Tax Horror Stories

Connecticut's Sales Tax on "Computer and Data Processing" Service

Connecticut has a sales tax on any service that the state deems as "computer and data processing", for e.g. it could be a magazine subscription your client got off the Internet or their groceries, it’s all the same to them. Under the Internet Tax Freedom Act, such taxation is prohibited until October 2001. The present governor has signed a bill to completely phase out this sales tax by July 1st, 2002. According to a policy statement by the Department of Revenue services for the state of Connecticut, "a purchaser of on-line access services where the benefit of the services is received in Connecticut is a user of taxable computer and data processing services, and is liable for use tax on the purchase of those services, at the current rate for computer and data processing services."

Even if the seller doesn’t collect the 6% tax on tangible personal properties or other services and products purchased over the Internet, the purchaser is responsible for remitting the tax on it. These are the kind of taxes that forced the Congress to pass laws like the Internet Tax Freedom Act to prevent anybody from taxing the Internet. The act is very clear on the moratorium it has placed on any taxation of e-commerce. Obviously the Congressmen understand that the issues at stakes are very fragile and one wrong step might negatively effect the "E-conomy" of the future. Still Connecticut’s Department of Revenue is going after collecting all and any use tax owed by their residents and businesses that use the Internet to do their shopping. They even offer "rewards" to other states for tracking down Connecticut residents that are buying products over the Internet but are not paying their taxes.