Connecticut Tax Law Changes - the "Amazon Law" 

Earlier this month, Connecticut enacted a bill that amended corporation business tax, personal income tax, and sales and use tax provisions, two of which will be discussed below.

The first change is the inclusion of an "Amazon Law" provision.  The sales tax provision of the bill explicitly requires remote retail sellers to collect sales tax on their taxable sales in the state if the company sells above a specific threshold amount ("... in excess of two thousand dollars during the preceding four quarterly periods ending on the last day of March, June, September and December") through remote affiliates in Connecticut.

The "Amazon Law" change is accomplished by expanding the definition of a "retailer" to include a person"...making sales of tangible personal property or services through [a third party] who is a resident of [Connecticut], if the retailer enters into an agreement with the resident, under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by link on an Internet web site or otherwise, to the retailer, provided [that a certain threshold of sales is met during the specific period]."

The second change provides that an entity is deemed to be engaged in business in Connecticut if it acts through affiliates in Connecticut and its sales exceed the threshold stated above.

The term "engaged in business in the state" was amended to expand acts or methods of transacting business to now include"...retail sales [that] are made from outside this state to a destination within this state ... by the distribution of catalogs, periodicals, advertising flyers or other advertising by means of print, radio or television media, or by mail, telegraphy, telephone, computer database, cable, optic, microwave or other communication system, for the purpose of effecting retail sales of tangible personal property, provided one hundred or more retail sales from outside this state to destinations within this state are made during [a specific] twelve-month period...," where the nonresident has an affiliate within Connecticut.

For purpose of this provision, persons are affiliated persons with respect to each other where one of such persons has an ownership interest of more than five percent, whether direct or indirect, in the other.

These provisions took effect upon the passage of the bill and are applicable to sales occurring on and after May 4, 2011.

Connecticut tax officials say they are reviewing what action they may take in the wake of the adoption of this new law.  A spokesman for Commissioner of Revenue Services Kevin Sullivan says that all options are being reviewed with respect to all periods that these companies have had substantial nexus as a result of doing business in the state while profiting from the unfair advantage of not collecting and remitting sales taxes as other in-state and out-of-state businesses do.

Please review your internet sales, and contact us to discuss compliance if you believe that you are affected by the new Connecticut statutes.

Standard Mileage Rate Deduction increases  

for the Second Half of 2011

The Internal Revenue Service announced on June 23, 2011, an increase in the optional standard mileage rates for the six months of 2011.  Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.  

The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011.  This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as previously established by the Internal Revenue Service.

The New York State Tax Department has won a decision that could impact taxpayers who are domiciled in other states but are present in New York State for more than 183 days.

The decision held the taxpayer was subject to New York State Income tax and possibly New York City tax as residents, since they maintained a permanent place of abode in New York, although the taxpayer never used the apartment as his residence.  The apartment was maintained by the taxpayer for his sick elderly parents.  The decision of the Tax Appeals Tribunal could result in New York State residency and taxation for individuals who work in New York and are present for more than 183 days a year and own a house or apartment in New York, even if not used by the taxpayer as his residence.

 New York Broadens its Power to Deal  

with Sales Tax Compliance