Connecticut Seal

General Assembly

File No. 762

    January Session, 2017

Substitute House Bill No. 7312

House of Representatives, May 15, 2017

The Committee on Finance, Revenue and Bonding reported through REP. ROJAS of the 9th Dist., Chairperson of the Committee on the part of the House, that the substitute bill ought to pass.

AN ACT CONCERNING THE DEPARTMENT OF REVENUE SERVICES' RECOMMENDATIONS FOR STATE TAXATION AND COLLECTION AND IMPROVING TAX GAP COMPLIANCE.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 12-39h of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2018):

[Any] Notwithstanding any instructions by the payor to the contrary, [notwithstanding,] any partial payment against any tax outstanding shall be applied by the Commissioner of Revenue Services first to any penalties unless a waiver of penalty has been requested and approved in accordance with the general statutes, and any amount in excess of such penalty shall be applied first to [interest on] such tax and then to the interest on such tax.

Sec. 2. Subparagraph (A) of subdivision (20) of subsection (a) of section 12-701 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2017, and applicable to taxable years commencing on or after January 1, 2017):

(A) There shall be added thereto (i) to the extent not properly includable in gross income for federal income tax purposes, any interest income from obligations issued by or on behalf of any state, political subdivision thereof, or public instrumentality, state or local authority, district or similar public entity, exclusive of such income from obligations issued by or on behalf of the state of Connecticut, any political subdivision thereof, or public instrumentality, state or local authority, district or similar public entity created under the laws of the state of Connecticut and exclusive of any such income with respect to which taxation by any state is prohibited by federal law, (ii) any exempt-interest dividends, as defined in Section 852(b)(5) of the Internal Revenue Code, exclusive of such exempt-interest dividends derived from obligations issued by or on behalf of the state of Connecticut, any political subdivision thereof, or public instrumentality, state or local authority, district or similar public entity created under the laws of the state of Connecticut and exclusive of such exempt-interest dividends derived from obligations, the income with respect to which taxation by any state is prohibited by federal law, (iii) any interest or dividend income on obligations or securities of any authority, commission or instrumentality of the United States which federal law exempts from federal income tax but does not exempt from state income taxes, (iv) to the extent included in gross income for federal income tax purposes for the taxable year, the total taxable amount of a lump sum distribution for the taxable year deductible from such gross income in calculating federal adjusted gross income, (v) to the extent properly includable in determining the net gain or loss from the sale or other disposition of capital assets for federal income tax purposes, any loss from the sale or exchange of obligations issued by or on behalf of the state of Connecticut, any political subdivision thereof, or public instrumentality, state or local authority, district or similar public entity created under the laws of the state of Connecticut, in the income year such loss was recognized, (vi) to the extent deductible in determining federal adjusted gross income, any income taxes imposed by this state, (vii) to the extent deductible in determining federal adjusted gross income, any interest on indebtedness incurred or continued to purchase or carry obligations or securities the interest on which is exempt from tax under this chapter, (viii) expenses paid or incurred during the taxable year for the production or collection of income which is exempt from taxation under this chapter or the management, conservation or maintenance of property held for the production of such income, and the amortizable bond premium for the taxable year on any bond the interest on which is exempt from tax under this chapter to the extent that such expenses and premiums are deductible in determining federal adjusted gross income, (ix) for property placed in service after September 10, 2001, but prior to September 11, 2004, in taxable years ending after September 10, 2001, any additional allowance for depreciation under subsection (k) of Section 168 of the Internal Revenue Code, as provided by Section 101 of the Job Creation and Worker Assistance Act of 2002, to the extent deductible in determining federal adjusted gross income, (x) to the extent deductible in determining federal adjusted gross income, the deduction allowable as qualified domestic production activities income, pursuant to Section 199 of the Internal Revenue Code, (xi) to the extent not properly includable in gross income for federal income tax purposes for the taxable year, any income from the discharge of indebtedness, in taxable years ending after December 31, 2008, in connection with any reacquisition, after December 31, 2008, and before January 1, 2011, of an applicable debt instrument or instruments, as those terms are defined in Section 108 of the Internal Revenue Code, as amended by Section 1231 of the American Recovery and Reinvestment Act of 2009, the inclusion of which income in federal gross income for the taxable year is deferred, as provided by said Section 1231, [and] (xii) to the extent not properly includable in gross income for federal income tax purposes, an amount equal to (I) any distribution from a manufacturing reinvestment account not used in accordance with subdivision (3) of subsection (c) of section 32-9zz to the extent that a contribution to such account was subtracted from federal adjusted gross income pursuant to clause (xix) of subparagraph (B) of this subdivision in computing Connecticut adjusted gross income for the current or a preceding taxable year, and (II) any return of money from a manufacturing reinvestment account pursuant to subsection (d) of section 32-9zz to the extent that a contribution to such account was subtracted from federal adjusted gross income pursuant to clause (xix) of subparagraph (B) of this subdivision in computing Connecticut adjusted gross income for the current or a preceding taxable year, and (xiii) to the extent not properly includable in gross income for federal income tax purposes, an amount equal to any compensation required to be recognized under Section 457A of the Internal Revenue Code that is attributable to services performed within this state.

Sec. 3. Subsection (c) of section 12-409 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2017):

(c) At the time of making an initial application for a permit, the applicant shall pay to the Commissioner of Revenue Services a permit fee of one hundred dollars for each permit. [Any permit issued on or after July 1, 1985, but prior to October 1, 2003, shall expire biennially on the anniversary date of the issuance of such permit unless renewed in accordance with such procedure and application form as prescribed by the commissioner.] Any permit issued on or after October 1, 2003, but prior to October 1, 2017, shall expire on the fifth anniversary date of the issuance of such permit unless renewed in accordance with such procedure and application form as prescribed by the commissioner. Any permit issued on or after October 1, 2017, shall expire biennially on the anniversary date of the issuance of such permit unless renewed in accordance with such procedure and application form as prescribed by the commissioner.

Sec. 4. Section 12-414 of the general statutes is repealed and the following is substituted in lieu thereof (Effective January 1, 2018):

(a) The taxes imposed [by] under this chapter are due and payable to the commissioner monthly on or before the last day of the month next succeeding each monthly period, except that (1) every person whose total tax liability for the twelve-month period ending on the preceding June thirtieth was less than one thousand dollars shall remit tax on an annual basis, (2) every person whose total tax liability for the twelve-month period ending on the preceding June thirtieth was one thousand dollars or more but less than four thousand dollars shall remit tax on a quarterly basis, and [(2)] (3) every person described in subdivision (2) of subsection (e) of this section shall remit tax as prescribed by the commissioner under said subdivision (2). ["Quarterly"] For purposes of this section, "quarterly" means a period of three calendar months commencing on the first day of January, April, July or October of each year or, if any seller commences business on a date other than the first day of January, April, July or October, a period beginning on the date of commencement of business and ending on March thirty-first, June thirtieth, September thirtieth or December thirty-first, respectively.

(b) (1) On or before the last day of the month following each monthly or quarterly period, as the case may be, or on the date or dates prescribed by the commissioner under subsection (e) of this section, a return for the preceding period shall be filed with the commissioner in such form as the commissioner may prescribe. An annual return shall be filed on or before January thirty-first and shall report sales for the previous calendar year.

(2) For purposes of the sales tax, a return shall be filed by every seller. For purposes of the use tax, a return shall be filed by every retailer engaged in business in the state and by every person purchasing services or tangible personal property, the storage, acceptance, consumption or other use of which is subject to the use tax, who has not paid the use tax due a retailer required to collect the tax, except that every person making such purchases for personal use or consumption in this state, and not for use or consumption in carrying on a trade, occupation, business or profession, need file only one use tax return covering purchases during a calendar year. Such return shall be filed and the tax due thereon paid on or before the fifteenth day of the fourth month succeeding the end of the calendar year for which such return is filed. Returns shall be signed by the person required to file the return or by his or her authorized agent but need not be verified by oath, provided a return required to be filed by a corporation shall be signed by an officer of such corporation.

(c) For purposes of the sales tax, the return shall show the gross receipts of the seller during the preceding reporting period. For purposes of the use tax, (1) in case of a return filed by a retailer, the return shall show the total sales price of the services or property sold by the retailer, the storage, acceptance, consumption or other use of which became subject to the use tax during the preceding reporting period, [;] and (2) in case of a return filed by a purchaser, the return shall show the total sales price of the service or property purchased by the purchaser, the storage, acceptance, consumption or other use of which became subject to the use tax during the preceding reporting period. The return shall also show the amount of the taxes for the period covered by the return in such manner as the commissioner may require and such other information as the commissioner deems necessary for the proper administration of this chapter. The Commissioner of Revenue Services is authorized in his or her discretion, for purposes of expediency, to permit returns to be filed in an alternative form wherein the person filing the return may elect to report his or her gross receipts, including the tax reimbursement to be collected as provided for in this section, as a part of such gross receipts or to report his or her gross receipts exclusive of the tax collected in such cases where the gross receipts from sales have been segregated from tax collections. In the case of the former, the percentage of such tax-included gross receipts that may be considered to be the gross receipts from sales exclusive of the taxes collected thereon shall be computed by dividing the numeral one by the sum of the rate of tax provided in section 12-408, expressed as a decimal, and the numeral one.

(d) Returns, together with the amount of the tax due thereon, shall be filed with the Commissioner of Revenue Services.

(e) (1) The commissioner, if he or she deems it necessary in order to [insure] ensure payment to or facilitate the collection by the state of the amount of taxes, may permit or require returns and payment of the amount of taxes for other than monthly or quarterly periods.

(2) (A) For purposes of this subdivision, "weekly period" means the seven-day period beginning on a Saturday and ending the following Friday. The commissioner may require any person who is delinquent, as described in section 12-7a, to remit the tax collected during a weekly period on a weekly basis. Any person who is required to remit tax for a weekly period shall remit such tax to the commissioner on or before the Wednesday next succeeding the weekly period and shall do so in the manner and method prescribed [by the commissioner] in subparagraph (B) of this subdivision.

(B) The requirement to remit tax on a weekly basis shall not alter a person's obligation to file monthly or quarterly returns, as the case may be, as provided in subsection (b) of this section. To the extent that the end of one month and the beginning of the following month may fall within the same weekly period, each person required by the commissioner to remit tax under [this] subparagraph (A) of this subdivision shall report all of the tax collected and remitted during such weekly period, regardless of the month, along with the corresponding gross receipts, on the return covering the monthly period that ended during such weekly period. Each person obligated to file monthly or quarterly returns shall file such returns electronically with the Department of Revenue Services and shall make each weekly remittance by electronic funds transfer, in accordance with the provisions of chapter 228g.

