Connecticut’s use tax, mirroring the state sales tax rate of 6.35%, is a critical component ensuring fair competition between in-state and out-of-state sellers. It applies to goods or services purchased outside Connecticut and used within the state without paying sales tax. For businesses, managing use tax obligations involves several strategic steps:

Identify Taxable Purchases: Determine which out-of-state purchases are subject to use tax. Common items include online purchases, mail-order goods, and equipment bought during business trips to other states.

Accurate Record-Keeping: Maintain detailed records of all out-of-state purchases, including receipts and invoices. This documentation is essential for calculating and reporting use tax accurately.

Utilize Tax Automation Tools: Implement reliable tax software that can track out-of-state purchases and automate use tax calculations. This reduces manual errors and ensures timely compliance.

Regularly File Use Tax Returns: Businesses must report and pay use tax using Form OS-114. Establish a routine schedule for filing returns to avoid penalties and interest charges.

Stay Informed on Exemptions: Some business purchases and production materials may be exempt from use tax. Regularly consult Connecticut’s tax regulations to identify eligible exemptions and apply them correctly.

Consult Tax Professionals: Engaging with tax advisors can provide tailored guidance on managing use tax obligations, ensuring compliance, and optimizing tax strategies.

By effectively managing use tax obligations, Connecticut businesses can maintain compliance, avoid penalties, and ensure fair competition within the state’s marketplace. Investing in robust tax management systems and maintaining organized records are key to successful use tax administration.