SN 94(16)

Dry Cleaning Establishment Surcharge

This publication has been superseded by SN 2017(4)

PURPOSE: The purpose of this Special Notice is to describe the dry cleaning establishment surcharge which applies to the gross receipts at retail from dry cleaning services performed on or after January 1, 1995.

BACKGROUND: In its May Special Session, the General Assembly enacted 1994 Conn. Pub. Acts 4, §41, which imposed a dry cleaning surcharge of one percent of the gross receipts at retail from dry cleaning services performed on or after July 1, 1994. However, due to flaws in this legislation, the Department determined that it was unenforceable as written and on September 12, 1994, issued AN 94(11), Important Information About Dry Cleaning Surcharges, to this effect.

In its November Special Session, the General Assembly amended 1994 Conn. Pub. Acts 4, §41, and imposed a one percent dry cleaning surcharge which applies to dry cleaning services performed on or after January 1, 1995.

EFFECTIVE DATE: Effective upon issuance and applicable to the gross receipts at retail from dry cleaning services performed on or after January 1, 1995.

STATUTORY AUTHORITY: 1994 Conn. Pub. Acts 4, §41 (May Spec. Sess.), as amended by 1994 Conn. Pub. Acts 3, §10 (Nov. Spec. Sess.).

DEFINITIONS:

"Dry Cleaning Establishment" means any place of business engaged in the cleaning of clothing or other fabrics using tetrachlorethylene, stoddard solvent or other chemicals OR any place of business which accepts clothing or other fabrics to be cleaned by another establishment using such chemicals.

"Gross Receipts at Retail" means the total amount accruing from dry cleaning service at retail, valued in money, without any deduction for the cost of the materials used, labor or service costs or any other expense.

"Retail sale" means a sale of dry cleaning services for any purpose other than resale in the regular course of business.

"Dry Clean" means to cleanse (clothing or fabrics) with chemical solvents rather than water. (Webster's II New Riverside University Dictionary)

IMPOSITION OF THE SURCHARGE: A dry cleaning surcharge of one percent of the gross receipts at retail from dry cleaning services of each dry cleaning establishment, as defined in this notice, shall be paid to the Commissioner of Revenue Services for any dry cleaning service performed on or after January 1, 1995.

NOTE: The surcharge does not apply to the gross receipts from any other services, such as shirt laundering, alterations, tailoring or mending, or from sales of goods by those establishments.

EXAMPLE 1: Dry cleaner A charges the customer $7.00, of which $4.00 is the charge for dry cleaning and $3.00 is the charge for laundering shirts. Dry cleaner A's gross receipts subject to the surcharge include the $4.00 from dry cleaning services and not the $3.00 from shirt laundering.

SURCHARGE IS IMPOSED UPON DRY CLEANING ESTABLISHMENT: Unlike Connecticut sales tax, the surcharge is imposed upon the dry cleaning establishment, not the customers. Therefore, the dry cleaning establishment is not required to charge its customers an additional amount on account of the surcharge.

If an additional amount is charged, however, such additional amount is included in the establishment's gross receipts from dry cleaning services (and is itself subject to the surcharge).

EXAMPLE 2: Dry cleaner B charges $10.00 to dry clean a dress. The gross receipts subject to the surcharge include the $10.00 from this transaction.

EXAMPLE 3: Dry cleaner C charges $10.00 to dry clean a dress and an additional 10 cents billed as "environmental surcharge." Dry cleaner B's gross receipts subject to the surcharge include the $10.10 from this transaction.

EXAMPLE 4: Dry cleaner D charges $25.25, of which $20.00 is for dry cleaning, $5.00 is for tailoring and $.25 is a dry cleaning or environmental surcharge. Dry cleaner D's gross receipts from dry cleaning services include the $20.25 from the dry cleaning and the surcharge. (Any amount charged on account of the surcharge is part of the gross receipts from dry cleaning services subject to the surcharge.)

DRY CLEANING ESTABLISHMENT REMEDIATION ACCOUNT: Moneys received by the state from the imposition of the surcharge shall be deposited within the general fund in the "Dry Cleaning Establishment Remediation Account." The state, acting through the Commissioner of Economic Development, shall use the moneys in the account to provide grants to dry cleaning establishments for the purposes of clean-up or prevention of pollution resulting from the discharge, spillage, uncontrolled loss, seepage or filtration of chemicals or hazardous waste on or at the site of dry cleaning establishments.

In order to qualify for a grant, a dry cleaning establishment must demonstrate to the satisfaction of the Commissioner of Economic Development that it (1) is using or has previously used, tetrachlorethylene or stoddard solvent or other chemicals for the purpose of cleaning clothes or other fabrics, (2) has been doing business and has maintained its principal office and place of business in this state for a period of at least one year prior to the date of its application for assistance under this section and (3) is unable to obtain financing from conventional sources on reasonable terms or in reasonable amounts.

Further information about application for grants should be obtained from the Department of Economic Development.

FILING REQUIREMENTS: The dry cleaning surcharge is due and payable on or before the last day of the month following the end of each calendar quarter on a form prescribed by the Commissioner of Revenue Services.

PENALTY AND INTEREST: If the dry cleaning surcharge is not paid when due, a penalty of 10% of the amount due or $50.00, whichever is greater, will be imposed and the surcharge due will bear interest at the rate of 1% per month or fraction thereof from the due date to the date of payment.

EFFECT OF THIS DOCUMENT: A Special Notice is a document that announces a new policy or practice in response to changes in State or federal laws or regulations or to judicial decisions. A Special Notice indicates the Department's informal interpretation of Connecticut tax law and may be referred to for general guidance by taxpayers or tax practitioners.

EFFECT ON OTHER DOCUMENTS: AN 94(11) is obsoleted and may not be relied upon after the date of issuance of this Special Notice. 

SN 94(16)
Dry cleaning surcharge
Issued: 12/20/94