SALES TAX TUESDAY 2018: Connecticut

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Fall is almost here, and that means Thanksgiving is too. And where there is Fall and Thanksgiving, there is one of my favorites, ‘Pumpkin Pie.’ So, I am traveling up to New England, where Fall many times comes early, for this week’s Sales Tax Tuesday. Almost anywhere you go in New England the ‘pumpkins’ will abound right now, but there is one state where one of ‘my key spices’ for Pumpkin is one of this state's nicknames. I am talking about Connecticut, also known as ‘the Nutmeg State.’

You might about now be saying, “that recipe on the back of the can doesn’t say anything about ‘nutmeg,’” or if you are the pumpkin pie cook in your family you may be saying, “I use Pumpkin Pie spice.” Well, you have your old recipe and I will have ‘my mother's,’ so there!  And, my recipe calls for a "1/4 teaspoon of ground nutmeg (or perhaps a pinch more)" per pie filling. Besides, I have even been known to dust my whipping cream on top of the pie with a little nutmeg.

Connecticut, “the Nutmeg State,” is the third smallest state by area (only 5,543 square miles), 29th most populous (3,596,677), and the fourth most densely populated (739 per square mile) of the 50 United States. By the way, the official state nickname is the ‘Constitution State,’ but a majority of residents prefer the Nutmeg nickname, as do I.

Nutmeg is a somewhat sweet and delicate spice grated from the seed of a tree that grows in Indonesia. Back in the 18th century when sailors would bring nutmegs back to Connecticut from their voyages, some industrious state merchants (in other words, ‘crooked’) decided they could sell ‘fake nutmegs’ carved out of local wood (“yuck, wood chips in my pumpkin pie, no thank you”). Today, any fake nutmegs sold would still be taxable in Connecticut because the Connecticut Department of Revenue Services (CDORS) would consider them as souvenir trinkets.

And, since I just mentioned the CDORS, I have to stop my story and tell you that this is one of Insightful Accountant’s Sales Tax Tuesday 2018 features which are a joint venture with Avalara, the ‘tax people.’ During 2018, and probably well into 2019 (thanks to all the extra features we have incorporated into our STT2018 series this year) we are bringing you our state-by-start tour paying sales tax all along the way, with the exception of those few states that don’t have sales tax.

As you know by now, sales tax provides critical revenues in many states, and that’s all too true of Connecticut whose business tax guide puts it this way, “if you sell goods or taxable services in Connecticut, you are required by law to charge and collect Connecticut sales tax.” Goods are taxable unless they are specifically exempted under Connecticut law, and services are only taxable if they are specifically enumerated within Connecticut law.

By the way, one of those goods specifically exempted under Connecticut law is ‘Old Glory,’ the state exempts collection of sales taxes on the American Flag. The exemption is specific, it is an actual American Flag designed for display as a flag, not representations there of (like tablecloths, neckties, or other decorations). Connecticut is not alone in their exemption of the flag from sales taxes, there are several other states that recognize similar exemptions.

Connecticut has a state-wide sales tax rate of 6.35%, but unlike most sales tax states, there are no sales taxes imposed by local jurisdictions in Connecticut, only the state sales taxes.

Enough of this tax business, let's get back to what is truly important...'Pumpkin Pie.'  I figure if I am here in the nutmeg state, that I should be able to find some wonderful pumpkin pie at this time of the year. But there is more to this story than just Connecticut's status as 'the nutmeg state.' It also seems that a few years back 'The Daily Meal' was going around the U.S. determining the 'best pie by state' and Connecticut was determined to have the best 'Pumpkin Pie.'

Now that fall is here, I figure it this way, Connecticut is the 'best Pumpkin pie state,' and the 'nutmeg state,' so surely somebody has to be doing something with all the 'pumpkin innards' that are being scraped out so that kids can turn the orbs into jack-o-lanterns, right? Well I was told to 'go Norwalk, young man, go Norwalk'.  For the life of me I can't figure out why anyone would call me 'young man,' but that is what I was told, anyway.

