Connecticut Adds Taxes to Internet Sales and Jewelry

Connecticut is the latest state to require Internet
companies collect sales tax.

The requirement was part of a budget signed
by Governor Dannel Malloy May 4.

The new law requires online retailers to collect Connecticut
sales tax if they conduct more than $2,000 worth of business and have
affiliates (defined as “independent contractor or other representatives”) in
the state.

Similar laws are already on the books in several states, and
were recently passed in Illinois
and Arkansas. Other
state legislatives are currently considering them.

The new budget also includes a .65 percent luxury tax on
jewelry items over $5,000, and watches over $1,000.

Even though the luxury tax is listed as a 7 percent tax,
it is not added on to the state’s standard sales tax, which has now risen to
6.35 percent. The current .65 percent levy is significantly lower than the Governor’s original budget proposal, which called for a 3
percent tax on jewelry sales.

This tax targeting jewelry is the first
since the federal luxury tax was repealed in the 1990s, and Jewelers of America and the Connecticut Jewelers Association have expressed concern about its impact.

“While we’re pleased that
Connecticut lawmakers said no to the higher luxury tax rate of 3 percent, Jewelers of
America is concerned that even a smaller tax sets an unwelcome precedent,” said JA chief operating officer Robert Headley. “Historically speaking, these types of taxes don’t work and have hurt
affected industries.”

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