New Year Brings State Tax Changes
The New Year brings an expansion of Connecticut’s sales tax, the end of the business entity tax, and an increase in small business filing fees.
Effective Jan. 1, the state’s 6.35% sales will apply to safety apparel items, parking, dry cleaning, laundromats (other than coin operated), and interior design services.
The expansion of the sales tax was part of the two-year, $43.4 billion budget adopted by the legislature and signed by Gov. Ned Lamont in June.
“Just like the tax increases that went into effect in both July and October, residents, businesses, and parents will feel an additional pinch in their wallets starting Jan. 1,” said CBIA’s Eric Gjede.
Adding safety apparel to the list of taxable items will increase workplace safety and compliance costs for Connecticut companies.
The state Department of Revenue Services defines safety apparel as “any item of clothing or protective equipment worn by an employee for protection during the course of the employee’s employment.”
This includes fall prevention belts and harnesses, goggles and safety glasses, helmets and hard hats, hearing protection, respirators, and athletic equipment.
Business Entity Tax
The New Year also brings the end of the biennial, $250 business entity tax—loathed more on principle rather than impact as it funded no state services.
The BET was essentially a small business tax, levied on all limited liability companies, partnerships, and S corporations formed under the laws of Connecticut or registered to do business in the state.
While small businesses may celebrate the BET’s demise, annual filing fees for LLCs, partnerships, and S corporations increase 300% to $80 effective Jan. 1.
“We urge lawmakers to pursue tax policies that will encourage businesses to come to Connecticut and help grow our economy,” Gjede said.
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