Recent articles about the budget shortfalls in Connecticut prompted a round of discussion on whether the state should raise the state sales tax rate from 6% to 6.5%. Since many of us at FedTax.net live and work in Connecticut, we were preparing to send out a letter to Governor Malloy and our state Representatives suggesting there is an easier way to raise money without raising the tax rate. Governor Malloy beat us to the punch by announcing that he has already identified online sales as a challenge that his administration is going to take on. The Governor was quoted in the Connecticut Mirror as saying: “We can’t afford it,” referring to projected $48.3 million annual loss Connecticut faces from missed taxes on Internet sales. (The $48.3 billion is from a study by researchers at the University of Tennessee. In fact this study did not take telephone order or mail order sales into account, so it would be reasonable to expect that much more sales tax is going uncollected through these channels).
In announcing his appointment of Former Lt. Governor Kevin Sullivan as the new commissioner of the Department of Revenue Services, Malloy made it clear that taxing online sales will be a high priority for Sullivan: “Malloy, who takes office on Jan. 5, said his administration is looking at ways to tax Internet sales, a hot button issue this holiday shopping season. The state is in dire need of more revenue …and he wants Sullivan to go after those not paying their required taxes.” (nbcconnecticut.com)
Connecticut is very familiar with the Streamlined sales tax initiative, having participated in the process as an Advisory member state since 2002. In 2007 Connecticut conducted a study on whether to join the Streamlined Sales Tax Agreement but decided to wait for Federal legislation. (Which is ironic because it appears that Federal legislation has been ‘waiting’ for more states to join in). Last year the state introduced a bill into committee that would have enacted an ‘affiliate tax law’ similar to New York’s. The bill died in committee due to concern that Amazon would drop its Connecticut affiliate relationships if such a bill was passed.
The momentum at the federal level in support of the Main Street Fairness Act, combined with Governor Malloy’s determination to address the challenge at the state level, could result in Connecticut being the 25th state to join the list of Streamlined states.