Issues affecting Connecticut s implementation of the SSUTA
There are several issues that have been identified as unique to Connecticut or that would require a major revision to the current sales tax law.
Prohibition of multiple rates. §308 of the SSUTA prohibits multiple state sales tax rates. The following have been identified as requiring change: ¾ The room occupancy tax is currently under the Sales and Use Tax statute at a rate of 12%.
Member states have either removed their room occupancy tax from their Sales and Use Tax chapters by adding a replacement/excise tax or excluded it from their petition. ¾ Computer and data processing services are imposed at a 1% rate. ¾ The Manufacturing Recovery Act of 1992 fifty percent exemption is currently levied at an
effective rate of 3% on manufacturers, fabricators and processors. Prohibition of exemptions based on value of item. §323 of the SSUTA prohibits exemptions that are based on the value of the transaction or item. The following have been identified as
items that may require change: ¾ The exemption for clothing under $50. revenue for this exemption.
Connecticut currently foregoes $140 million in
¾ Monthly charges of $150 or less for electricity otherwise exempt. ¾ The first $2,500 of funeral expenses. ¾ Items not costing more than $20 each by certain nonprofit organizations and schools. ¾ Sales of certain items for not more than $100 by nursing homes, rest homes, residential
care homes, convalescent homes or adult day care centers.
Treatment of Services.
Connecticut, unlike many other states, taxes a broad array of
enumerated services under the sales and use tax. The SSUTA requires that a state must use destination sourcing for taxing services. Under the agreement, general sourcing definitions for receipt of services is where the services are first used. However, the Governing Board has not fully clarified what destination means for services, which could pose a problem for Connecticut.
Pros/Cons for Connecticut’s joining the SSUTA
Currently, Internet and catalog retailers without physical presence do not collect sales other "clicks and bricks" retailers with both online and traditional stores are required to
taxes on all taxable sales.
As Internet sales displace “Main Street” sales, state governments need to
stop the erosion in this traditionally stable revenue source to be able to reliably fund necessary services
for its citizens into the future and level the playing field the extent sellers voluntarily collect and remit under the
domestic and out-of-state retailers. To the playing field is somewhat leveled.
According to estimated population figures from the U.S. Bureau of the Census for 2005, only 21.3% of the country’s population lives in states that are members of the SSUTA. If associate member states are added in, that percentage rises to 30.7%. While Connecticut joining would only increase that percentage to 31.9%, it would show that states like Connecticut consider this an important issue and may provide impetus for Congress to pass federal legislation to require that all remote sellers register
and remit sales and use taxes to those states that are part of the SSUTA.
For retailers that voluntarily agree to collect and remit sales taxes, uniformity of definitions greatly decrease the burden of compliance and force states to be less parochial as members of the world economy.
While the SSUTA was created to remove barriers to interstate commerce by providing uniformity in tax base definitions and sourcing rules for all taxable transactions, central electronic registration, as well as simplification of rates, exemptions, and remittances while preserving an individual state’s taxing authority, the decision to comply with the SSUTA can only be made by each governor and state