Connecticut Legislature Modifies Previous Tax Changes

On June 30, 2015, final budget Bill S1502 was enacted by special session of the Connecticut General Assembly and signed by Governor Dannel Malloy.

This final budget Bill follows significant outcry from the business community and discussions between Governor Malloy and the General Assembly, in response to the original budget Bill, H7061, passed on June 3. That Bill encompassed wide-ranging changes to all facets of Connecticut taxation, including corporate income tax, personal income tax, and sale and use taxes. On June 10, Marcum issued a Tax Flash advising clients of the changes contained in the original Bill, many retroactive to January 1, 2015.

The updated Bill (S1502) changes a number of provisions of original Bill (H7061), as follows:

Mandatory Unitary Combined Reporting Requirement – Delayed Until 2016
The change to a unitary taxing scheme discussed in the June 10, 2015 Tax Flash remains in effect, but implementation has been postponed from tax years beginning on or after January 1, 2015 to tax years beginning on or after January 1, 2016.

Increase in Personal Income Tax Rates – To Remain as Previously Enacted
Effective January 1, 2015, personal income tax rates will rise via an increase in the top bracket from 6.7% to 6.9%, and through the creation of a new 6.99% marginal tax rate (for individuals earning more than $500,000 and couples earning more than $1 million).

Sales Tax Rate Increase for Computer and Data Processing Services Repealed
Bill S1502 repeals the increases in sales tax rates that were scheduled to go into effect on October 1, 2015 (2%) and October 1, 2016 (3%). Thus, the tax rate on Computer Services, including electronically delivered software, will remain at 1%. The Bill also restores the exemption for Internet access services, which will not fall under the Computer Services definition.

Sales Tax Increase for Website Creation, Development and Maintenance Delayed
The exclusion for sales tax on services rendered in connection with website creation, development and maintenance was to be repealed July 1, 2015, making those services subject to sales tax. S1502 delays the repeal of the exclusion to October 1, 2015.

Sales Tax on Car Washing Services
Taxation of car washing services was added by Bill H7061, and Bill S1502 expands that provision to include coin-operated car washes.

Ambulatory Surgical Center Tax
Original Bill H7061 imposed a 6% gross receipts tax on surgical centers, effective October 1, 2015. Special Bill S1502 amends this provision to provide that the tax will not be imposed on any amount of gross receipts that constitute either of the following:

• The first $1 million of gross receipts of the ambulatory surgical center in the applicable fiscal year; or
• Net patient revenue of a hospital imposed under Chapter 211a of the general statutes.

Should you have any questions related to this article or how these tax laws may impact you, contact your Marcum State and Local Tax Advisor.