Connecticut is stepping up efforts to collect state sales taxes not being paid by online and out-of-state retailers.
Current state law requires out-of-state sellers with a substantial economic presence in the state to collect and remit Connecticut sales tax. But the Department of Revenue Services estimates at least $70 million is being evaded annually.
DRS Commissioner Kevin Sullivan says it's unfair when only in-state businesses "bear the burden of tax collection and the pricing disadvantage of including sales tax" while out-of-state businesses offer the same goods and services, but sales tax-free.
“That’s not possible when out-of-state retailers promote, facilitate, contract and deliver the same goods and services as in-state businesses but only Connecticut businesses bear the burden of tax collection and the pricing disadvantage of including sales tax. It’s also a burden on consumers who are legally responsible to pay use tax for untaxed purchases of goods and services. And, when any group does not pay its fair share, everyone else pays for it," Sullivan said in a statement on Tuesday.
Sullivan says DRS plans to close this loophole for big retailers doing business in Connecticut, not out-of-state companies doing a modest amount of business in the state.
“We are not going to chase out-of-state retailers that make a modest amount of sales into Connecticut. We are going to close this tax loophole for big retailers doing big business in Connecticut and not competing fairly. States have waited for decades in the hope that Congress would help, but that is clearly not going to happen. So it’s up to the states to assure the promise of the federal Commerce Clause that neither in-state nor out-of-state retailers will have an unfair advantage in the marketplace and in taxes paid to help maintain that marketplace," Sullivan said.
President of the Connecticut Retail Merchants Association Tim Phelan "commended" the work of the Department of Revenue Services and said their "main street retailers" just want the "chance to compete fairly."
"That’s not happening when out of state on-line retailers and other sellers of goods operate tax free online," Phelan said in a statement on Tuesday.
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