[(B)] (C) The commissioner shall send a written notice, in accordance with the provisions of section 12-2f, informing each person required to remit tax on a weekly basis pursuant to this subdivision of such requirement. [Any person so required shall remit tax on a weekly basis for a period of one year commencing from the date set forth in such notice. Such notice shall also contain information regarding the manner and method of such remittal.] Such notice shall include (i) a statement that such person is required to establish a separate bank account as set forth in subparagraph (D) of this subdivision unless such person elects to remit tax through a certified service provider as set forth in subparagraph (E) of this subdivision, (ii) a form for such person to make such election, and (iii) a list of all certified service providers, which, for purposes of this section, means any service provider certified by the Streamlined Sales Tax Governing Board, Incorporated, and the contact information for each such provider. A person making such election shall return the form to the commissioner not later than two business days after receipt of the form. If a person does not make such election or fails to return the form in the time period prescribed under this subparagraph, such person shall establish a separate bank account and make deposits into such account, in accordance with the provisions of subparagraph (D) of this subdivision. The election of a certified service provider or the determination that a person is required to establish a separate bank account shall be irrevocable and shall remain in effect until the commissioner notifies such person that, based on evidence of continuous compliance, such person is no longer subject to the requirements of this subsection. The commissioner may authorize a certified service provider to retain a portion of each amount of sales tax remitted by such certified service provider on behalf of a person pursuant to this subparagraph, provided such retained portion shall not exceed the actual cost charged by the certified service provider to such person for the services provided pursuant to this subparagraph.

(D) (i) Each person who elects or is otherwise required to establish a bank account under subparagraph (C) of this subdivision shall, not later than thirty days after receiving the notice under said subparagraph, establish such bank account with a financial institution, as defined in section 36a-41. Such account shall be separate from any other bank account of such person and shall be established under the designation, "(name of person required to establish such account), Trustee, Special Fund in Trust for the State of Connecticut, Department of Revenue Services, Under Section 12-408 of the Connecticut General Statutes". Such person shall provide to the commissioner, upon request, the name of the financial institution where such account was established, the account number of such account and any other information regarding such account that the commissioner may require.

(ii) Upon the establishment of such account, such person shall deposit into such account the tax collected or received by such person, not later than two business days after such collection or receipt. The taxes deposited in such account shall constitute a fund in trust for the state of Connecticut and deemed to be the property of the state, payable only to the Department of Revenue Services, and no liens shall be placed on the taxes deposited in such account. No other funds shall be deposited into such account for any reason except for maintenance of the account.

(iii) If, without the prior authorization of the commissioner, a person withdraws funds from such account for any purpose other than to remit tax due to the commissioner, such person shall be guilty of larceny, as defined in section 53a-119. Each unauthorized withdrawal shall constitute a separate offense.

(iv) The commissioner may request at any time from a financial institution an accounting of any bank account established pursuant to clause (i) of this subparagraph that is maintained by such institution. Not later than five business days after receipt of such request from the commissioner, the financial institution shall provide an accounting to the commissioner.

(E) If a person elects under subparagraph (C) of this subdivision to remit tax through a certified service provider, such person shall, not later than thirty days after making such election, contract with a certified service provider and begin remitting tax through such provider. Such person shall provide to the commissioner, upon request, a copy of the executed contract, a written authorization for the commissioner to contact the certified service provider regarding such person and any other information with respect to the arrangement between such person and such provider that the commissioner may require. Each certified service provider remitting tax on behalf of any person required to remit tax for a weekly period shall do so in the manner and method prescribed in subparagraph (B) of this subdivision.

(F) (i) If any person who elects or is otherwise required to establish a bank account under subparagraph (C) of this subdivision fails to remit tax as provided in this subdivision and the commissioner determines that collection of such tax will be jeopardized by delay, the commissioner may serve notice on the financial institution where such bank account was established and withdraw such tax from such account. Upon receipt of such notice, the financial institution shall immediately pay to the commissioner the amount of tax requested by the commissioner and such payment shall be applied toward the amount of tax due to the commissioner from such person. The commissioner shall not withdraw from such account any penalty or interest that may be owed by such person in connection with such tax. Such penalty or interest may be collected by the commissioner in accordance with the provisions of section 12-35, as amended by this act, and chapter 906.

(ii) If the financial institution fails or refuses to pay to the commissioner the amount of tax sought by the commissioner pursuant to clause (i) of this subparagraph, the Attorney General may, upon request by the commissioner, bring an action in the superior court for the judicial district of Hartford to compel the financial institution to pay the amount of tax requested by the commissioner. The state may seek and the court may impose penalties against the financial institution for its failure to comply with its obligations under this clause.

(iii) Contemporaneously with the service of notice on the financial institution, the commissioner shall provide a written notice to the person who established the bank account pursuant to subparagraph (D)(i) of this subdivision of such person's right to file a claim with the commissioner if such account contains funds other than such taxes that constitute the property of the state. Such notice shall be provided in person, left at the person's dwelling or usual place of business, sent by first-class mail to such person's last-known address or sent by electronic mail or facsimile machine to such person. Such person shall have ten business days after receipt of such notice to file such claim on a form prescribed by the commissioner. Failure to file a claim within the time period prescribed shall constitute a waiver of any demand against the state.

(iv) Not later than ten business days after receipt of a claim filed pursuant to clause (iii) of this subparagraph, the commissioner shall determine whether such claim is valid. If the commissioner determines the claim is valid, the commissioner shall return to such person only those funds that are not the property of the state and such funds shall not be subject to offset by the state. If the commissioner determines the claim is not valid in whole or in part, the commissioner shall provide written notice of denial to such person.

(v) Not later than five business days after the date of mailing of a notice of denial, such person may file with the commissioner a written protest of the denial, setting forth the grounds on which the protest is based. If a protest is filed, the commissioner shall, not later than ten business days after receipt of such protest, reconsider the denial. The commissioner shall provide written notice to such person of the commissioner's determination of reconsideration, setting forth briefly the commissioner's findings of fact and the basis for the commissioner's decision in each case decided adversely in whole or in part to such person.

(vi) Any person aggrieved by a determination of the commissioner under this subsection may appeal to the superior court for the judicial district of New Britain, in accordance with the provisions of section 4-183. Such appeal shall not constitute an appeal from the Commissioner of Revenue Services for purposes of section 4-186.

[(C)] (G) (i) Any person who fails to remit tax as provided in this subdivision shall be subject to all penalties imposed under this chapter, including revocation of such person's permit.

(ii) Any penalty imposed under this subdivision shall not be subject to waiver.

(H) (i) Nothing in this subsection shall affect the rights afforded under chapter 219 to persons subject to the provisions of this subsection, including the ability to file a claim for refund under section 12-425.

(ii) Except as otherwise provided, no action taken by the commissioner under this subsection shall constitute collection actions for purposes of section 12-35, as amended by this act, or chapter 906.

(f) Except for returns and payments required to be made under subdivision (2) of subsection (e) of this section, the commissioner for good cause may extend the time for making any return and paying any amount required to be paid under this chapter, if a written request therefor is filed with the commissioner together with a tentative return which must be accompanied by a payment of the tax, which shall be estimated in such tentative return, on or before the last day for filing the return. Any person to whom an extension is granted shall pay, in addition to the tax, interest at the rate of one per cent per month or fraction thereof from the date on which the tax would have been due without the extension until the date of payment.

Sec. 5. Section 12-707 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2017):

(a) (1) Each employer required to deduct and withhold tax under this chapter from the wages of employees shall be liable for such tax and shall file a withholding return as prescribed by the Commissioner of Revenue Services and pay over to the commissioner, or to a depositary designated by the commissioner, the taxes so required to be deducted and withheld at the times specified in subsection (b) of this section.

(2) Each payer [of nonpayroll amounts] shall deduct and withhold tax under this chapter from the nonpayroll amounts of payees, shall be liable for such tax [,] and shall file a withholding return as prescribed by the commissioner and pay over to the commissioner, or to a depository designated by the commissioner, the taxes so required to be deducted and withheld at the times specified in subsection (b) of this section.

(b) (1) (A) With respect to the tax required to be deducted and withheld under this chapter from wages paid during any calendar year beginning on or after January 1, 2005, and in accordance with an annual determination described in subdivision (2) of this subsection, each employer shall be either a weekly remitter, monthly remitter or quarterly remitter for the calendar year. If an employer is a weekly remitter, the employer shall pay over to the commissioner the tax required to be deducted and withheld under this chapter in accordance with subdivision (3) of this subsection. If an employer is a monthly remitter, the employer shall pay over to the commissioner the tax required to be deducted and withheld under this chapter in accordance with subdivision (4) of this subsection. If an employer is a quarterly remitter, the employer shall pay over to the commissioner the tax required to be deducted and withheld under this chapter in accordance with subdivision (5) of this subsection. Notwithstanding any provision of this subsection, if an employer is a household employer, the employer shall pay over to the commissioner the tax required to be deducted and withheld under this chapter in accordance with subdivision (6) of this subsection.

(B) With respect to the tax required to be deducted and withheld under this chapter from nonpayroll amounts paid during any calendar year beginning on or after January 1, 2005, and in accordance with an annual determination described in subdivision (2) of this subsection, each payer shall be either a weekly remitter, monthly remitter or quarterly remitter for the calendar year. If a payer is a weekly remitter, the payer shall pay over to the commissioner the tax required to be deducted and withheld under this chapter in accordance with subdivision (3) of this subsection. If a payer is a monthly remitter, the payer shall pay over to the commissioner the tax required to be deducted and withheld under this chapter in accordance with subdivision (4) of this subsection. If a payer is a quarterly remitter, the payer shall pay over to the commissioner the tax required to be deducted and withheld under this chapter in accordance with subdivision (5) of this subsection.

(2) (A) The annual determination for an employer required to deduct and withhold tax under this chapter shall be based on the employer's reported liability for the tax required to be deducted and withheld under this chapter during the twelve-month look-back period, provided, if any employer fails timely to file one or more required withholding tax returns for the four quarterly periods within the twelve-month look-back period, the commissioner may base the annual determination for the employer on any information available to the commissioner. If an employer's reported liability for the tax required to be deducted and withheld under this chapter during the twelve-month look-back period was more than ten thousand dollars, the employer is a weekly remitter for the calendar year next succeeding such twelve-month period. If an employer's reported liability for the tax required to be deducted and withheld under this chapter during the twelve-month look-back period was more than two thousand dollars but not more than ten thousand dollars, the employer is a monthly remitter for the calendar year next succeeding such twelve-month period. If an employer's reported liability for the tax required to be deducted and withheld under this chapter during the twelve-month look-back period was two thousand dollars or less, the employer is a quarterly remitter for the calendar year next succeeding such twelve-month period. Notwithstanding any provision of this section, if an employer is a seasonal employer, the annual determination shall be based on the seasonal employer's reported liability for the tax required to be deducted and withheld under this chapter during the twelve-month look-back period multiplied by a fraction, the numerator of which is four, and the denominator of which is the number of quarterly periods during such twelve-month period that the employer paid wages to employees.

