This Informational Publication has been modified and superseded by IP 92(6.3)
This Informational Publication has been modified and superseded by IP 92(6.3)
For more detailed information about state taxes, request IP 94(5), Getting Started in Business: Understanding Connecticut Taxes, from the Department of Revenue Services.
DEPARTMENT OF REVENUE SERVICES: 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 withholding. For further information or a registration application, contact Taxpayer Services at 1-800-382-9463 (in-state) or 203-566-7033.
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 corporation, when their income is derived from the manufacture, sale or use of tangible personal or real property, 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). Multistate corporations, when their income is derived from business other than the manufacture, sale or use of tangible personal or real property, multiply their Connecticut net income by an apportionment fraction, the numerator of which is their gross receipts from business carried on within Connecticut, and the denominator of which is their gross receipts from business carried on everywhere. The Connecticut net income (or apportioned Connecticut net income for multistate corporations) is taxed at:
FOR INCOME YEARS BEGINNING RATE
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 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:
(1) 15th day of 3rd month: 30% of current year tax or 60% of prior year tax, whichever is less
(2) 15th day of 6th month: 70% of current year tax (including previous payment)
(3) 15th day of 9th month: 80% of current year tax (including previous payment)
(4) 15th day of 12th month: 100% of current year tax (including previous payment)
A return is due by the first day of the 4th month after the close of the income 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 income year.
CORPORATION BUSINESS TAX CREDITS: Credits that may be applied against the corporation business tax are available to new and existing businesses. For further information on these credits request a copy of IP 94(6), Overview of Connecticut Corporation Business Tax Credits.
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 room occupancy tax rate of 12% applies to the occupancy of a room in a hotel or lodging house for a period of thirty consecutive days or less.
The use tax generally applies to taxable tangible personal property or services on which the Connecticut 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.
Certain services subject to tax: This list includes most commonly rendered taxable services.
NOTE: This list is not all inclusive.
NOTE: An exemption from sales and use taxes is provided for sales of most services between parent companies and their wholly-owned subsidiaries.
For more detailed information on sales and use taxes, request a copy of IP 94(5), Getting Started in Business: Understanding Connecticut Taxes.
Filing requirements: Connecticut retailers making sales of taxable goods or services are required to collect sales tax on their sales except when a properly completed Connecticut Sales and Use Tax Resale Certificate is taken in good faith or such sales are otherwise exempt from the tax. 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.
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. These items are exempt from the tax provided a properly completed exemption certificate is given to the seller.
There is also a partial exemption of 30% - 50% of the purchase price of materials, tools, fuels, machinery and equipment, available to manufacturers, processors and fabricators in computing the sales or use tax due. The percentage of the purchase price to be excluded from the measure of sales and use taxes increases over a five-year phase-in period. For more information on this exemption, please refer to SN 93(1.1), The Manufacturing Recovery Act of 1992 Exemption for Purchases of Property Used in Manufacturing, Processing and Fabricating.
Replacement and component parts: The tax rate on replacement and repair parts used directly in manufacturing production machinery by qualifying taxpayers is 5%. Such repair and replacement parts may also qualify for partial exemption under the Manufacturing Recovery Act of 1992. The purchaser who qualifies for the reduced rate and the partial exemption must issue to the seller a Sales and Use Tax Certificate for Purchase of Repair or Replacement Parts Used in Production Machinery at the Reduced Rate of 5% and CERT-109, Certificate of Partial Exemption Machinery and Equipment. 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.
OTHER EXEMPTIONS: Certain sales are exempt from tax including but not limited to sales of food (other than meals), clothing under $50, newspapers and magazines by subscription, prescription and certain nonprescription drugs.
MOTOR VEHICLE FUELS TAX: A tax is imposed on motor fuel used to propel motor vehicles on public highways. The rate is 32 per gallon (33, effective July 1, 1995). The gasohol rate is 31 per gallon (32, effective July 1, 1995) 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 or diesel fuel tax rate. Motor carriers are those persons who operate passenger vehicles seating more than nine passengers in addition to the driver, road tractors, tractor trucks 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 vas paid on the fuel.
INCOME TAX WITHHOLDING: An employer that (1) maintains an office in Connecticut or 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 employees and from 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.
OTHER STATE AGENCIES: The following taxes are administered by other state or municipal agencies: corporation franchise tax, unemployment compensation tax, property tax, motor vehicle fees.
CORPORATION FRANCHISE TAX: The Office of the Secretary of the State collects a franchise tax from Connecticut corporations. 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: A domestic corporation is 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: (Minimum franchise tax: $150)
There is an additional fee of $50 for filing the certificate of incorporation, and a $25 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 $150. The fee for a certified copy of a corporate document is $25.
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 $275 and a certificate of good standing from the state of incorporation. The month when authorization was given for the corporation to conduct business becomes the filing month for annual reporting purposes. Filing must be made on or before the last business day of such month. A license fee of $300 is payable with the annual report.
UNEMPLOYMENT COMPENSATION TAX: The 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 203-566-5180.
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 to the Act 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 to the Act 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 for calendar year 1994. The rate ranges from 0.0% to 1.5% for years 1995 - 1998.
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.
Legislation enacted by the 1993 General Assembly increased the $7,100 taxable wage base to $9,000 in 1994 and additional $1,000 per year through 1998.
The maximum unemployment compensation rate is $317 per week, effective October 1993. 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.
PROPERTY TAX: The property tax is administered by each Connecticut municipality. Further information can be obtained from the city or town assessor.
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. Not later than November 1, each company must file a declaration of its personal property with the local assessor. Personal property and motor vehicles are revalued annually. Increases in assessed values of real property resulting from revaluation may be phased-in for up to five years, 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 a four year period. The exemption must be claimed annually. Applications for exemption and personal property declaration forms are available from the assessor.
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 FEES: Motor vehicle registration is administered by the Department of Motor Vehicles, 60 State Street, Wethersfield, CT 06161 or call 203-566-4710 or 1-800-842-8222.
Driver licenses are renewed every four years for $35.50; and commercial driver licenses (CDL's) are renewed every four years for $50.
There is a biennial registration fee of $70 for private passenger cars and $78 for passenger cars used for business purposes. The annual registration fee for commercial motor vehicles is based on the vehicle gross weight (weight of vehicle empty plus weight of heaviest load) as follows:
Both motorized units (tractors) and trailers must be registered. There are fixed annual fees for saw rigs ($25), spray rigs ($25), and well drillers ($46). Permanently mounted cranes require 1/2 fee by gross weight. There is a $306 registration fee per year (not pro-rated) for "heavy duty vehicles" (55,000 lbs gross weight and over). Overweight vehicles require a special permit from the Department of Transportation.
Specific registration classes exist for taxis, liveries, and buses, each with special requirements and fees.
SPECIAL INTEREST LICENSE PLATES: Motorists interested in purchasing a Long Island Sound license plate may call 1-800-CT-SOUND or write to: Long Island Sound Fund, 60 State Street, Wethersfield, CT 06109. Information about other "special interest license plates" is available by writing to the same address.
BOAT REGISTRATION FEES: There is an annual registration fee for boats in lieu of a local property tax. For more information, contact the Department of Motor Vehicles at 203-566-3781.
EFFECT ON OTHER DOCUMENTS: IP 92(6.2) modifies and supersedes IP 92(6.1) which may no longer be relied upon after this date.
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