Will Out-of-State Sellers Soon be Collecting Connecticut Sales Tax?

by TaxJar November 1, 2020

If you’ve been following the internet sales tax debate for any length of time, you’ve probably run into the Quill Corp. v. North Dakota Supreme Court ruling. The ruling says that companies must have some form of physical presence in the state to collect sales tax. While the Supreme Court case that led to the ruling was about mail order companies, it has generally been understood that eCommerce sales fall under the same principle.

In other words, if you sell online but do not have a physical presence in a state, then you are not responsible for collecting sales tax in that state.

Recently, states have decided to question the validity of the Quill ruling as it concerns internet sales. States need revenue, and some even feel that eCommerce sellers have an advantage over local brick and mortar stores and thus are taking away business (and sales tax) from local businesses.

Connecticut is the latest state to jump into the fray.

Connecticut’s Troubling New Sales Tax Bulletin
Up until recently, Connecticut’s SN 92(19), called “Effect of Quill Corp. v. North Dakota on the Collection of Use Tax by Retailers Who Engage in Business in Connecticut Only by Selling Items Through Mail Order Catalogs With Delivery by Common Carriers,” basically laid out guidelines how companies and sellers were to operate under the guidelines of Quill. Basically, if a business had no official capacity or presence in the state, then they were not required to collect sales tax.

That sounds good, right?

But recently, Connecticut released a new bulletin revoking the above special notice SN 92(19.) While state authorities haven’t exactly detailed if or how they plan on collecting Connecticut sales tax from out of state sellers, they’ve taken steps to try and enforce their new rules. All the while Quill is still a valid US Supreme Court ruling, by the way. While the fight to require “internet sales tax” goes on at the federal and state level, nothing has officially changed yet.

Filing Sales Tax in Connecticut
If you need to file a sales tax return in Connecticut, TaxJar has your back. You can now enroll in AutoFile for the state of Connecticut and we’ll automatically file your sales tax return for you! Find out more at TaxJar.com.

Connecticut Ramping Up for Internet Sales Tax
We need to watch Connecticut’s next move. The state’s revenue commissioner Louis Bucari says they want to “make sure Connecticut is in the best possible position” when it comes to applying nexus to sellers who sell into the state. It’s hard to say whether they plan to try and tax out-of-state sellers soon or when federal legislation passes. But again, as it seems like Connecticut is intent on ignoring (or reinterpreting) the Quill ruling,

Making things even more interesting, an Amazon fulfillment warehouse is scheduled to open in Connecticut in 2014. With the state’s new free-for-all rules, how will this affect what Amazon sellers will have to put up with when it comes to collecting sales tax? Will Connecticut be like Minnesota and definitively rule that 3rd party fulfillment creates sales tax nexus?

This is an important issue to watch for Amazon FBA sellers, and other 3rd party fulfillment sellers who may end up with sales tax nexus according to Connecticut’s possible new rules. We’ll keep you posted here as this Connecticut vs. Quill issue plays out.

Start the conversation! We appreciate input from Connecticut sellers or accounting professionals with more to add about this bulletin.Please note: This blog is for informational purposes only. Be advised that sales tax rules and laws are subject to change at any time. For specific sales tax advice regarding your business, contact a tax advisor.

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