(B) The annual determination for a payer required to deduct and withhold tax under this chapter shall be based on the payer's reported liability for the tax required to be deducted and withheld under this chapter during the look-back calendar year, provided, if any payer fails timely to file the required withholding tax return for the look-back calendar year, the commissioner may base the annual determination for the payer on any information available to the commissioner. If a payer's reported liability for the tax required to be deducted and withheld under this chapter during the look-back calendar year was more than ten thousand dollars, the payer is a weekly remitter for the calendar year for which the annual determination is being made. If a payer's reported liability for the tax required to be deducted and withheld under this chapter during the look-back calendar year was more than two thousand dollars but not more than ten thousand dollars, the payer is a monthly remitter for the calendar year for which the annual determination is being made. If a payer's reported liability for the tax required to be deducted and withheld under this chapter during the look-back calendar year was two thousand dollars or less, the payer is a quarterly remitter for the calendar year for which the annual determination is being made.

(3) (A) An employer that is a weekly remitter shall pay over to the department the tax required to be deducted and withheld from wages under this chapter on or before the Wednesday next succeeding the weekly period during which the wages from which the tax was required to be deducted and withheld were paid to employees.

(B) A payer that is a weekly remitter shall pay over to the department the tax required to be deducted and withheld from nonpayroll amounts under this chapter on or before the Wednesday next succeeding the weekly period during which the nonpayroll amounts from which the tax was required to be deducted and withheld were paid to payees.

(4) (A) An employer that is a monthly remitter shall pay over to the department the tax required to be deducted and withheld from wages under this chapter on or before the fifteenth day of the month next succeeding the month during which the wages from which the tax was required to be deducted and withheld were paid to employees.

(B) A payer that is a monthly remitter shall pay over to the department the tax required to be deducted and withheld from nonpayroll amounts under this chapter on or before the fifteenth day of the month next succeeding the month during which the nonpayroll amounts from which the tax was required to be deducted and withheld were paid to payees.

(5) (A) An employer that is a quarterly remitter shall pay over to the department the tax required to be deducted and withheld from wages under this chapter on or before the last day of the month next succeeding the quarterly period during which the wages from which the tax was required to be deducted and withheld were paid to employees.

(B) A payer that is a quarterly remitter shall pay over to the department the tax required to be deducted and withheld from nonpayroll amounts under this chapter on or before the last day of the month next succeeding the quarterly period during which the nonpayroll amounts from which the tax was required to be deducted and withheld were paid to payees.

(6) An employer that is a household employer shall pay over to the department the tax required to be deducted and withheld under this chapter on or before the April fifteenth next succeeding the calendar year during which the wages from which the tax was required to be deducted and withheld were paid to household employees.

(c) In the case of an overpayment of tax under this chapter by an employer, refund or credit shall be made to the employer only to the extent that the amount of such overpayment was not deducted and withheld by the employer.

(d) The amount of tax required to be deducted and withheld and paid over to the commissioner under this chapter, when so deducted and withheld, shall be held to be a special fund in trust for the state. No employee or other person shall have any right of action against the employer [in] with respect to any moneys deducted and withheld from wages and paid over to the commissioner in compliance or in intended compliance with this chapter.

(e) (1) If an employer required to deduct and withhold tax under this chapter from the wages of employees and to pay over to the commissioner the taxes so required to be deducted and withheld sells out the employer's business or stock of goods or quits the employer's business, such employer's successors or assigns shall withhold a sufficient portion of the purchase price to cover the amount of such taxes, and any interest and penalties thereon, due and unpaid, as of the time of such sale or quitting of the business, until the employer produces a receipt from the commissioner showing that the taxes, interest and penalties have been paid or a certificate indicating that no such taxes are due.

(2) If the purchaser of a business or stock of goods fails to withhold a portion of the purchase price as required, the purchaser shall be personally liable for the payment of the amount required to be withheld by the purchaser, to the extent of the purchase price, valued in money. Not later than sixty days after the latest of the dates specified in subdivision (3) of this subsection, the commissioner shall either issue a certificate indicating that no taxes are due or mail notice to the purchaser in the manner provided in section 12-728 of the amount that must be paid as a condition of issuing the certificate. Failure of the commissioner to mail the notice shall release the purchaser from any further obligation to withhold a portion of the purchase price as provided in this subsection. The period within which the obligation of the successor may be enforced shall begin when the employer sells out the employer's business or stock of goods or quits the employer's business or when the assessment against the employer becomes final, whichever event occurs later.

(3) For purposes of subdivision (2) of this subsection, the latest of the following dates shall apply:

(A) The date that the commissioner receives a written request from the purchaser for a certificate;

(B) The date of the sale or quitting of the business; or

(C) The date that the employer's records are made available to the commissioner for audit.

(f) (1) The commissioner may, whenever the commissioner deems it necessary to ensure compliance with the payment requirements under this section, require any employer or payer to deposit with the commissioner such security as the commissioner determines necessary, provided the amount of such security shall not be greater than six times the employer's or payer's estimated liability for the prior twelve-month period or the employer's or payer's liability for the next twelve-month period, determined in such manner as the commissioner deems proper. The commissioner may increase or decrease the amount of the security, subject to the limitations in this subsection.

(2) The commissioner may sell the security at public auction if it becomes necessary to do so to recover any tax or amount required to be collected or any interest or penalty due. Notice of such sale may be served personally or by mail upon the person that deposited the security. If the notice is served by mail, it shall be made in the manner prescribed for service of notice of a deficiency assessment and shall be addressed to such person at the person's address as it appears in the commissioner's records. Security in the form of a bearer bond, issued by the United States or the state of Connecticut, that has a prevailing market price may be sold by the commissioner at private sale at a price not lower than the prevailing market price thereof. Upon any sale, any surplus above the amounts due shall be returned to the person that deposited the security.

[(f)] (g) As used in this section:

(1) "Employer" means an employer, as defined in Section 3401 of the Internal Revenue Code;

(2) "Payer" means a person making a payment of nonpayroll amounts to one or more payees;

(3) "Payee" means a person receiving a payment of nonpayroll amounts from a payer;

(4) "Nonpayroll amounts" includes (A) gambling winnings, other than Connecticut lottery winnings, that are paid to a resident, or to a person receiving payment on behalf of a resident, and that are subject to federal income tax withholding; (B) Connecticut lottery winnings that are required to be reported by the Connecticut Lottery Corporation to the Internal Revenue Service, whether or not subject to federal income tax withholding, whether paid to a resident, nonresident or a part-year resident, and whether paid to an individual, trust or estate; (C) pension and annuity distributions, where the recipient is a resident individual and has requested that tax be deducted and withheld under this chapter; (D) military retired pay, where the payee is a resident individual and has requested that tax be deducted and withheld under this chapter; (E) unemployment compensation, where the recipient has requested that tax be deducted and withheld under this chapter; and (F) payments made to an athlete or entertainer, where the payments are not wages for federal income tax withholding purposes and where the commissioner requires the payer to deduct and withhold tax under this chapter;

(5) "Reported liability" means, in the case of an employer, the liability for the tax required to be deducted and withheld under this chapter, as shown on the employer's withholding tax returns for the four quarterly periods within the twelve-month look-back period, and, in the case of a payer, the liability for the tax required to be deducted and withheld under this chapter, as shown on the payer's withholding tax return for the look-back calendar year;

(6) "Twelve-month look-back period" means the twelve-month period that ended on the June thirtieth next preceding the calendar year for which the annual determination for an employer is made by the commissioner;

(7) "Look-back calendar year" means the calendar year preceding by two years the calendar year for which the annual determination for a payer is made by the commissioner;

(8) "Seasonal employer" means an employer that regularly in the same one or more quarterly periods of each calendar year pays no wages to employees;

(9) "Household employee" means an employee whose services of a household nature in or about a private home of an employer constitute domestic service in a private home of the employer, as the phrase is used in Section 3121(a)(7) of the Internal Revenue Code or in regulations adopted thereunder;

(10) "Household employer" means an employer of a household employee;

(11) "Weekly period" means the seven-day period beginning on a Saturday and ending on the following Friday; and

(12) "Quarterly period" means the period of three full months beginning on the first day of January, April, July or October.

Sec. 6. Section 12-705 of the general statutes is repealed and the following is substituted in lieu thereof (Effective January 1, 2018):

(a) (1) Each employer, as defined in section 12-707, as amended by this act, maintaining an office or transacting business within this state and making payment of any wages taxable under this chapter to a resident or nonresident individual shall deduct and withhold from such wages for each payroll period a tax computed in such manner as to result, so far as practicable, in withholding from the employee's wages during each calendar year an amount substantially equivalent to the tax reasonably estimated to be due from the employee under this chapter with respect to the amount of such wages during the calendar year. The method of determining the amount to be withheld shall be prescribed by regulations of the Commissioner of Revenue Services adopted in accordance with chapter 54.

(2) Each payer, as defined in section 12-707, as amended by this act, of pension or annuity distributions, including distributions from an employer pension, an annuity, a profit-sharing plan, a stock bonus, a deferred compensation plan, an individual retirement arrangement, an endowment or a life insurance contract, that (A) maintains an office or transacts business within this state, and (B) makes payment of any amounts taxable under this chapter to a resident individual, shall deduct and withhold from the taxable portion of any such distribution a tax computed in such manner as to result, so far as practicable, in withholding from the distributions paid during each calendar year an amount substantially equivalent to the tax reasonably estimated to be due from the payee, as defined in section 12-707, as amended by this act, under this chapter with respect to such distributions during the calendar year. The method of determining the amount to be withheld shall be the same as the method used by employers with respect to the payment of wages, except that a lump sum distribution shall be taxable at the highest marginal rate unless (i) any portion of the lump sum distribution was previously subject to tax, or (ii) the lump sum distribution is a rollover that is effected as a direct trustee-to-trustee transfer. For purposes of this section, "lump sum distribution" means a payment from a payer to a resident payee of such resident payee's entire retirement account balance, exclusive of any other tax withholding and any administrative charges and fees.

