TSSN-23

Q & A for the New Business

This TSSN has been obsoleted by IP 2003(26)

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Although most Connecticut residents are familiar with the fact that the state has a Sales Tax, very few people know much about the tax. Ignorance can be hazardous for the owner of a small business. State law requires businesses to collect Sales Tax in exchange for the privilege of doing business in Connecticut. A firm that fails to collect the tax can lose its permit to do business. Basic information is provided in this pamphlet to help firms avoid the most obvious, and potentially costly, errors.

Q. What is Sales Tax?

A. The Sales Tax is a levy imposed on the sale and rental of many goods and services at the rate of 8%. The tax is collected by the vendor and remitted directly to the state.

Q. What kinds of businesses must collect the tax?

A. A business selling or renting tangible personal property, which includes, but is not limited to the following: home appliances, automobiles, craft items, household furnishings, antiques, VCR's & tapes, jewelry, stereo & TV equipment, computers and computer software.

Some services are also taxable. These include, but are not limited to:

• Computer and data processing
• Employment and personnel services
• Architectural, building engineering and building planning or design services, including interior design and decorating services
• Business analysis, management, management consulting and public relations services
• Stenographic services
• Motor vehicle repairs to trade or business vehicles
• Valet parking and car wash services
• Radio and television repair services
• Furniture reupholstering and repair services
• Repair services to electrical or electronic devices
• Health and athletic club services
• Land surveying services
• Lobbying or consulting services
• Sales agent services for selling tangible personal property (except consignee services for selling works of art or clothing)
• Locksmith services
• Advertising or public relations services including layout, art direction, graphic design, mechanical preparation or production supervision, not related to the development of media advertising
• Credit information and reporting
• Private investigation and security services
• Sign painting and lettering
• Telephone answering
• Landscaping and horticultural services (including lawn mowing services)
• Window cleaning services
• Maintenance services (including snow plowing services)
• Janitorial services
• Exterminating services
• Swimming pool cleaning and maintenance services
• Repairs or maintenance services to tangible personal property (except repairs to motor vehicles owned by individuals which are not used in trade or business)
• Services rendered to commercial, industrial or income producing real property (including renovation)

Q. How do I register my business?

A. You register either in person or by mail.

If you apply in person, you will be issued a Seller's Permit and assigned a tax registration number that same day. The locations at which you may apply in person are: 25 Sigourney Street, Hartford and at the area field offices located at 10 Middle Street, Bridgeport; (no office is located in Hamden any longer); 55 West Main Street, Suite 100, Waterbury and (now 401 West Thames Street, Building #700, Norwich, CT 06360) Norwich. A $100 (updated 7/2011) permit fee is required and you must complete Form REG-1 which requires you to furnish your Social Security number and general profile of your business. If the business is a partnership or corporation, you must furnish the partners' or officers' names, addresses, Social Security numbers and the company's federal employer identification number.

To obtain a permit through the mail, call the Department of Revenue Services at 1-800-382-9463 for an application form REG-1. The $50 fee is still required. It will take about two weeks to receive your permit.

If you will be hiring employees, you must contact the Connecticut Department of Labor at (860) 566-5160.

The Internal Revenue Service must also be contacted to determine your federal tax requirements. The Internal Revenue Services' toll-free telephone number is 1-800-829-1040. Walk-in assistance is available at 135 High Street in Hartford.

Q. Once I have a Sales Tax Permit, will I ever need to get another one?

A. Each new business location must have its own Seller's Permit.

If your business expands and you open a second shop, you must also get a new permit for the new location.

Also, If the ownership or structure of the business changes (for example, if a sole proprietorship becomes a partnership or corporation), a new permit is required.

Q. What if my business is located out of State and I intend to make sales into Connecticut (for example, through the mail or by Common Carrier)?

A. You should complete Form REG-7. You will be issued a certificate of authority to collect Connecticut Use Tax.

Q. What if my business is located out of state but I intend to come into Connecticut and sell (for example, at a craft show or flea market)?

A. You must complete a Form REG-1. You will be issued a Seller's Permit to collect Connecticut Sales Tax.

Q. How do I obtain a new copy of my Seller's permit if I change my address or lose the permit?

A. Notify this department in writing at the following address:

Department of Revenue Services
Registration Section
25 Sigourney Street
Hartford, Connecticut 06106

There is no fee for this service.

Q. Must I make a minimum amount of sales before I am required to register for collection of Sales Tax?

A. No. You are required to register before you start your business.

Q. How often are Sales Tax returns filed and how do I get them?

A. Sales Tax returns are mailed to you on a quarterly basis. The quarterly periods and due dates are as follows:

Periods	Due Dates
January 1 - March 31	April 30
April 1 - June 30	July 31
July 1 - September 30	October 31
October 1 - December 31	January 31

If your Sales Tax liability exceeds $4,000 per year, the returns will be mailed to you each month. They are due at the end of the following month.

