Connecticut Sales Tax Enforcement Is Heating Up—Here’s What You Need to Know
If you are selling goods or taxable services in Connecticut—or even into Connecticut—you may have noticed a sharp uptick in audit activity lately. From questionnaires to full-blown audits, the state is cracking down on businesses that have not been collecting and remitting sales tax properly.
Here is what you need to do to protect your business.
What’s Happening in Connecticut?
Over the last year, the Connecticut Department of Revenue Services (DRS) has increased its enforcement efforts around sales tax compliance. Businesses; specifically, those with lengthy non-compliance issues, out-of-state sales, online sales, and non-filers—are seeing:
- More audit notices
- Nexus questionnaires
- Requests for resale certificates
- Data-sharing follow-ups (if you were audited in another state)
Why Is This Happening Now?
Several factors are fueling the surge:
- Revenue Recovery Needs
Connecticut, like many states, is working to close post-pandemic budget gaps. Sales tax; especially from online sellers, presents a growing source of potential revenue.
- More Tools, Less Manpower
Despite stretched staffing at the DRS, the state is using automated tools to flag inconsistencies in filings, mismatches in registration data, and businesses that should be registered but are not.
- Catch-Up Due to Prior Underfunding
Connecticut’s Department of Revenue Services has long struggled with underfunding and a shortage of revenue examiners. With limited staff, the state is now devoting more targeted efforts to fully investigate and collect from businesses that are not in compliance with sales tax laws. This catch-up approach means businesses that may have flown under the radar in the past are now facing increased scrutiny.
- Audit Domino Effect
Connecticut may initiate an audit not because you made a mistake within the state, but because another state shared your sales data. Once one state finds a compliance issue, others often follow.
Tax Rates
The sales tax rate of 6.35% applies to the retail sale, lease, or rental of most goods (including digital goods, which are described in Special Notice 2019(8)) and taxable services.
Note: There are no additional sales taxes imposed by local jurisdictions in Connecticut.
Special Sales Tax Rates Apply to Certain Sales:
| Rate | Applies To |
| 1% | – Computer and data processing services- Canned software electronically accessed or transferred (business use only) |
| 2.99% | – Vessels, motors for vessels, trailers for vessels- Dyed diesel fuel sold by a marine dock for marine use |
| 4.5% | – Motor vehicles sold to nonresident U.S. military members stationed full-time in CT (with CERT-135 form) |
| 7.35% | – Meals and certain beverages |
| 7.75% | – Motor vehicles over $50,000- Jewelry (real or imitation) over $5,000- Clothing, handbags, luggage, watches, etc. over $1,000 |
| 9.35% | – Rental or lease of a passenger motor vehicle for 30 days or less |
What Should You Do If You Are Contacted?
Do not panic—but don’t ignore it either.
If you receive a questionnaire, request for records, or audit notice from Connecticut:
- Get help. Contact your Accavallo & Co team member immediately. A sales tax professional can help you respond accurately and avoid overpaying. We will speak with the revenue examiner and present data on your behalf. This reduces the margin for error and eases the nerves of the taxpayer.
- Respond promptly. Ignoring a DRS inquiry can escalate the situation.
- Gather documentation. Start pulling sales records, exemption certificates, and previous filings.
Not Registered but Making Sales into Connecticut?
If you have been making sales into Connecticut—especially online or digital sales—but are not registered to collect sales tax, now is the time to act.
Voluntary disclosure may still be an option if the state has not contacted you yet. This can limit penalties and interest, and help you get compliant without triggering an audit.
Bottom Line
Connecticut is taking sales tax enforcement seriously—and it is not just big businesses being targeted. Whether you are a remote seller, a digital goods provider, or a local company, understanding your tax obligations and getting ahead of compliance issues is essential.
If you are unsure whether you’re at risk or want to proactively address exposure, consult with your Accavallo & Company tax professional who understands Connecticut’s rules and audit trends.