(b) The commissioner may, if such action is deemed necessary for the protection of the revenue and under such regulations as [he] the commissioner may adopt in accordance with the provisions of chapter 54, require persons other than employers and payers (1) to deduct and withhold taxes from payments made by such persons to residents of this state, nonresidents and part-year residents, (2) to file a withholding return as prescribed by the commissioner, and (3) to pay over to the commissioner, or to a depositary designated by the commissioner, the taxes so required to be deducted and withheld, in accordance with a schedule established in such regulations.

(c) The commissioner may adopt regulations providing for withholding from (1) remuneration for services performed by an employee for his or her employer [which] that does not constitute wages, (2) wages paid to an employee by an employer not maintaining an office or transacting business within this state, or (3) any other type of payment with respect to which the commissioner finds that withholding would be appropriate under the provisions of this chapter if the employer and the employee, or, in the case of any other type of payment, the person making and the person receiving such payment, agree to such withholding. Such agreement shall be made in such form and manner as the commissioner may [, by regulation,] prescribe by regulations adopted in accordance with the provisions of chapter 54. For purposes of this chapter, remuneration, wages or other payments with respect to which such an agreement is made shall be regarded as if they were wages paid to an employee by an employer maintaining an office or transacting business within this state to the extent that such remuneration or wages are paid or other payments are made during the period for which the agreement is in effect.

Sec. 7. Section 12-706 of the general statutes is repealed and the following is substituted in lieu thereof (Effective January 1, 2018):

(a) The Commissioner of Revenue Services may enter into agreements with the tax officers of other states, which require income tax to be withheld from the payment of wages and salaries, so as to govern the amounts to be withheld from the wages and salaries of residents of such states under this chapter. Such agreements may provide for recognition of anticipated tax credits in determining the amounts to be withheld and, under regulations prescribed in accordance with the provisions of chapter 54 by said commissioner, may relieve employers in this state from withholding income tax on wages and salaries paid to nonresident employees. The agreements authorized by this subsection are subject to the condition that the tax officers of such other states grant similar treatment to residents of this state.

(b) (1) Each employer required to deduct and withhold tax under this chapter from the wages of an employee shall furnish to each such employee with respect to the wages paid by such employer to such employee during the calendar year, on or before January thirty-first of the next succeeding year, a written statement as prescribed by the Commissioner of Revenue Services showing the amount of wages paid by the employer to the employee, the amount deducted and withheld as tax [,] and such other information as said commissioner shall prescribe. Each such employer shall file a copy of such written statement with the Commissioner of Revenue Services on or before [said] such January thirty-first date.

(2) Each payer and person other than a payer required to deduct and withhold tax under this chapter from nonpayroll amounts shall furnish to each payee, as defined in section 12-707, as amended by this act, with respect to the nonpayroll amounts paid to such payee during the calendar year, on or before January thirty-first of the next succeeding year, a written statement as prescribed by said commissioner showing the amount of nonpayroll amounts paid to the payee, the amount deducted and withheld as tax and such other information as said commissioner shall prescribe. Each such payer shall file a copy of such written statement with said commissioner on or before such January thirty-first date.

(c) [Wages] Amounts upon which tax is required to be withheld shall be taxable under this chapter as if no withholding were required, but any amount of tax actually deducted and withheld in any calendar year shall be deemed to have been paid to said commissioner on behalf of the [person] employee or payee from whom withheld [,] and such [person] employee or payee shall be credited with having paid that amount of tax for the taxable year beginning in such calendar year.

Sec. 8. Subsection (g) of section 12-707 of the general statutes, as amended by section 5 of this act, is repealed and the following is substituted in lieu thereof (Effective January 1, 2018):

(g) As used in this section and sections 12-705 and 12-706, as amended by this act:

(1) "Employer" means an employer, as defined in Section 3401 of the Internal Revenue Code;

(2) "Payer" means a person making a payment of nonpayroll amounts to one or more payees;

(3) "Payee" means a person receiving a payment of nonpayroll amounts from a payer;

(4) "Nonpayroll amounts" includes (A) gambling winnings, other than Connecticut lottery winnings, that are paid to a resident, or to a person receiving payment on behalf of a resident, and that are subject to federal income tax withholding; (B) Connecticut lottery winnings that are required to be reported by the Connecticut Lottery Corporation to the Internal Revenue Service, whether or not subject to federal income tax withholding, whether paid to a resident, nonresident or a part-year resident, and whether paid to an individual, trust or estate; (C) pension and annuity distributions, [where the recipient is a resident individual and has requested that tax be deducted and withheld] for which the payer is required to deduct and withhold tax under this chapter; (D) military retired pay, where the payee is a resident individual and has requested that tax be deducted and withheld under this chapter; (E) unemployment compensation, where the recipient has requested that tax be deducted and withheld under this chapter; and (F) payments made to an athlete or entertainer, where the payments are not wages for federal income tax withholding purposes and where the commissioner requires the payer to deduct and withhold tax under this chapter;

(5) "Reported liability" means, in the case of an employer, the liability for the tax required to be deducted and withheld under this chapter, as shown on the employer's withholding tax returns for the four quarterly periods within the twelve-month look-back period, and, in the case of a payer, the liability for the tax required to be deducted and withheld under this chapter, as shown on the payer's withholding tax return for the look-back calendar year;

(6) "Twelve-month look-back period" means the twelve-month period that ended on the June thirtieth next preceding the calendar year for which the annual determination for an employer is made by the commissioner;

(7) "Look-back calendar year" means the calendar year preceding by two years the calendar year for which the annual determination for a payer is made by the commissioner;

(8) "Seasonal employer" means an employer that regularly in the same one or more quarterly periods of each calendar year pays no wages to employees;

(9) "Household employee" means an employee whose services of a household nature in or about a private home of an employer constitute domestic service in a private home of the employer, as the phrase is used in Section 3121(a)(7) of the Internal Revenue Code or in regulations adopted thereunder;

(10) "Household employer" means an employer of a household employee;

(11) "Weekly period" means the seven-day period beginning on a Saturday and ending on the following Friday; and

(12) "Quarterly period" means the period of three full months beginning on the first day of January, April, July or October.

Sec. 9. (NEW) (Effective July 1, 2017, and applicable to information returns due for calendar years commencing on or after January 1, 2017) (a) For purposes of this section, (1) "payment settlement entity", "third party settlement organization" and "electronic payment facilitator" have the same meanings as provided in Section 6050W of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time, and (2) "reporting entity" means any payment settlement entity, third party settlement organization, electronic payment facilitator or other third party acting on behalf of a payment settlement entity, that processes reportable payment transactions with respect to a participating payee located in Connecticut.

(b) (1) Each reporting entity shall file with the Department of Revenue Services, not later than thirty days after the reporting entity files information returns with the Internal Revenue Service, a duplicate of all such information returns, in such form and manner as prescribed by the commissioner.

(2) Any reporting entity that fails to file a duplicate information return required under subdivision (1) of this subsection within the time prescribed shall be subject to a civil penalty of (A) fifty dollars for each such failure if the failure is for not more than one month after such duplicate was required to be filed, and (B) an additional fifty dollars for each month or fraction thereof during which such failure continues, except the total amount of the penalty imposed on a reporting entity under this subdivision shall not exceed two hundred fifty thousand dollars annually. Subject to the provisions of section 12-3a of the general statutes, the commissioner may waive all or part of the penalties provided under this subdivision when it is proven to the commissioner's satisfaction that the failure to timely file such duplicate was due to reasonable cause and was not due to wilful neglect.

Sec. 10. Subsection (b) of section 12-35 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2017):

(b) (1) Any such warrant on any intangible personal property of any person may be served by mailing a certified copy of such warrant by certified mail, return receipt requested, to any third person in possession of, or obligated with respect to, receivables, bank accounts, evidences of debt, securities, salaries, wages, commissions, compensation or other intangible personal property subject to such warrant, ordering such third person to forthwith deliver such property or pay the amount due or payable to the state collection agency [which] that has made out such warrant, provided such warrant may be issued only after the state collection agency making out such warrant has notified the person owning such property, in writing, of its intention to issue such warrant. The notice of intent shall be: (A) Given in person; (B) left at the dwelling or usual place of business of such person; or (C) sent by certified mail, return receipt requested, to such person's last known address, not less than thirty days before the day the warrant is to be issued.

(2) Any such warrant on any intangible personal property of any person may be served by electronic mail or facsimile machine on any third person in possession of, or obligated with respect to, receivables, bank accounts, evidences of debt, securities, salaries, wages, commissions, compensation or other intangible personal property subject to such warrant, ordering such third person to forthwith deliver such property or pay the amount due or payable to the state collection agency [which] that has made out such warrant, provided such warrant may be issued only after the state collection agency making out such warrant has notified the person owning such property, in writing, of its intention to issue such warrant. The notice of intent shall be: (A) Given in person; (B) left at the dwelling or usual place of business of such person; or (C) sent by certified mail, return receipt requested, to such person's last-known address, not less than thirty days before the day the warrant is to be issued. Any such warrant for tax due may further include an order to such third person to continually deliver, during the one hundred eighty days immediately following the date of issuance of the warrant or until the tax is fully paid, whichever occurs earlier, all intangible property that is due and that becomes due to the person owing the tax. Except as otherwise provided in this subdivision, such warrant shall have the same force and effect as an execution issued pursuant to chapter 906.

Sec. 11. (NEW) (Effective October 1, 2017) (a) For purposes of this section, "hosting platform" means a person that offers an Internet web site through which (1) hotel or lodging house operators have the ability to display available hotel or lodging house rooms to prospective guests, (2) such operators and prospective guests have the ability to communicate with each other to reach agreement for occupancy of a room or rooms, and (3) guests have the ability to pay rent to such operator for such occupancy. "Hosting platform" does not include a person that advertises accommodations exclusively at a hotel or lodging house that holds a permit provided for in section 12-409 of the general statutes, as amended by this act.

(b) A hosting platform shall obtain a permit from the Commissioner of Revenue Services to collect the tax imposed under subparagraph (B) of subdivision (1) of section 12-411 of the general statutes. The hosting platform shall collect and remit such tax in the same form and manner as if the hosting platform is the hotel or lodging house operator. Any person other than a hosting platform may obtain a certificate of authority from the commissioner to collect such tax, provided such person agrees to collect such tax in accordance with the provisions of subdivision (3) of section 12-411 of the general statutes for occupancy of any room or rooms in a hotel or lodging house located in this state.

(c) If a guest has paid rent to the hosting platform and the hosting platform has collected the tax due on such rent, the hotel or lodging house operator shall not be required to collect the tax imposed under subparagraph (B) of subdivision (1) of section 12-411 of the general statutes.

