Key Takeaways

  • The $250 Connecticut Business Entity Tax was repealed starting January 1, 2020.
  • LLCs must still meet annual filing obligations and comply with state tax requirements.
  • Connecticut imposes a pass-through entity tax (PET) on eligible businesses.
  • Businesses must register with the Connecticut Department of Revenue Services (DRS) and obtain a state tax ID.
  • Annual reports are required by March 31 each year, with an $80 filing fee.
  • Businesses may owe additional taxes, such as withholding, sales/use, and corporate taxes (if elected).

The CT business entity tax is a tax required of all limited liability companies that operate in the state of Connecticut. The business entity tax costs $250 and is due every two years.

What is the Connecticut Business Entity Tax?

The Connecticut business entity tax is a tax that is due on odd years. Your business must pay this tax by April 15 after the end of the biennial period. The current biennial period started on Jan. 1, 2017 and will end on Dec. 31, 2018, meaning that the next time the business entity tax is due is April 15, 2019.

LLCs in Connecticut have two different options for paying the business entity tax. First, you may pay the tax by mail. Second, you can use the Taxpayer Service Center (TCS) to pay for your tax online. You can call the Connecticut Department of Revenue at 850-297-5962 for more information about the business entity tax.

Repeal of the Connecticut Business Entity Tax

The Connecticut Business Entity Tax (BET)—a $250 biennial fee imposed on certain business entities—was officially repealed for tax years beginning on or after January 1, 2020. This change was enacted by the Connecticut General Assembly and means that LLCs, S corporations, limited liability partnerships, and limited partnerships are no longer required to pay this specific tax moving forward.

However, while the BET is no longer applicable, businesses must still comply with a range of other tax and reporting obligations, such as filing annual reports and paying pass-through entity taxes.

Getting a State Tax ID Number

Businesses that operate in this state must obtain a State Tax ID Number. You can acquire your ID number by registering with the Department of Revenue. Without this number, you will be unable to pay for your business entity tax, and your LLC may face stiff penalties. When you're ready to register your business with the Department of Revenue, you can either do so online or by filing Form REG-1. You can contact the Department directly if you need help with your registration or if you have any questions.

Use and Sales Tax in Connecticut

In addition to the business entity tax, Connecticut business must also pay sales taxes and use taxes. These taxes are due for all businesses that provide taxable services or sell goods in the state. Before your business can sell goods or offer services, you must acquire a Sales Tax Permit.

Businesses must collect these taxes and pay them to the state. A $500 fine is possible for businesses that fail to acquire a Sales Tax Permit. Imprisonment is also possible for operating a business without this permit.

Withholding Taxes in Connecticut

If your business operates in Connecticut and you have employees, you are responsible for withholding income taxes. Prior to collecting these taxes, you must register with the Department of Revenue for withholding tax. As with other taxes, you can register with the TSC or by mail. In addition to registering for withholding taxes, you must register for workers' compensation and unemployment taxes with the Department of Labor.

Other Forms to File

Other forms and taxes may be required depending on several different factors:

  • The location of your business
  • The industry of your business
  • How the IRS taxes your business
  • Whether you have employees and how many

Some of the forms you may need to file include:

  • Form CT-1040
  • Form CT-1065
  • Form CT-1120SI

Taxes that may apply to your Connecticut business include:

  • Corporation business tax
  • Controlling interest transfer tax
  • Estimated corporation business tax
  • Franchise tax
  • Minimum tax
  • Net income tax
  • Motor vehicle fuels tax
  • Property tax

Connecticut Annual Report Requirements for LLCs

Connecticut LLCs must file an annual report with the Secretary of State by March 31 each year. The filing must be submitted online through the Business One Stop portal, and there is an $80 fee as of 2023. The annual report updates or confirms key business details, including the registered agent, principal address, and the business's NAICS code.

Failure to file the report can result in penalties and may jeopardize the business’s good standing with the state.

Business Registration and Tax Filing Portal

Connecticut businesses can manage most of their tax obligations through myconneCT, the state’s online tax administration system. This platform allows entities to register their businesses, file returns, and make payments for various taxes, including:

  • Pass-through entity tax
  • Sales and use tax
  • Withholding tax
  • Corporation business tax (if applicable)

For businesses with employees, the ReEmployCT system is used to register for and file unemployment insurance tax returns with the Department of Labor.

Pass-Through Taxation Legislation

Since the beginning of 2017, pass-through entities in Connecticut have had to pay income tax. This legislation was passed by the Connecticut General Assembly.

This new income tax rule affects several entities:

  • Partnerships
  • S corporations
  • Limited liability companies that have elected to be taxed as partnerships.

Publicly traded partnerships are not affected by this legislation if they consent to filing an annual partnership return and report information about unit holders that have received over $500 in distributed income from sources in the state.

The annual report filed by publicly traded partnerships must include the following information:

  • The name of the unit holders
  • The address of the unit holders
  • The unit holder's EIN or Social Security number

Calculating Pass-Through Entity Income Tax

Connecticut pass-through entities are subject to an income tax rate of 6.99 percent. This rate applies to either taxable income or an alternate tax base. Taxable income is considered federal net income that comes from sources in Connecticut that have been modified by subtraction and addition adjustments from these same sources. These adjustments are the same ones that apply to individual taxpayers. Pass-through entities should use personal taxpayer sourcing rules when determining their taxable income.

No Franchise Tax in Connecticut

Unlike some states, Connecticut does not impose a franchise tax on LLCs or similar entities for the privilege of operating in the state. This can be a financial advantage for businesses choosing to form or operate in Connecticut.

Electing Corporate Tax Status in Connecticut

While LLCs are taxed as pass-through entities by default, members may elect to have the LLC taxed as a corporation by filing IRS Form 2553. If this election is made, the LLC will also be subject to the Connecticut Corporation Business Tax.

Corporations are required to file Form CT-1120 and may also be subject to a surtax, depending on their income. Additional registration with the DRS is required if this election is made.

Frequently Asked Questions

  1. Is the Connecticut Business Entity Tax still active?
    No. The $250 biennial business entity tax was repealed for tax years beginning on or after January 1, 2020.
  2. Do I still need to file an annual report in Connecticut?
    Yes. LLCs must file an annual report with the Secretary of State by March 31 each year and pay the $80 filing fee.
  3. What taxes do Connecticut LLCs have to pay now?
    LLCs may need to pay the Pass-Through Entity Tax (PET), sales and use tax, withholding tax, and unemployment tax, depending on their business activities.
  4. How do I register my Connecticut business for tax purposes?
    Businesses must register with the Department of Revenue Services (DRS) through the myconneCT portal.
  5. Can an LLC in Connecticut choose to be taxed as a corporation?
    Yes. An LLC can elect corporate tax status by filing IRS Form 2553. If elected, it will pay Connecticut’s corporate business tax instead of the PET.

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