in 1992; and no surtax thereafter). The additional tax cannot be more than $1,000,000 nor be less than $250.
A corporation has the following filing requirements when its estimated current year tax exceeds $1,000. Four estimated tax payments are required as follows:
|15th day of 3rd month||30% of total tax|
|15th day of 6th month||70% of total tax (including previous payment)|
|15th day of 9th month||80% of total tax (including previous payment)|
|15th day of 12th month||100% of total tax (including previous payment)|
A return is due by the first day of the 4th month after the close of the business year. "C" corporations file a Form CT-1120. "S" corporations file a Form CT-1120S on or before this date and an informational return, Form CT-1120SI, on or before the 15th day of the 4th month after the close of the business year.
SALES AND USE TAXES: The sales and use taxes apply at a 6% rate to retail sales (or leases) of most goods and certain services.
The use tax generally applies to taxable tangible personal property services on which the sales tax was not imposed by the seller. The tax is payable by the purchaser directly to the state. If an item purchased in another state already has been subject to that state's sales tax, credit for such tax is generally given when computing the Connecticut use tax.
Services subject to tax:
- Computer and data processing services;
- Credit information and reporting services;
- Employment agencies providing personnel services;
- Private investigation, protection, patrol work, watchman and armored car services;
- Sign painting and lettering services;
- Telephone answering services;
- Stenographic services;
- Business analysis, management, and management consulting services; and
- Piped-in music.
The tax also applies to services to industrial, commercial or income-producing real property, including but not limited to management, maintenance, janitorial, refuse removal, electrical, plumbing and carpentry. Renovation or repair services to residential and business property involving paving, painting, roofing, siding, staining, wallpapering and exterior sheet metal are subject to tax as are the services of exterminating, landscaping, maintenance, janitorial, land surveying, window cleaning, and swimming pool cleaning and maintenance. Repairs to tangible personal property, motor vehicle repairs, parking and car washing services, repairs to electrical or electronic devices, health and athletic club services, lobbying or consulting services, sales agent services for selling tangible personal property, locksmith services, advertising or public relations services (not related to the development of media advertising or cooperative direct mail advertising), telecommunications services, community antenna television services, photographic studio services, tax preparation services, transportation services (such as livery), miscellaneous personal services, amusement, recreation and entertainment services, extended warranty and service contracts and mooring or storing services for vessels are also taxed.
NOTE: An exemption from sales and use taxes is provided for sales of certain services between parent companies and their wholly-owned subsidiaries.
Manufacturer's Exemptions: The sales and use taxes are imposed on most items purchased by Connecticut manufacturers. However, there are certain exemptions: machinery used directly in the manufacturing production process; materials that become an ingredient or component part of the products to be sold; and tools, fuel and materials that are used directly in an industrial plant in the actual fabrication of finished products to be sold are exempt from the tax provided a properly completed exemption certificate is given to the seller.
Replacement and Component Parts: The tax rate on replacement and repair parts used directly in manufacturing production machinery by qualifying taxpayers is 5.5%. A sales tax refund up to $7,500 for purchases of repair or replacement parts used exclusively for manufacturing production machines by qualifying taxpayer is also available. Component parts purchased exclusively for the purpose of being assembled into a new machine which is used directly in the manufacturing production process are exempt from sales and use taxes.
Filing Requirements: Connecticut manufacturers are required to collect sales tax on their sales except where a properly completed Connecticut resale certificate is taken in good faith or such sales are otherwise exempted by statute. The tax is remitted quarterly to the state, except in those instances where the tax for a 12-month period ended on the preceding September 1 was more than $4,000, in which event, the tax is remitted monthly. Annual filing is allowed for businesses whose total annual liability for sales and use taxes is less than $1,000.
MOTOR VEHICLE FUELS TAX: A tax is imposed on motor fuel used to propel motor vehicles on public highways. The rate is 26¢ per gallon. The gasohol rate is 25¢ per gallon and the diesel fuel tax rate is 18¢ per gallon.
MOTOR CARRIER ROAD TAX: A tax is imposed on motor carriers on the use of motor fuel in their operations in Connecticut. The rate is equivalent to the Connecticut motor vehicle fuels tax rate. Motor carriers are those persons who operate passenger vehicles seating more than nine passengers in addition to the driver, road tractors, or any trucks having a registered gross vehicle weight over 18,000 pounds or a light weight over 7,500 pounds. A credit is allowed for any Connecticut motor vehicle fuels tax that was paid on the fuel.
INCOME TAX WITHHOLDING: An employer that (1) maintains an office in Connecticut or who is transacting business within Connecticut and (2) is considered an employer for federal income tax withholding purposes, is an employer for Connecticut income tax withholding purposes and must withhold Connecticut income tax from wages of resident and nonresident employees who work in Connecticut. Each time an employer makes a deposit of federal income tax withholding, the employer must mail a deposit of Connecticut withholding tax to the Connecticut Department of Revenue Services. Quarterly reconciliations are due on the last day of the month following the end of the calendar quarter. The annual reconciliation for the preceding year is due on the last day of February.
The Office of the Secretary of the State administers a franchise tax. For further information write to the Secretary of the State, 30 Trinity St., Hartford, CT 06106 and enclose a stamped, self-addressed envelope.
Domestic corporations: Domestic corporations are required to pay a franchise tax to the Secretary of the State at the time of incorporation and at the time of any increase in the number of shares of authorized capital stock as follows:
First 10,000 shares
|1¢ per share|
|1 /2¢ per share|
|100,001-1,000,000 shares||1/4¢ per share|
|1,000,000+ shares||1/5¢ per share|
Minimum franchise tax: $150
There is an additional fee of $45 for filing the certificate of incorporation, and a $12 fee for a certified copy of the certificate. Corporations must file biennial reports on or before the last business day of the month in which occurs the anniversary date of incorporation (domestic) or authorization to transact business (foreign). The filing fee is $125; late filing fee, including penalty is $150. The fee for a certified copy of a corporate document is $12.