Sec. 12. Section 12-3c of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

The Commissioner of Revenue Services shall, subject to the provisions of section 31-51i, require each applicant for a position of employment with, [and] each employee applying for transfer to and, at least once every ten years, each current employee of, the Department of Revenue Services, to (1) state in writing whether such applicant or employee has ever been convicted of a crime or whether criminal charges are pending against such applicant or employee at the time of application for employment or transfer and, if so, to identify the charges and court in which such charges are pending, and (2) be fingerprinted and submit to state and national criminal history records checks. The criminal history records checks required by this section shall be conducted in accordance with section 29-17a.

Sec. 13. Subparagraph (B) of subdivision (1) of section 12-408 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2017, and applicable to sales occurring on or after October 1, 2017):

(B) (i) At a rate of fifteen per cent with respect to each transfer of occupancy, from the total amount of rent received [for such occupancy of any room or rooms in] by a hotel or lodging house for the first period not exceeding thirty consecutive calendar days;

(ii) At a rate of eleven per cent with respect to each transfer of occupancy, from the total amount of rent received by a bed and breakfast establishment for the first period not exceeding thirty consecutive calendar days;

Sec. 14. Subparagraph (B) of subdivision (1) of section 12-411 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2017, and applicable to sales occurring on or after October 1, 2017):

(B) (i) At a rate of fifteen per cent of the rent paid [for occupancy of any room or rooms in] to a hotel or lodging house for the first period [of not more than] not exceeding thirty consecutive calendar days;

(ii) At a rate of eleven per cent of the rent paid to a bed and breakfast establishment for the first period not exceeding thirty consecutive calendar days;

Sec. 15. Section 12-407 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2017, and applicable to sales occurring on or after October 1, 2017):

(a) Whenever used in this chapter:

(1) "Person" means and includes any individual, firm, copartnership, joint venture, association, association of persons however formed, social club, fraternal organization, corporation, limited liability company, foreign municipal electric utility as defined in section 12-59, estate, trust, fiduciary, receiver, trustee, syndicate, the United States, this state or any political subdivision thereof or any group or combination acting as a unit, and any other individual or officer acting under the authority of any court in this state.

(2) "Sale" and "selling" mean and include:

(A) Any transfer of title, exchange or barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consideration;

(B) Any withdrawal, except a withdrawal pursuant to a transaction in foreign or interstate commerce, of tangible personal property from the place where it is located for delivery to a point in this state for the purpose of the transfer of title, exchange or barter, conditional or otherwise, in any manner or by any means whatsoever, of the property for a consideration;

(C) The producing, fabricating, processing, printing or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing or imprinting, including, but not limited to, sign construction, photofinishing, duplicating and photocopying;

(D) The furnishing and distributing of tangible personal property for a consideration by social clubs and fraternal organizations to their members or others;

(E) The furnishing, preparing, or serving for a consideration of food, meals or drinks;

(F) A transaction whereby the possession of property is transferred but the seller retains the title as security for the payment of the price;

(G) A transfer for a consideration of the title of tangible personal property which has been produced, fabricated or printed to the special order of the customer, or of any publication, including, but not limited to, sign construction, photofinishing, duplicating and photocopying;

(H) A transfer for a consideration of the occupancy of any room or rooms in a hotel, [or] lodging house or bed and breakfast establishment for a period of thirty consecutive calendar days or less;

(I) The rendering of certain services, as defined in subdivision (37) of this subsection, for a consideration, exclusive of such services rendered by an employee for the employer;

(J) The leasing or rental of tangible personal property of any kind whatsoever, including, but not limited to, motor vehicles, linen or towels, machinery or apparatus, office equipment and data processing equipment, provided for purposes of this subdivision and the application of sales and use tax to contracts of lease or rental of tangible personal property, the leasing or rental of any motion picture film by the owner or operator of a motion picture theater for purposes of display at such theater shall not constitute a sale within the meaning of this subsection;

(K) The rendering of telecommunications service, as defined in subdivision (26) of this subsection, for a consideration on or after January 1, 1990, exclusive of any such service rendered by an employee for the employer of such employee, subject to the provisions related to telecommunications service in accordance with section 12-407a;

(L) (i) The rendering of community antenna television service, as defined in subdivision (27) of this subsection, for a consideration on or after January 1, 1990, exclusive of any such service rendered by an employee for the employer of such employee. For purposes of this chapter, "community antenna television service" includes service provided by a holder of a certificate of cable franchise authority pursuant to section 16-331p, and service provided by a community antenna television company issued a certificate of video franchise authority pursuant to section 16-331e for any service area in which it was not certified to provide community antenna television service pursuant to section 16-331 on or before October 1, 2007;

(ii) The rendering of certified competitive video service, as defined in subdivision (38) of this subsection, for consideration on or after October 1, 2007, exclusive of any such service rendered by an employee for the employer of such employee;

(M) The transfer for consideration of space or the right to use any space for the purpose of storage or mooring of any noncommercial vessel, exclusive of dry or wet storage or mooring of such vessel during the period commencing on the first day of October in any year to and including the thirty-first day of May of the next succeeding year;

(N) The sale for consideration of naming rights to any place of amusement, entertainment or recreation within the meaning of subdivision (3) of section 12-540;

(O) The transfer for consideration of a prepaid telephone calling service, as defined in subdivision (34) of this subsection, and the recharge of a prepaid telephone calling service, provided, if the sale or recharge of a prepaid telephone calling service does not take place at the retailer's place of business and an item is shipped by the retailer to the customer, the sale or recharge shall be deemed to take place at the customer's shipping address, but, if such sale or recharge does not take place at the retailer's place of business and no item is shipped by the retailer to the customer, the sale or recharge shall be deemed to take place at the customer's billing address or the location associated with the customer's mobile telephone number; and

(P) The furnishing by any person, for a consideration, of space for storage of tangible personal property when such person is engaged in the business of furnishing such space, but "sale" and "selling" do not mean or include the furnishing of space which is used by a person for residential purposes. As used in this subparagraph, "space for storage" means secure areas, such as rooms, units, compartments or containers, whether accessible from outside or from within a building, that are designated for the use of a customer, where the customer can store and retrieve property, including self-storage units, mini-storage units and areas by any other name to which the customer has either unlimited free access or free access within reasonable business hours or upon reasonable notice to the service provider to add or remove property, but does not mean the rental of an entire building, such as a warehouse. For purposes of this subparagraph, furnishing space for storage shall not include general warehousing and storage, where the warehouse typically handles, stores and retrieves a customer's property using the warehouse's staff and equipment and does not allow the customer free access to the storage space and shall not include accepting specific items of property for storage, such as clothing at a dry cleaning establishment or golf bags at a golf club.

(3) (A) "Retail sale" or "sale at retail" means and includes a sale for any purpose other than resale in the regular course of business of tangible personal property or a transfer for a consideration of the occupancy of any room or rooms in a hotel, [or] lodging house or bed and breakfast establishment for a period of thirty consecutive calendar days or less, or the rendering of any service described in subdivision (2) of this subsection. The delivery in this state of tangible personal property by an owner or former owner thereof or by a factor, if the delivery is to a consumer pursuant to a retail sale made by a retailer not engaged in business in this state, is a retail sale in this state by the person making the delivery. Such person shall include the retail selling price of the property in such person's gross receipts.

(B) "Retail sale" or "sale at retail" does not include any sale of any tangible personal property, where, no later than one hundred twenty days after the original sale, the original purchaser sells or becomes contractually obligated to sell such property to a retailer who is contractually obligated to lease such property back to such original purchaser in a lease that is taxable under this chapter or the sale of such property by the original purchaser to the retailer who is contractually obligated to lease such property back to such original purchaser in a lease that is taxable under this chapter. If the original purchaser has paid sales or use tax on the original sale of such property to the original purchaser, such original purchaser may (i) claim a refund of such tax under the provisions of section 12-425, upon presentation of proof satisfactory to the commissioner that the mutual contractual obligations described in this subparagraph were undertaken no later than one hundred twenty days after the original sale and that such tax was paid to the original retailer on the original sale and was remitted to the commissioner by such original retailer or by such original purchaser, or (ii) issue at the time of such original sale or no later than one hundred twenty days thereafter a certificate, in the form prescribed by the commissioner, to the original retailer certifying that the mutual contractual obligations described in this subparagraph have been undertaken. If such certificate is issued to the original retailer at the time of the original sale, no tax on the original sale shall be collected by the original retailer from the original purchaser. If the certificate is issued after the time of the original sale but no later than one hundred twenty days thereafter, the original retailer shall refund to the original purchaser the tax collected on the original sale and, if the original retailer has previously remitted the tax to the commissioner, the original retailer may either treat the amount so refunded as a credit against the tax due on the return next filed under this chapter, or claim a refund under section 12-425. If such certificate is issued no later than one hundred twenty days after the time of the original sale but the tangible personal property originally purchased is not, in fact, subsequently leased by the original purchaser, such original purchaser shall be liable for and be required to pay the tax due on the original sale.

(4) "Storage" includes any keeping or retention in this state for any purpose except sale in the regular course of business or subsequent use solely outside this state of tangible personal property purchased from a retailer.

(5) "Use" includes the exercise of any right or power over tangible personal property incident to the ownership of that property, except that it does not include the sale of that property in the regular course of business.

(6) "Storage" and "use" do not include (A) keeping, retaining or exercising any right or power over tangible personal property shipped or brought into this state for the purpose of subsequently transporting it outside the state for use thereafter solely outside the state, or for the purpose of being processed, fabricated or manufactured into, attached to or incorporated into, other tangible personal property to be transported outside the state and thereafter used solely outside the state, or (B) keeping, retaining or exercising any right or power over tangible personal property acquired by the customer of a commercial printer while such property is located at the premises of the commercial printer in this state pursuant to a contract with such printer for printing and distribution of printed material if the commercial printer could have acquired such property without application of tax under this chapter.

(7) "Purchase" and "purchasing" means and includes: (A) Any transfer, exchange or barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property or of the occupancy of any room or rooms in a hotel, [or] lodging house or bed and breakfast establishment for a period of thirty consecutive calendar days or less for a consideration; (B) a transaction whereby the possession of property is transferred but the seller retains the title as security for the payment of the price; (C) a transfer for a consideration of tangible personal property which has been produced, fabricated or printed to the special order of the customer, or of any publication; (D) when performed outside this state or when the customer gives a resale certificate pursuant to section 12-410, the producing, fabricating, processing, printing or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing or imprinting; (E) the acceptance or receipt of any service described in any of the subparagraphs of subdivision (2) of this subsection; (F) any leasing or rental of tangible personal property. Wherever in this chapter reference is made to the purchase or purchasing of tangible personal property, it shall be construed to include purchases as described in this subsection.