Q. On what price do I compute Sales Tax?

A. The tax is computed on the selling price (not your cost) of the taxable goods, rental or service. The tax must be computed one of two ways:

1. Tax included, in which case the bill must be marked "tax included," or

2. The tax is added to the sales price, and separately stated on the bill.

Q. If I bill my customers "tax included," how do I report my gross receipts?

A. Multiply the amount you billed your customers by 92.5 percent (.925). The result is your gross receipts, which must be reported on the gross receipts line of your tax return.

Example:

Billed amount $100.00
Multiplication factor .925 (92.5 percent)
Gross receipts $ 92.50

Q. I perform a taxable service and sell taxable goods from the same location. Do I need more than one Seller's Permit?

A. No. Only one Seller's Permit is required. A Seller's Permit allows you to collect tax for the sales of goods, rentals and services.

Q. When do I report a credit sale?

A. You must report a credit sale during the filing period in which the sale is made, not when customer renders payment.

Q. How do I purchase my inventory or goods for resale without paying Sales Tax?

A. Use a blank "Sales and Use Tax Resale Certificate," which is to be completed and remitted to each of the vendors from whom you make a purchase.

A certificate may not be used to purchase items for your own use, such as office supplies, furniture and fixtures.

Q. What must customers provide to demonstrate that they are exempt from paying Sales Tax?

A. The customer must give you a completed State of Connecticut Exemption Certificate. There are several types of exemption certificates:

• If a customer is a retailer making purchases of inventory, the customer must present a "Sales and Use Tax Resale Certificate."
• If the customer is a charitable or religious organization, the customer must present a "Charitable and Religious Organizations Exemption Certificate." If the organization is purchasing meals or lodging, however, the customer must request an approval letter from this Department and present it to the retailer. (Connecticut retailers should not accept Exemption Certificates from other States.)
• If the customer is a manufacturer, the customer must present a "Certificate of Exemption for Purchases of Machinery, Materials, Tools and Fuel."
• If the customer is a farmer, the customer must present a copy of the "Farmer Tax Exemption Permit."
• If the customer is the State of Connecticut, a Connecticut municipality, or the federal government, the customer must present a "Government Agency Exemption Certificate." Purchases made by state or municipal governments from other states are subject to the Sales Tax.
• If the customer is a manufacturer, and is purchasing gas and/or electricity, the customer must present a "Certificate for Purchases of Gas and Electricity."

Q. If I make an out-of-state sale with delivery outside Connecticut, do I collect Connecticut Sales Tax?

A. No. However, depending upon your activities in the other state, you may be required to register and collect Sales Tax in that state.

Merchants may be able to collect tax on behalf of New York State if they are admitted to the New York/Connecticut Sales Tax Agreement. Contact Connecticut's Taxpayer Service Division to learn more about the program. The Division's toll-free telephone number for Connecticut callers is 1-800-382-9463.

However, an out-of-state resident making a purchase, and taking possession in Connecticut, must pay Connecticut tax.

Q. Should I file a return if I have made no sales?

A. Yes. The return must be completed by showing "zero sales" and "zero tax due."

Q. What are the penalties and interest if I file a Sales Tax return late?

A. There is a penalty of $50.00 or 15% of the tax due, whichever is greater for the late payment of the tax.

Interest of 1 2/3% per cent per month is calculated on the tax only.

Q. What records must I keep to verify the figures on my Sales Tax return?

A. The following records must be kept at least three years, preferably four to five years:

• Sales receipts
• Purchase invoices
• Cash register tapes
• State and federal tax returns
• Documents that show price changes
• Exemption certificates

Q. I am closing my business. What should I do?

A. 1. File your monthly or quarterly return and check the "Yes" box following the question, "Are you out of business now?"

2. Enter the last business date in the block provided.

3. Also, write the word FINAL prominently across the top of the return.

4. Enclose your permit card with the return.

Q. If I purchase a business, am I obligated for the previous owner's Sales Tax liability?

A. Yes. To avoid this, obtain a Sales Tax Certificate of Clearance from this department prior to paying the purchase price to the seller.

If you need to obtain a Certificate of Clearance, call (860) 541-3254.

Q. Where do I call for help with understanding my Connecticut Sales Tax obligations?

A. The Department of Revenue Services has a Taxpayer Service Division that can be reached Monday through Friday, 8:30 a.m. to 4:30 p.m. at 1-800-382-9463 or (860) 297-5962.

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TSSN-23
(Rev. 7/90)