I just received a host of proposals for the upcoming Connecticut Legislative Session proposed or endorsed by the Connecticut Department of Revenue Services (DRS) regarding Connecticut State Tax Changes. Two of the proposals will impact our state tax resolution clientele who have issues with Sales & Use taxes and those who owe money to the state of Connecticut for back income taxes.
Bad news regarding Connecticut State Tax Changes for those who owe CT taxes and want a Sales & Use permit:
The DRS is proposing to "prohibit the issuance of a tax license or permit" such as Sales and Use Tax Permits, Cigarette Retailer permits, Tobacco Products permits, etc., to any person who has an outstanding tax liability due to these Connecticut State Tax Changes. Once the taxpayer is in compliance, a license or permit could be issued. Of course, this proposal does not contain the statutory language that DRS is proposing, so I have to guess at how this would be worded and applied: So, think about this hypothetical for a second:
- You run your own convenience store for 5 years.
- Your store does not sell cigarettes.
- The store is in full compliance with all tax laws.
- The store is owned as a sole proprietorship.
- A hurricane hits the area and your store is destroyed.
- You missed your 3rd and 4th Quarter Estimated tax payments because all of your time and money is now going into rebuilding.
- You incur a tax liability because your store was the only one in the neighborhood and everyone and their mother refueled at your store and picked up gas for their generators prior to the storm – huge business boom before catastrophe.
- Your business is closed down for 6 months due to the rebuilding efforts.
- Once it reopens, business is down because everyone has switched to another gas station.
- You have 6 months of losses.
- Your tax liability remains unpaid because you have no money right now to pay it. You decide that you need something different to attract people back to your store so you apply for a cigarette retailer permit.
- You are denied because you owe the DRS money.
Unfortunately, due to these Connecticut State Tax Changes and without this competitive edge, you can't get back enough business to pay your liability. What are you to do? Does this seem too far-fetched? Well consider this; the text of the Connecticut State Tax Changes proposal reads:
" prohibit the issuance of a tax license or permit (e.g., Sales and Use Tax, Cigarette Retailer, Tobacco Products) by DRS to any person who has an outstanding tax liability. Once in compliance, the license or permit could be issued."
So any DRS tax debt could form the basis of denial; even state income taxes; even if you are in a repayment for those back taxes. For instance, what if someone owes $10,000 to the State for income — not Sales & Use – tax? And this person has been making payments religiously. This Connecticut State Tax Changes proposal could frustrate the ability to apply for a Sale and Use permit. These Connecticut State Tax Changes provide a good reason to deal with your CT state tax help now.
A proposal more favorable for our clients regarding Connecticut State Tax Changes:
Currently, the interest rate for balances due to DRS is 12% per year and the interest rate that DRS has to pay on late-issued refunds is 8%. If Connecticut's rates were tied to the federal rate, it would look more like the current IRS rates of 3% for both balances due and late-issued refunds. DRS is proposing to tie the state income tax rate on late refunds and balances due to the federal rate.
The Commissioner has proposed this change for the following stated reason: "Interest rates should not be considered punitive. They should reflect either the reasonable loss to the state of unpaid balances or reasonable loss to the taxpayer for the unpaid refund." WooHoo!! Someone who recognizes the basic concept of what interest is. A static interest rate that does not change with changes to the economy and currently acceptable interest rate is bound to become either punitive or irrelevant (i.e. too low to compensate anyone for their loss).
Interesting side note: by Connecticut law, any interest rate about 12% for a consumer loan is considered to be "usury" or an illegal rate of interest. 12% is the very maximum amount of interest allowed to be charged in the state of Connecticut for consumer loans (other than for businesses, where it increases to 17%). Please note that credit card companies across the country are allowed to charge more than this.
If you have a CT state tax issue that you need assistance with, contact us. We can help. Call us at 888-727-8796 or email info@irsmedic.com.