(8) (A) "Sales price" means the total amount for which tangible personal property is sold by a retailer, the total amount of rent for which occupancy of a room is transferred by an operator, the total amount for which any service described in subdivision (2) of this subsection is rendered by a retailer or the total amount of payment or periodic payments for which tangible personal property is leased by a retailer, valued in money, whether paid in money or otherwise, which amount is due and owing to the retailer or operator and, subject to the provisions of subdivision (1) of section 12-408, as amended by this act, whether or not actually received by the retailer or operator, without any deduction on account of any of the following: (i) The cost of the property sold; (ii) the cost of materials used, labor or service cost, interest charged, losses or any other expenses; (iii) for any sale occurring on or after July 1, 1993, any charges by the retailer to the purchaser for shipping or delivery, notwithstanding whether such charges are separately stated in a written contract, or on a bill or invoice rendered to such purchaser or whether such shipping or delivery is provided by the retailer or a third party. The provisions of subparagraph (A) (iii) of this subdivision shall not apply to any item exempt from taxation pursuant to section 12-412. Such total amount includes any services that are a part of the sale; except as otherwise provided in subparagraph (B)(v) or (B)(vi) of this subdivision, any amount for which credit is given to the purchaser by the retailer, and all compensation and all employment-related expenses, whether or not separately stated, paid to or on behalf of employees of a retailer of any service described in subdivision (2) of this subsection.

(B) "Sales price" does not include any of the following: (i) Cash discounts allowed and taken on sales; (ii) any portion of the amount charged for property returned by purchasers, which upon rescission of the contract of sale is refunded either in cash or credit, provided the property is returned within ninety days from the date of purchase; (iii) the amount of any tax, not including any manufacturers' or importers' excise tax, imposed by the United States upon or with respect to retail sales whether imposed upon the retailer or the purchaser; (iv) the amount charged for labor rendered in installing or applying the property sold, provided such charge is separately stated and exclusive of such charge for any service rendered within the purview of subparagraph (I) of subdivision (37) of this subsection; (v) unless the provisions of subdivision (4) of section 12-430 or of section 12-430a are applicable, any amount for which credit is given to the purchaser by the retailer, provided such credit is given solely for property of the same kind accepted in part payment by the retailer and intended by the retailer to be resold; (vi) the full face value of any coupon used by a purchaser to reduce the price paid to a retailer for an item of tangible personal property, whether or not the retailer will be reimbursed for such coupon, in whole or in part, by the manufacturer of the item of tangible personal property or by a third party; (vii) the amount charged for separately stated compensation, fringe benefits, workers' compensation and payroll taxes or assessments paid to or on behalf of employees of a retailer who has contracted to manage a service recipient's property or business premises and renders management services described in subparagraph (I) or (J) of subdivision (37) of this subsection, provided, the employees perform such services solely for the service recipient at its property or business premises and "sales price" shall include the separately stated compensation, fringe benefits, workers' compensation and payroll taxes or assessments paid to or on behalf of any employee of the retailer who is an officer, director or owner of more than five per cent of the outstanding capital stock of the retailer. Determination whether an employee performs services solely for a service recipient at its property or business premises for purposes of this subdivision shall be made by reference to such employee's activities during the time period beginning on the later of the commencement of the management contract, the date of the employee's first employment by the retailer or the date which is six months immediately preceding the date of such determination; (viii) the amount charged for separately stated compensation, fringe benefits, workers' compensation and payroll taxes or assessments paid to or on behalf of (I) a leased employee, or (II) a worksite employee by a professional employer organization pursuant to a professional employer agreement. For purposes of this subparagraph, an employee shall be treated as a leased employee if the employee is provided to the client at the commencement of an agreement with an employee leasing organization under which at least seventy-five per cent of the employees provided to the client at the commencement of such initial agreement qualify as leased employees pursuant to Section 414(n) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, or the employee is added to the client's workforce by the employee leasing organization subsequent to the commencement of such initial agreement and qualifies as a leased employee pursuant to Section 414(n) of said Internal Revenue Code of 1986 without regard to subparagraph (B) of paragraph (2) thereof. A leased employee, or a worksite employee subject to a professional employer agreement, shall not include any employee who is hired by a temporary help service and assigned to support or supplement the workforce of a temporary help service's client; (ix) any amount received by a retailer from a purchaser as the battery deposit that is required to be paid under subsection (a) of section 22a-245h; the refund value of a beverage container that is required to be paid under subsection (a) of section 22a-244; or a deposit that is required by law to be paid by the purchaser to the retailer and that is required by law to be refunded to the purchaser by the retailer when the same or similar tangible personal property is delivered as required by law to the retailer by the purchaser, if such amount is separately stated on the bill or invoice rendered by the retailer to the purchaser; and (x) the amount charged for separately stated compensation, fringe benefits, workers' compensation and payroll taxes or assessments paid to a media payroll services company, as defined in this subsection.

(9) (A) "Gross receipts" means the total amount of the sales price from retail sales of tangible personal property by a retailer, the total amount of the rent from transfers of occupancy of rooms by an operator, the total amount of the sales price from retail sales of any service described in subdivision (2) of this subsection by a retailer of services, or the total amount of payment or periodic payments from leases or rentals of tangible personal property by a retailer, valued in money, whether received in money or otherwise, which amount is due and owing to the retailer or operator and, subject to the provisions of subdivision (1) of section 12-408, as amended by this act, whether or not actually received by the retailer or operator, without any deduction on account of any of the following: (i) The cost of the property sold; however, in accordance with such regulations as the Commissioner of Revenue Services may prescribe, a deduction may be taken if the retailer has purchased property for some other purpose than resale, has reimbursed the retailer's vendor for tax which the vendor is required to pay to the state or has paid the use tax with respect to the property, and has resold the property prior to making any use of the property other than retention, demonstration or display while holding it for sale in the regular course of business. If such a deduction is taken by the retailer, no refund or credit will be allowed to the retailer's vendor with respect to the sale of the property; (ii) the cost of the materials used, labor or service cost, interest paid, losses or any other expense; (iii) for any sale occurring on or after July 1, 1993, except for any item exempt from taxation pursuant to section 12-412, any charges by the retailer to the purchaser for shipping or delivery, notwithstanding whether such charges are separately stated in the written contract, or on a bill or invoice rendered to such purchaser or whether such shipping or delivery is provided by the retailer or a third party. The total amount of the sales price includes any services that are a part of the sale; all receipts, cash, credits and property of any kind; except as otherwise provided in subparagraph (B)(v) or (B)(vi) of this subdivision, any amount for which credit is allowed by the retailer to the purchaser; and all compensation and all employment-related expenses, whether or not separately stated, paid to or on behalf of employees of a retailer of any service described in subdivision (2) of this subsection.

(B) "Gross receipts" do not include any of the following: (i) Cash discounts allowed and taken on sales; (ii) any portion of the sales price of property returned by purchasers, which upon rescission of the contract of sale is refunded either in cash or credit, provided the property is returned within ninety days from the date of sale; (iii) the amount of any tax, not including any manufacturers' or importers' excise tax, imposed by the United States upon or with respect to retail sales whether imposed upon the retailer or the purchaser; (iv) the amount charged for labor rendered in installing or applying the property sold, provided such charge is separately stated and exclusive of such charge for any service rendered within the purview of subparagraph (I) of subdivision (37) of this subsection; (v) unless the provisions of subdivision (4) of section 12-430 or of section 12-430a are applicable, any amount for which credit is given to the purchaser by the retailer, provided such credit is given solely for property of the same kind accepted in part payment by the retailer and intended by the retailer to be resold; (vi) the full face value of any coupon used by a purchaser to reduce the price paid to the retailer for an item of tangible personal property, whether or not the retailer will be reimbursed for such coupon, in whole or in part, by the manufacturer of the item of tangible personal property or by a third party; (vii) the amount charged for separately stated compensation, fringe benefits, workers' compensation and payroll taxes or assessments paid to or on behalf of employees of a retailer who has contracted to manage a service recipient's property or business premises and renders management services described in subparagraph (I) or (J) of subdivision (37) of this subsection, provided the employees perform such services solely for the service recipient at its property or business premises and "gross receipts" shall include the separately stated compensation, fringe benefits, workers' compensation and payroll taxes or assessments paid to or on behalf of any employee of the retailer who is an officer, director or owner of more than five per cent of the outstanding capital stock of the retailer. Determination whether an employee performs services solely for a service recipient at its property or business premises for purposes of this subdivision shall be made by reference to such employee's activities during the time period beginning on the later of the commencement of the management contract, the date of the employee's first employment by the retailer or the date which is six months immediately preceding the date of such determination; (viii) the amount charged for separately stated compensation, fringe benefits, workers' compensation and payroll taxes or assessments paid to or on behalf of (I) a leased employee, or (II) a worksite employee by a professional employer organization pursuant to a professional employer agreement. For purposes of this subparagraph, an employee shall be treated as a leased employee if the employee is provided to the client at the commencement of an agreement with an employee leasing organization under which at least seventy-five per cent of the employees provided to the client at the commencement of such initial agreement qualify as leased employees pursuant to Section 414(n) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, or the employee is added to the client's workforce by the employee leasing organization subsequent to the commencement of such initial agreement and qualifies as a leased employee pursuant to Section 414(n) of said Internal Revenue Code of 1986 without regard to subparagraph (B) of paragraph (2) thereof. A leased employee, or a worksite employee subject to a professional employer agreement, shall not include any employee who is hired by a temporary help service and assigned to support or supplement the workforce of a temporary help service's client; (ix) the amount received by a retailer from a purchaser as the battery deposit that is required to be paid under subsection (a) of section 22a-256h; the refund value of a beverage container that is required to be paid under subsection (a) of section 22a-244 or a deposit that is required by law to be paid by the purchaser to the retailer and that is required by law to be refunded to the purchaser by the retailer when the same or similar tangible personal property is delivered as required by law to the retailer by the purchaser, if such amount is separately stated on the bill or invoice rendered by the retailer to the purchaser; and (x) the amount charged for separately stated compensation, fringe benefits, workers' compensation and payroll taxes or assessments paid to a media payroll services company, as defined in this subsection.

(10) "Business" includes any activity engaged in by any person or caused to be engaged in by any person with the object of gain, benefit or advantage, either direct or indirect.

(11) "Seller" includes every person engaged in the business of selling tangible personal property or rendering any service described in any of the subparagraphs of subdivision (2) of this subsection, the gross receipts from the retail sale of which are required to be included in the measure of the sales tax and every operator as defined in subdivision (18) of this subsection.

