TSSN-34

Questions and Answers on the Connecticut Use Tax
For Businesses & Professions

This TSSN is superseded by IP 93(3)

1. Q. What is Use Tax?

A.  The Use Tax is the tax that a customer pays when purchasing or leasing taxable goods or services from a retailer.

2. Q. How is this different from the Sales Tax?

A. The Sales Tax is the tax that the retailer pays when filing his/her Sales and Use Tax Return. The retailer is required by law to collect the Use Tax from retail customers and then to remit that amount to the State.

3. Q. Who must pay the tax?

A. Anyone who purchases taxable goods or services for use in Connecticut must pay the Use Tax.

4. Q. What if a Connecticut retailer doesn't collect tax from a customer on a sale of taxable goods or services?

A. The customer must file a Use Tax Return and pay the tax.

5. Q. How would a business that owes Use Tax remit these taxes to the State?

A. If purchases were made in connection with carrying on a trade, occupation, business or profession, the purchaser should be registered with the Department of Revenue Services for Business Use Tax and must report taxable purchases on a Sales and Use Tax Return for the monthly or quarterly period in which the taxable purchase was made.

6. Q. Can a business be registered just for Business Use Tax?

A. Yes, a business that is not required to register for Sales Tax can be registered just for Use Tax.

7. Q. What if a business purchases taxable goods for its own use by mail-order?

A. The business must report the purchase on a Sales and Use Tax Return and pay any tax that is due. In the event that the mail-order house is registered with DRS to collect Use Tax, the mail-order house will collect the tax at the time of purchase and remit the tax to the Department.

8. Q. What if the business buys in another state and pays Sales and Use Tax in that state?

A. The business must report the purchase on its Sales and Use Tax Return. If any tax paid to another state at the time of purchase is less than the Connecticut tax, the purchaser must remit the additional tax with the return.

9. Q. Are there any exemptions from the Use Tax?

A. Generally, any purchase or lease of goods or services which would not be subject to Connecticut Sales Tax would not be subject to Use Tax.

10. Q. What are examples of purchases made by Connecticut businesses to which Use Tax applies?

A. Use Tax applies to the purchase or lease of assets such as furniture, equipment, machines, instruments, and computers. It also applies to the purchase of goods such as office supplies, paper, stationery items, certain publications, packaged software, and books which are used by the business. Use Tax also applies to the purchase of taxable services including automobile maintenance or repair, janitorial services, telephone answering services, advertising, business analysis, stenography/word processing, and data processing.

11. Q. May a Connecticut business use a Resale Certificate to purchase goods and services for the use of the business?

A. No. A Resale Certificate may be used to purchase goods which are intended for resale in the regular course of business. A business is the consumer and must pay the tax on the goods and services that are used by the business.

12. Q. When may the use of a Resale Certificate result in a later Use Tax liability for a business?

A. Use of a Resale Certificate may lead to a later Use Tax liability in the following situations:

(a) A business may purchase inventory for resale and subsequently consume or use it in the business. For example, a computer distributor may take a computer from inventory to do billing for the business.

(b) A business may take items purchased for resale and, subsequently, give them away in a promotion. For instance, a distributor of office supplies may send out pens and pencils as part of its advertising.

(c) A car dealer may take a car from inventory and allow it to be used by family members.

(d) A contractor may use a Resale Certificate to purchase goods and services used in fulfilling a construction contract. These purchases may not be made with a Resale Certificate. For example, the lease of trucks, heavy equipment, and scaffolding, or the purchase of lumber, nails, tools or security services are taxable to the contractor and may not be purchased with a Resale Certificate.

13. Q. What are other common errors by businesses which lead to Use Tax liabilities?

A. The improper use of exemptions also leads to Use Tax liabilities. For example, companies have large Use Tax assessments due to improper use of manufacturer's exemption certificates for the purchase of machinery, materials, fuels and tools.

14. Q. How does the Department of Revenue Services discover Use Tax liabilities?

A. The Department of Revenue Services periodically audits businesses. In addition, Connecticut has reciprocal agreements with numerous states. These agreements enable states to share information on purchases subject to Use Tax.

15. Q. What are the penalties for not paying the Use Tax?

A. The penalty is 15% of the tax due or $50, whichever is greater. Interest is charged at the rate of 1 2/3% per month from the due date of the tax return. There are also criminal sanctions for willful failure to file a tax return. 

TSSN-34 (New 8/90)