FOREIGN CORPORATIONS: A corporation organized outside the state may obtain a certificate of authority to transact business in Connecticut by filing an application with the Secretary of the State and appointing an agent to accept service of process. Applications are available from the Secretary of the State and must be accompanied by a filing fee of $495 and a certificate of good standing from the state of its incorporation. The month when authorization was given for the corporation to conduct business becomes the filing month for biennial reporting purposes. Filing must be made on or before the last business day of such month. The biennial report and license fee of $575, late filing fee including penalty is $600, is payable to the biennial report.
The Connecticut Department of Labor administers the Unemployment Compensation Tax. For further information and registration forms, write to the Connecticut Department of Labor, Attn: Employer Status Unit, 200 Folly Brook Boulevard, Wethersfield, CT 06109 or call 860-566-5180.
UNEMPLOYMENT COMPENSATION TAX: Employers engaged in covered activities are subject to the Unemployment Compensation Act if (1) during a calendar quarter of the current or preceding calendar year they paid wages totaling $1,500 or more, or (2) they had, during the current or preceding calendar year, one or more employees at any time in each of 20 calendar weeks. Agricultural employers are subject if (1) during any calendar quarter of the current or preceding calendar year they paid wages totaling $20,000 or more, or (2) they had, during the current or preceding calendar year, 10 or more employees at any time in each of 20 calendar weeks. Domestic employers are subject if they paid wages totaling $1,000 or more during any calendar quarter of the current or preceding calendar year.
The Unemployment Compensation Fund is financed through a benefit/ratio system. For employers who qualify to be experience-rated (those who have been chargeable with benefits for at least one year ending June 30), taxes will be based on: (1) the benefit/ratio of each employer, which will determine the charged tax rate, and (2) unemployment compensation fund reserves, which will determine a fund-balance tax rate. These rates are recalculated annually for qualified employers. An employer's charged tax rate is the ratio of charges during the applicable experience period to the taxable payroll for the same period; it can range from 0.5% to 5.4% of taxable payroll. The fund-balance tax rate may increase an employer's total contribution rate, depending on the solvency of the unemployment compensation fund. It is calculated annually, applies uniformly to all employers who qualify for experience rating, and ranges from 0.0% to 1.5% of taxable payroll.
An employer who has not been subject to the Act for a sufficient period of time to be experience-rated shall pay contributions at a rate that is the higher of 1.0% of taxable wages, or the Connecticut five-year benefit cost rate. An employer's taxable wages consist of the sum of employees' wages not in excess of $7,100 per individual in a calendar year for years prior to 1994.
The maximum unemployment compensation rate is $288 per week, effective October 1991. The rate is revised annually as of the first Sunday in October. The annual increase is limited to $18 over the previous maximum benefit. However, the maximum benefit cannot exceed 60% of the average weekly wage of manufacturing production and related workers in Connecticut.
The property tax is administered by each Connecticut municipality. For further information on property tax write to the Office of Policy and Management, 80 Washington Street, Hartford, CT 06106 or call 860-566-8170.
PROPERTY TAX: Each company pays an ad valorem property tax to the community in which it has real and/or personal property. Manufacturing inventories of finished goods and goods in process are exempt, as are mercantile inventories.
October 1 is the annual assessment date for all local tax jurisdictions. In a revaluation year, increases in assessed values may be phased in for five years or less, at community option.
Any municipality with a population in excess of 35,000 (most recent federal census) may establish a special service district to construct, own, operate, and maintain public improvements, and to provide within that district such services which a municipality is authorized to provide, except elementary and secondary education.
Newly acquired manufacturing equipment is exempt from the property tax for the first five years.
Connecticut has a free-port law which permits goods shipped in from out-of-state to remain free of local property taxes while stored in a public warehouse not owned by consignor or consignee, provided such goods remain in their original packages.
Motor vehicle registration is administered by the Connecticut Department of Motor Vehicles. For further information, on motor vehicle fees write to the Connecticut Department of Motor Vehicles, 60 State Street, Wethersfield, CT 06161 or call 1-800-842-8222.
MOTOR VEHICLE FEES: There is a biennial registration fee of $70 for passenger cars. Operator's licenses are issued every four years for $35.50. Registration fees for commercial motor vehicles and tractors are based on the vehicle gross weight as follows:
|Up to 20,000 lbs.||
$1.15 per 100 lbs. (or fraction thereof)
|20,001 - 30,000 lbs.||
$1.40 per 100 lbs. (or fraction thereof)
$1.75 per 100 lbs. (or fraction thereof)
|73,001 - 80,000 lbs.||
$1.90 per 100 lbs. (or fraction thereof)
Minimum fee: $39
Overweight vehicles require a special permit from the Department of Transportation.
FOR FURTHER INFORMATION: Please call DRS during business hours, Monday through Friday:
- 1-800-382-9463 (toll-free within Connecticut), or
- 860-297-5962 (from anywhere)
TTY, TDD, and Text Telephone users only may transmit inquiries 24 hours a day by calling 860-297-4911.
FORMS AND PUBLICATIONS: Forms and publications are available all day, seven days a week:
- Internet: Preview and download forms and publications from the DRS Web site: http://www.ct.gov/drs
- Telephone: Call 860-297-4753 (from anywhere), or 1-800-382-9463 (toll-free within Connecticut) and select Option 2 from a touch-tone phone.