(12) "Retailer" includes: (A) Every person engaged in the business of making sales at retail or in the business of making retail sales at auction of tangible personal property owned by the person or others; (B) every person engaged in the business of making sales for storage, use or other consumption or in the business of making sales at auction of tangible personal property owned by the person or others for storage, use or other consumption; (C) every operator, as defined in subdivision (18) of this subsection; (D) every seller rendering any service described in subdivision (2) of this subsection; (E) every person under whom any salesman, representative, peddler or canvasser operates in this state, or from whom such salesman, representative, peddler or canvasser obtains the tangible personal property that is sold; (F) every person with whose assistance any seller is enabled to solicit orders within this state; (G) every person making retail sales from outside this state to a destination within this state and not maintaining a place of business in this state who engages in regular or systematic solicitation of sales of tangible personal property in this state (i) by the display of advertisements on billboards or other outdoor advertising in this state, (ii) by the distribution of catalogs, periodicals, advertising flyers or other advertising by means of print, radio or television media, or (iii) by mail, telegraphy, telephone, computer data base, cable, optic, microwave or other communication system, for the purpose of effecting retail sales of tangible personal property, provided such person has made one hundred or more retail sales from outside this state to destinations within this state during the twelve-month period ended on the September thirtieth immediately preceding the monthly or quarterly period with respect to which such person's liability for tax under this chapter is determined; (H) any person owned or controlled, either directly or indirectly, by a retailer engaged in business in this state which is the same as or similar to the line of business in which such person so owned or controlled is engaged; (I) any person owned or controlled, either directly or indirectly, by the same interests that own or control, either directly or indirectly, a retailer engaged in business in this state which is the same as or similar to the line of business in which such person so owned or controlled is engaged; (J) any assignee of a person engaged in the business of leasing tangible personal property to others, where leased property of such person which is subject to taxation under this chapter is situated within this state and such assignee has a security interest, as defined in subdivision (35) of subsection (b) of section 42a-1-201, in such property; (K) every person making retail sales of items of tangible personal property from outside this state to a destination within this state and not maintaining a place of business in this state who repairs or services such items, under a warranty, in this state, either directly or indirectly through an agent, independent contractor or subsidiary; and (L) every person making sales of tangible personal property or services through an agreement with another person located in this state under which such person located in this state, for a commission or other consideration that is based upon the sale of tangible personal property or services by the retailer, directly or indirectly refers potential customers, whether by a link on an Internet web site or otherwise, to the retailer, provided the cumulative gross receipts from sales by the retailer to customers in the state who are referred to the retailer by all such persons with this type of an agreement with the retailer, is in excess of two thousand dollars during the preceding four quarterly periods ending on the last day of March, June, September and December.

(13) "Tangible personal property" means personal property which may be seen, weighed, measured, felt or touched or which is in any other manner perceptible to the senses including canned or prewritten computer software. Tangible personal property includes the distribution, generation or transmission of electricity.

(14) "In this state" or "in the state" means within the exterior limits of the state of Connecticut and includes all territory within these limits owned by or ceded to the United States of America.

(15) (A) "Engaged in business in the state" means and includes but shall not be limited to the following acts or methods of transacting business: (i) Selling in this state, or any activity in this state in connection with selling in this state, tangible personal property for use, storage or consumption within the state; (ii) engaging in the transfer for a consideration of the occupancy of any room or rooms in a hotel, [or] lodging house or bed and breakfast establishment for a period of thirty consecutive calendar days or less; (iii) rendering in this state any service described in any of the subparagraphs of subdivision (2) of this subsection; (iv) maintaining, occupying or using, permanently or temporarily, directly or indirectly, through a subsidiary or agent, by whatever name called, any office, place of distribution, sales or sample room or place, warehouse or storage point or other place of business or having any representative, agent, salesman, canvasser or solicitor operating in this state for the purpose of selling, delivering or taking orders; (v) notwithstanding the fact that retail sales are made from outside this state to a destination within this state and that a place of business is not maintained in this state, engaging in regular or systematic solicitation of sales of tangible personal property in this state by the display of advertisements on billboards or other outdoor advertising in this state, by the distribution of catalogs, periodicals, advertising flyers or other advertising by means of print, radio or television media, or by mail, telegraphy, telephone, computer data base, cable, optic, microwave or other communication system, for the purpose of effecting retail sales of tangible personal property, provided one hundred or more retail sales from outside this state to destinations within this state are made during the twelve-month period ended on the September thirtieth immediately preceding the monthly or quarterly period with respect to which liability for tax under this chapter is determined; (vi) being owned or controlled, either directly or indirectly, by a retailer engaged in business in this state which is the same as or similar to the line of business in which the retailer so owned or controlled is engaged; (vii) being owned or controlled, either directly or indirectly, by the same interests that own or control, either directly or indirectly, a retailer engaged in business in this state which is the same as or similar to the line of business in which the retailer so owned or controlled is engaged; (viii) being the assignee of a person engaged in the business of leasing tangible personal property to others, where leased property of such person is situated within this state and such assignee has a security interest, as defined in subdivision (35) of subsection (b) of section 42a-1-201, in such property; (ix) notwithstanding the fact that retail sales of items of tangible personal property are made from outside this state to a destination within this state and that a place of business is not maintained in this state, repairing or servicing such items, under a warranty, in this state, either directly or indirectly through an agent, independent contractor or subsidiary; and (x) selling tangible personal property or services through an agreement with a person located in this state, under which such person located in this state, for a commission or other consideration that is based upon the sale of tangible personal property or services by the retailer, directly or indirectly refers potential customers, whether by a link on an Internet web site or otherwise, to the retailer, provided the cumulative gross receipts from sales by the retailer to customers in the state who are referred to the retailer by all such persons with this type of agreement with the retailer is in excess of two thousand dollars during the four preceding four quarterly periods ending on the last day of March, June, September and December.

(B) A retailer who has contracted with a commercial printer for printing and distribution of printed material shall not be deemed to be engaged in business in this state because of the ownership or leasing by the retailer of tangible or intangible personal property located at the premises of the commercial printer in this state, the sale by the retailer of property of any kind produced or processed at and shipped or distributed from the premises of the commercial printer in this state, the activities of the retailer's employees or agents at the premises of the commercial printer in this state, which activities relate to quality control, distribution or printing services performed by the printer, or the activities of any kind performed by the commercial printer in this state for or on behalf of the retailer.

(C) A retailer not otherwise a retailer engaged in business in the state who purchases fulfillment services carried on in this state by a person other than an affiliated person, or who owns tangible personal property located on the premises of an unaffiliated person performing fulfillment services for such retailer shall not be deemed to be engaged in business in the state. For purposes of this subparagraph, persons are affiliated persons with respect to each other where one of such persons has an ownership interest of more than five per cent, whether direct or indirect, in the other, or where an ownership interest of more than five per cent, whether direct or indirect, is held in each of such persons by another person or by a group of other persons who are affiliated persons with respect to each other. For purposes of this subparagraph, "fulfillment services" means services that are performed by a person on its premises on behalf of a purchaser of such services and that involve the receipt of orders from the purchaser of such services or an agent thereof, which orders are to be filled by the person from an inventory of products that are offered for sale by the purchaser of such services, and the shipment of such orders to customers of the purchaser of such services.

(D) A retailer not otherwise a retailer engaged in business in this state that participates in a trade show or shows at the convention center, as defined in subdivision (3) of section 32-600, shall not be deemed to be engaged in business in this state, regardless of whether the retailer has employees or other staff present at such trade shows, provided the retailer's activity at such trade shows is limited to displaying goods or promoting services, no sales are made, any orders received are sent outside this state for acceptance or rejection and are filled from outside this state, and provided further that such participation is not more than fourteen days, or part thereof, in the aggregate during the retailer's income year for federal income tax purposes.

(16) "Hotel" means any building regularly used and kept open as such for the feeding and lodging of guests where any person who conducts himself properly and who is able and ready to pay for such services is received if there are accommodations for such person and which derives the major portion of its operating receipts from the renting of rooms and the sale of food. "Hotel" [shall include] includes any apartment hotel wherein apartments are rented for fixed periods of time, furnished or unfurnished, while the keeper of such hotel supplies food to the occupants thereof, if required, but does not include a bed and breakfast establishment.

(17) "Lodging house" means any building or portion of a building, other than a hotel, [or] an apartment hotel or a bed and breakfast establishment, in which persons are lodged for hire with or without meals, including, but not limited to, any motel, motor court, motor inn, tourist court, furnished residence or similar accommodation; provided the terms "hotel", "apartment hotel", [and] "lodging house" and "bed and breakfast" shall not be construed to include: (A) Privately owned and operated convalescent homes, residential care homes, homes for the infirm, indigent or chronically ill; (B) religious or charitable homes for the aged, infirm, indigent or chronically ill; (C) privately owned and operated summer camps for children; (D) summer camps for children operated by religious or charitable organizations; (E) lodging accommodations at educational institutions; or (F) lodging accommodations at any facility operated by and in the name of any nonprofit charitable organization, provided the income from such lodging accommodations at such facility is not subject to federal income tax.

(18) "Operator" means any person operating a hotel, [or] lodging house or bed and breakfast establishment in the state, including, but not limited to, the owner or proprietor of such premises, lessee, sublessee, mortgagee in possession, licensee or any other person otherwise operating such hotel, [or] lodging house or bed and breakfast establishment.

(19) "Occupancy" means the use or possession, or the right to the use or possession, of any room or rooms in a hotel, [or] lodging house or bed and breakfast establishment, or the right to the use or possession of the furnishings or the services and accommodations accompanying the use and possession of such room or rooms, for the first period of not more than thirty consecutive calendar days.

(20) "Room" means any room or rooms of any kind in any part or portion of a hotel, [or] lodging house or bed and breakfast establishment let out for use or possession for lodging purposes.

(21) "Rent" means the consideration received for occupancy and any meals included with such occupancy, valued in money, whether received in money or otherwise, including all receipts, cash, credits and property or services of any kind or nature, and also any amount for which credit is allowed by the operator to the occupant, without any deduction therefrom whatsoever.

(22) "Certificated air carrier" means a person issued a certificate or certificates by the Federal Aviation Administration pursuant to Title 14, Chapter I, Subchapter G, Part 121, 135, 139 or 141 of the Code of Federal Regulations or the Civil Aeronautics Board pursuant to Title 14, Chapter II, Subchapter A, Parts 201 to 208, inclusive, and 298 of the Code of Federal Regulations, as such regulations may hereafter be amended or reclassified.

(23) "Aircraft" means aircraft, as the term is defined in section 15-34.

