How do I collect sales tax legally?

How to Collect Sales Tax Legally in Connecticut

Collecting sales tax in Connecticut requires understanding the state's specific rules and operational steps. Follow this guide to ensure your business complies with Connecticut sales tax regulations.

Register for a Sales Tax Permit

• Register with the Connecticut Department of Revenue Services (DRS): Before collecting sales tax, your business must obtain a Sales and Use Tax Permit by registering online through the DRS website.
• Provide accurate business information: Ensure your business registration includes your federal EIN, business structure, and contact details for compliance and reporting purposes.

Determine Taxable Sales

• Identify taxable goods and services: In Connecticut, most tangible personal property sales are taxable. Some services may also be taxable. Review the DRS guidelines to classify your products correctly.
• Understand exemptions: Certain sales may be exempt, such as sales to nonprofit organizations or resale items. Maintain proper documentation for exempt sales to support your records.

Collect the Correct Sales Tax Rate

• Apply the statewide rate: As of 2026, Connecticut’s base sales tax rate is 6.35%.
• Account for special district taxes: Some areas may have additional local taxes; verify if your business location requires collecting these.
• Use point-of-sale systems: Implement automated software or POS systems that calculate sales tax accurately based on product and location.

Maintain Accurate Records

• Track all taxable and non-taxable sales: Maintain detailed invoices and receipts for each transaction.
• Retain exemption certificates: Keep copies of exemption certificates from customers for audit purposes.
• Use bookkeeping software: Automate recordkeeping to ensure accuracy and simplify reporting.

Report and Remit Sales Tax

• File sales tax returns regularly: Connecticut requires periodic filing—monthly, quarterly, or annually—depending on your sales volume.
• Submit payments on time: Remit collected sales tax to the Connecticut DRS by the due dates to avoid penalties.
• Use online portals: Utilize the DRS online services for filing returns and payments to streamline compliance.

Additional Operational Considerations

• Employee training: Train staff on proper sales tax collection procedures to reduce errors.
• Audit preparedness: Keep all sales tax records organized and accessible in case of a DRS audit.
• Stay updated: As of 2026, monitor any changes in tax rates or regulations through the Connecticut DRS website.