In Norwalk, the place for pie is Michele's Pies, where they have won the National Pie Championship no less than 27 times. Sure enough Michele's Pies has Pumpkin Pie, but not just any old pumpkin pie, they have a 'Maple Pumpkin with Pecan Streusel' that is out-of-this-world. It is in fact a 'National Pie Championship Aware Winner.' Of course, Michele's also makes a traditional 'Fresh Pumpkin.' They wouldn't tell me if they put 'nutmeg' in their pumpkin pie filling, but I am betting they do.

Next on my pumpkin pie stop list was Oronoque Farms in Shelton. There I found both a 'Pumpkin Chiffon' and a 'traditional Pumpkin' pie. What can I say, if there are two different kinds of pumpkin pie, I am going to have to try both. My next stop was in Orange at a place called Julia's Bakery. This place has an enormous selection of cakes, cookies, breads and more, including pies. They offer pumpkin almost everything baked, including pumpkin squares, pumpkins puffs, pumpkin pie bars, and of course, pumpkin pie.

If I keep eating every pumpkin pie (or pumpkin this-n-that) I spy, I won't be able to fit in the RV for the rest of this trip! I guess that means it's time for some sales tax facts.

Connecticut Sales Tax Facts:

  • Sales and Use tax managed by the Department of Revenue Services.
  • Connecticut has only one sales tax jurisdiction. The state rate at 6.35%.
  • Sales tax is sourced at the destination address.
  • Some common nexus creating activities are: sales solicitation, contract workers, preforming services, various forms of physical advertising (billboards, print, and even television), selling at a trade-show, craft show, or flea market.
  • Affiliate relationships with retailers in excess of $2,000 in the previous year will create nexus. This includes, links on a website that drive traffic to your website (click-through nexus).
  • Connecticut has a 1% rate that is charged on most technology related products instead of the 6.35% rate. This includes data processing, digital goods (books, audio, and video), downloadable software, SAAS, software implementation and support.
  • Connecticut completely exempts sales tax on the following products and services: child-car-seats, bicycle helmets, medical goods & equipment, magazine subscriptions, college textbooks, weatherization products, shoe repair services, safety apparel, firearm-safety-devices, and antique coins.
  • Connecticut exempts food products for human consumption including food sole in coin-operated vending machines, and meals delivered to the elderly, but it does not generally include sales of food/meals at eating establishments, or for take-out, nor are carbonated beverages, candy or alcoholic beverages considered 'food for human consumption' for purposes of exemption.
  • Vegetable seeds for planing to produce food for human consumption are exempt, so those pumpkin seeds used to make pumpkin pies are exempt.
  • Burial or cremation related personal property including caskets for burial, with a value up to $2500.00 are exempt from sales taxes.
  • Exemptions certificates are valid for the following business: non-profits, farmers, commercial fisherman, and for purposes of resale.
  • When initially registering with Connecticut returns are required on a monthly basis, and then downgraded to quarterly or annual filing depending on sales for the first 12 month period.

We gave you some other updates on sales tax changes taking place in Connecticut earlier in this series in articles on sales tax holidays and Economic nexus and diapers. Some 'facts' shown herein may have changed either as a result of, in response to, or since those earlier articles and the updates they covered.

OK, with that said, and only one more bite of pumpkin pie to take here in Connecticut, I will just have to start telling you the hard facts. No matter what state you are in, whether it is a single-rate state like Connecticut, or a state that every city, county, township, and parish has a different rate (or few), the complexities of sales tax still vary. There maybe differences in exemptions, and partial exemptions, there maybe significant differences by location, not just zip code, not to mention this new 'economic nexus' thing that will likely mean that you will have sales tax responsibilities even when you are sending products out-of-state.

Because every jurisdiction that is looking toward sales tax as one of their primary, if not the primary, source of revenue is out to make certain that every dime of sales tax is collected properly, jurisdictions are putting increased efforts into enforcement. That typically means more tax auditors, and more sales tax audits. 

Sales tax administration, when done manually, consumes a lot of your valuable time in order to simply pass-through dollars to all of these jurisdictions rather than spending that time generating revenue for you and your business. That's why it is more important than ever to make use of an Avalara sales tax automation solution. AvaTax can simplify your sales tax responsibilities including tax calculation, exemption certificate management, returns process and 1099 filing and reporting. With Avalara by your side, sales tax will be less taxing than ever before.

And lastly let me just say, "No, I am not giving you my mother's Pumpkin Pie recipe!"