CT Business Entity Tax: Everything You Need to Know
The CT business entity tax is a tax required of all limited liability companies that operate in the state of Connecticut.3 min read
2. Getting a State Tax ID Number
3. Use and Sales Tax in Connecticut
4. Withholding Taxes in Connecticut
5. Other Forms to File
6. Pass-Through Taxation Legislation
7. Calculating Pass-Through Entity Income Tax
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.
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
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:
- 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.
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