New State Tax Law Targets Online Retailers

A new Connecticut law requires larger online retailers to add sales taxes to purchases beginning Dec. 1.
The new law applies to companies that do $250,000 or more in annual business in Connecticut and have at least 200 separate transactions here each year.
Known as marketplace facilitators, these large companies—including Amazon and eBay—provide a forum that enables third parties, known as marketplace sellers, to advertise property or services subject to sales tax, including digital goods.
Since 2013, Amazon has charged state sales tax on items it sells in Connecticut.
However, third-party sellers operating on Amazon and other facilitators, did not add sales taxes.

Adds $35 Million in Revenue

From Dec. 1, the marketplace facilitator must collect the 6.35% sales tax—directly or indirectly through agreements with third parties—then remit payments to the state on behalf of the marketplace seller.
Coupled with a change earlier this year in federal law, the statute is expected to bring about $35 million in additional revenue to the state.
Marketplace facilitators are also required as of Dec. 1 to register with the state Department of Revenue Services and obtain a Connecticut Sales and Use Tax Permit.
Some out-of-state marketplace sellers may also be required to register with the state DRS, depending on annual sales here.
The DRS issued guidance for conditions under which marketplace facilitators and marketplace sellers must register.

National Trend

South Dakota earlier this year won a U.S. Supreme Court case, gaining the right to collect sales tax on online purchases from out-of-state companies.
Since that June decision, at least 30 states started requiring retailers to charge sales taxes, even if they don’t have a physical presence in those states.
Connecticut passed its law in May.
Connecticut consumers have always been required by law to pay sales tax on out-of-state purchases, although few seem aware of the law—and fewer voluntarily paid it, according to DRS Commissioner Scott Jackson.
Businesses with questions about the new law may email the DRS Legal Division, or call them at 860.297.5962 for Connecticut businesses and 800.382.9463 for out-of-state businesses.

For more information, contact CBIA’s Eric Gjede (860.480.1874) | @egjede