Connecticut Sales Tax Nexus Requirements

Sales tax nexus is the connection between a business and a state that requires the company to collect and remit sales tax. If a business has nexus in a state, it must register to collect and pay taxes on sales within that jurisdiction. This obligation is determined by state-specific laws and has evolved significantly from being based solely on physical presence.

Determining if You Have Nexus in Connecticut

A business establishes a sales tax obligation in Connecticut through several distinct activities. The traditional method is physical presence, which includes maintaining an office, warehouse, or retail store. Storing inventory, using a third-party fulfillment service, employing individuals who work in the state, or having independent contractors solicit business for more than two days a year also creates physical nexus.

Following the 2018 Supreme Court decision in South Dakota v. Wayfair, states can require tax collection based on economic activity alone. In Connecticut, economic nexus is established if, during the preceding 12-month period, a remote seller has both more than $100,000 in gross receipts from sales to Connecticut customers and 200 or more separate retail transactions into the state. A business must meet both the revenue and transaction thresholds to be required to register based on economic nexus.

Connecticut also has provisions for click-through nexus. This applies when out-of-state sellers have agreements with Connecticut-based entities that refer potential customers through online links. If an out-of-state retailer generates more than $100,000 in gross receipts from these referrals during the four preceding quarterly periods, they are required to register and collect sales tax.

Affiliate nexus occurs when an out-of-state seller is related to a business with a physical presence in Connecticut. If the in-state affiliate engages in activities that support the remote seller’s market, such as providing services or selling a similar product line under a common name, this relationship can create a sales tax obligation for the out-of-state company.

Marketplace Facilitator Considerations

For businesses that sell products through online platforms, it is important to understand Connecticut’s marketplace facilitator laws. A marketplace facilitator is defined as a company that provides a forum for sales, collects payment from the customer, and remits that payment to the seller, such as Amazon, Etsy, and eBay.

Under Connecticut law, the marketplace facilitator is considered the retailer for tax purposes and is responsible for collecting and remitting sales tax on all sales made through its platform into the state. This rule applies if the facilitator has made or facilitated at least $250,000 in total retail sales during the prior twelve-month period. This shifts the compliance burden from the individual seller to the platform operator.

This means that for a small business selling through a registered marketplace, those sales are not counted toward its own economic nexus thresholds. If a business sells exclusively through one or more marketplace facilitators that collect on its behalf, it may not need to register for a Connecticut sales tax permit. However, if the business also sells through its own website or other channels, it must track its direct sales to determine if it independently meets the economic nexus thresholds.

Information Needed to Register for a Sales and Use Tax Permit

Before beginning the registration process, a business should gather several pieces of information to ensure a smooth application. The required items include:

• Federal Employer Identification Number (EIN) or a Social Security Number (SSN) for a sole proprietorship
• The legal name of the business and any “Doing Business As” (DBA) name
• Physical business address, a description of business activities, and the corresponding North American Industry Classification System (NAICS) code
• Personal identifying information for all owners, partners, or corporate officers, including their names and Social Security Numbers

The registration process is completed online through the Connecticut Department of Revenue Services (DRS) portal, myconneCT, by filling out Form REG-1, Business Taxes Registration Application. There is a one-time $100 registration fee, which must be paid from a checking or savings account.

The Permit Application and Filing Process

Upon successful submission of the application and payment of the fee, the myconneCT system will immediately issue a temporary Sales and Use Tax Permit. The permanent permit is mailed within 15 days. This permit is valid for two years and must be renewed; the state will automatically mail a renewal to businesses with an active and compliant account.

After receiving the permit, the business must begin collecting sales tax on all taxable sales. Connecticut’s general sales tax rate is 6.35%, but different rates apply to specific goods and services. For instance, a higher tax rate is charged on meals and luxury items, while a lower rate applies to computer and data processing services.

The DRS assigns a filing frequency based on the business’s sales tax liability. Businesses with a tax liability of $4,000 or more in the previous year file monthly. Those with a liability between $1,001 and $4,000 file quarterly, and those with $1,000 or less file annually.

Returns must be filed electronically through the myconneCT portal using Form OS-114. A return must be filed for every period, even if no sales were made or no tax was collected. The due date for returns and payments is the last day of the month following the end of the reporting period.