If you have sold clothing online and have sales tax nexus in Connecticut, chances are you have been confused over the years. For a long time, clothing priced at under $75 was sales tax exempt in Connecticut. And then the state lowered that threshold to $50. But now, all clothing is taxable in Connecticut.
Fortunately, Connecticut has just one statewide tax rate, which is currently 6.35%.
Long story short, if you sell clothing to a buyer in Connecticut, chances are you’ll be required to simply charge the same 6.35% state sales tax rate that you would charge if you sold that same customer a toothbrush or a bedside table.
Sounds simple, right? Well, it is fairly simple… except if you charge $1,000 or more for an article of clothing or footwear.
Connecticut’s Clothing “Luxury Good Tax”
Connecticut doesn’t stop at making all clothing taxable.
They also tax some articles of clothing at a higher rate. This is part of Connecticut’s “luxury goods tax.”
The legalese says: “an article of clothing or footwear intended to be worn on or about the human body, a handbag, luggage, umbrella, wallet or watch for a sales price exceeding one thousand dollars is taxed at a rate of seven and three-fourths per cent on the entire sales price.”
Or to put it simply, if you sell an article of clothing, or one of the above listed accessories and price it at over $1,000 then you are required to charge a higher 7.75% sales tax rate on that article of clothing.
To sum it up, articles of clothing or footwear priced at $1,000 or less are taxed at Connecticut’s regular sales tax rate of 6.35%.
But articles of clothing, footwear (and some accessories) priced at $1,000 or higher are taxed at Connecticut’s higher rate of 7.75%.
How to Automate Connecticut Sales Tax Collection
Do you sell clothing online? Connecticut is just one of many US states, like New York and Massachusetts, where clothing is taxed differently based on price. If you accidentally collect sales tax on a product that isn’t taxable, you create a negative customer experience. No one wants your customer to back out of their shopping cart in favor of a competitor who gets tax right.
But if you don’t collect sales tax on a product that was actually taxable, you end up owing that sales tax out of pocket when it comes time to file your sales tax returns with the state.
That’s why TaxJar has your back. With the TaxJar API, you can be sure you’re collecting the right amount of sales tax. Our product tax codes ensure you collect the right amount of “luxury” sales tax on that taxable wedding dress you ship to Connecticut, and the regular 6.35% Connecticut sales tax amount on the shoes you ship in that same order.
Further, most eCommerce businesses have nexus in multiple states. For example, clothing priced under $110 is non-taxable at the state level in New York, while clothing is generally taxable in a majority of US states. With TaxJar, you’ll collect the right amount of sales tax from every customer, in every state, every time.
Ready to automate sales tax collecting, reporting and filing? To learn more about TaxJar and get started, visit TaxJar.com/how-it-works.