(24) "Vessel" means vessel, as the term is defined in section 15-127.

(25) "Licensed marine dealer" means a marine dealer, as the term is defined in section 15-141, who has been issued a marine dealer's certificate by the Commissioner of Energy and Environmental Protection.

(26) (A) "Telecommunications service" means the electronic transmission, conveyance or routing of voice, image, data, audio, video or any other information or signals to a point or between or among points. "Telecommunications service" includes such transmission, conveyance or routing in which computer processing applications are used to act on the form, code or protocol of the content for purposes of transmission, conveyance or routing without regard to whether such service is referred to as a voice over Internet protocol service or is classified by the Federal Communications Commission as enhanced or value added. "Telecommunications service" does not include (i) value-added nonvoice data services, (ii) radio and television audio and video programming services, regardless of the medium, including the furnishing of transmission, conveyance or routing of such services by the programming service provider. Radio and television audio and video programming services shall include, but not be limited to, cable service as defined in 47 USC 522(6), audio and video programming services delivered by commercial mobile radio service providers, as defined in 47 CFR 20, and video programming service by certified competitive video service providers, (iii) any telecommunications service (I) rendered by a company in control of such service when rendered for private use within its organization, or (II) used, allocated or distributed by a company within its organization, including in such organization affiliates, as defined in section 33-840, for the purpose of conducting business transactions of the organization if such service is purchased or leased from a company rendering telecommunications service and such purchase or lease is subject to tax under this chapter, (iv) access or interconnection service purchased by a provider of telecommunications service from another provider of such service for purposes of rendering such service, provided the purchaser submits to the seller a certificate attesting to the applicability of this exclusion, upon receipt of which the seller is relieved of any tax liability for such sale so long as the certificate is taken in good faith by the seller, (v) data processing and information services that allow data to be generated, acquired, stored, processed or retrieved and delivered by an electronic transmission to a purchaser where such purchaser's primary purpose for the underlying transaction is the processed data or information, (vi) installation or maintenance of wiring equipment on a customer's premises, (vii) tangible personal property, (viii) advertising, including, but not limited to, directory advertising, (ix) billing and collection services provided to third parties, (x) Internet access service, (xi) ancillary services, and (xii) digital products delivered electronically, including, but not limited to, software, music, video, reading materials or ring tones.

(B) For purposes of the tax imposed under this chapter (i) gross receipts from the rendering of telecommunications service shall include any subscriber line charge or charges as required by the Federal Communications Commission and any charges for access service collected by any person rendering such service unless otherwise excluded from such gross receipts under this chapter, and such gross receipts from the rendering of telecommunications service shall also include any charges for vertical service, for the installation or maintenance of wiring equipment on a customer's premises, and for directory assistance service; (ii) gross receipts from the rendering of telecommunications service shall not include any local charge for calls from public or semipublic telephones; and (iii) gross receipts from the rendering of telecommunications service shall not include any charge for calls purchased using a prepaid telephone calling service, as defined in subdivision (34) of this subsection.

(27) "Community antenna television service" means (A) the one-way transmission to subscribers of video programming or information by cable, fiber optics, satellite, microwave or any other means, and subscriber interaction, if any, which is required for the selection of such video programming or information, and (B) noncable communications service, as defined in section 16-1, unless such noncable communications service is purchased by a cable network as that term is used in subsection (k) of section 12-218.

(28) "Hospital" means a hospital included within the definition of health care facilities or institutions under section 19a-630 and licensed as a short-term general hospital by the Department of Public Health, but does not include (A) any hospital which, on January 30, 1997, is within the class of hospitals licensed by the department as children's general hospitals, or (B) a short-term acute hospital operated exclusively by the state other than a short-term acute hospital operated by the state as a receiver pursuant to chapter 920.

(29) "Patient care services" means therapeutic and diagnostic medical services provided by the hospital to inpatients and outpatients including tangible personal property transferred in connection with such services.

(30) "Another state" or "other state" means any state of the United States or the District of Columbia excluding the state of Connecticut.

(31) "Professional employer agreement" means a written contract between a professional employer organization and a service recipient whereby the professional employer organization agrees to provide at least seventy-five per cent of the employees at the service recipient's worksite, which contract provides that such worksite employees are intended to be permanent employees rather than temporary employees, and employer responsibilities for such worksite employees, including hiring, firing and disciplining, are allocated between the professional employer organization and the service recipient.

(32) "Professional employer organization" means any person that enters into a professional employer agreement with a service recipient whereby the professional employer organization agrees to provide at least seventy-five per cent of the employees at the service recipient's worksite.

(33) "Worksite employee" means an employee, the employer responsibilities for which, including hiring, firing and disciplining, are allocated, under a professional employer agreement, between a professional employer organization and a service recipient.

(34) "Prepaid telephone calling service" means the right to exclusively purchase telecommunications service, that must be paid for in advance and that enables the origination of calls using an access number or authorization code, or both, whether manually or electronically dialed, provided the remaining amount of units of service that have been prepaid shall be known on a continuous basis.

(35) "Canned or prewritten software" means all software, other than custom software, that is held or existing for general or repeated sale, license or lease. Software initially developed as custom software for in-house use and subsequently sold, licensed or leased to unrelated third parties shall be considered canned or prewritten software.

(36) "Custom software" means a computer program prepared to the special order of a single customer.

(37) "Services" for purposes of subdivision (2) of this subsection, means:

(A) Computer and data processing services, including, but not limited to, time, programming, code writing, modification of existing programs, feasibility studies and installation and implementation of software programs and systems even where such services are rendered in connection with the development, creation or production of canned or custom software or the license of custom software;

(B) Credit information and reporting services;

(C) Services by employment agencies and agencies providing personnel services;

(D) Private investigation, protection, patrol work, watchman and armored car services, exclusive of (i) services of off-duty police officers and off-duty firefighters, and (ii) coin and currency services provided to a financial services company by or through another financial services company. For purposes of this subparagraph, "financial services company" has the same meaning as provided under subparagraphs (A) to (H), inclusive, of subdivision (6) of subsection (a) of section 12-218b;

(E) Painting and lettering services;

(F) Photographic studio services;

(G) Telephone answering services;

(H) Stenographic services;

(I) Services to industrial, commercial or income-producing real property, including, but not limited to, such services as management, electrical, plumbing, painting and carpentry, provided income-producing property shall not include property used exclusively for residential purposes in which the owner resides and which contains no more than three dwelling units, or a housing facility for low and moderate income families and persons owned or operated by a nonprofit housing organization, as defined in subdivision (29) of section 12-412;

(J) Business analysis, management, management consulting and public relations services, excluding (i) any environmental consulting services, (ii) any training services provided by an institution of higher education licensed or accredited by the Board of Regents for Higher Education or Office of Higher Education pursuant to sections 10a-35a and 10a-34, respectively, and (iii) on and after January 1, 1994, any business analysis, management, management consulting and public relations services when such services are rendered in connection with an aircraft leased or owned by a certificated air carrier or in connection with an aircraft which has a maximum certificated take-off weight of six thousand pounds or more;

(K) Services providing "piped-in" music to business or professional establishments;

(L) Flight instruction and chartering services by a certificated air carrier on an aircraft, the use of which for such purposes, but for the provisions of subdivision (4) of section 12-410 and subdivision (12) of section 12-411, would be deemed a retail sale and a taxable storage or use, respectively, of such aircraft by such carrier;

(M) Motor vehicle repair services, including any type of repair, painting or replacement related to the body or any of the operating parts of a motor vehicle;

(N) Motor vehicle parking, including the provision of space, other than metered space, in a lot having thirty or more spaces, excluding (i) space in a parking lot owned or leased under the terms of a lease of not less than ten years' duration and operated by an employer for the exclusive use of its employees, (ii) space in municipally operated railroad parking facilities in municipalities located within an area of the state designated as a severe nonattainment area for ozone under the federal Clean Air Act or space in a railroad parking facility in a municipality located within an area of the state designated as a severe nonattainment area for ozone under the federal Clean Air Act owned or operated by the state on or after April 1, 2000, (iii) space in a seasonal parking lot provided by an entity subject to the exemption set forth in subdivision (1) of section 12-412, and (iv) space in a municipally owned parking lot;

(O) Radio or television repair services;

(P) Furniture reupholstering and repair services;

(Q) Repair services to any electrical or electronic device, including, but not limited to, equipment used for purposes of refrigeration or air-conditioning;

(R) Lobbying or consulting services for purposes of representing the interests of a client in relation to the functions of any governmental entity or instrumentality;

(S) Services of the agent of any person in relation to the sale of any item of tangible personal property for such person, exclusive of the services of a consignee selling works of art, as defined in subsection (b) of section 12-376c, or articles of clothing or footwear intended to be worn on or about the human body other than (i) any special clothing or footwear primarily designed for athletic activity or protective use and which is not normally worn except when used for the athletic activity or protective use for which it was designed, and (ii) jewelry, handbags, luggage, umbrellas, wallets, watches and similar items carried on or about the human body but not worn on the body, under consignment, exclusive of services provided by an auctioneer;

(T) Locksmith services;

(U) Advertising or public relations services, including layout, art direction, graphic design, mechanical preparation or production supervision, not related to the development of media advertising or cooperative direct mail advertising;

(V) Landscaping and horticulture services;

(W) Window cleaning services;

(X) Maintenance services;

(Y) Janitorial services;

(Z) Exterminating services;

(AA) Swimming pool cleaning and maintenance services;

(BB) Miscellaneous personal services included in industry group 729 in the Standard Industrial Classification Manual, United States Office of Management and Budget, 1987 edition, or U.S. industry 532220, 812191, 812199 or 812990 in the North American Industrial Classification System United States Manual, United States Office of Management and Budget, 1997 edition, exclusive of (i) services rendered by massage therapists licensed pursuant to chapter 384a, and (ii) services rendered by an electrologist licensed pursuant to chapter 388;

(CC) Any repair or maintenance service to any item of tangible personal property including any contract of warranty or service related to any such item;

(DD) Business analysis, management or managing consulting services rendered by a general partner, or an affiliate thereof, to a limited partnership, provided (i) the general partner, or an affiliate thereof, is compensated for the rendition of such services other than through a distributive share of partnership profits or an annual percentage of partnership capital or assets established in the limited partnership's offering statement, and (ii) the general partner, or an affiliate thereof, offers such services to others, including any other partnership. As used in this subparagraph "an affiliate of a general partner" means an entity which is directly or indirectly owned fifty per cent or more in common with a general partner;

(EE) Notwithstanding the provisions of section 12-412, except subdivision (87) of said section 12-412, patient care services, as defined in subdivision (29) of this subsection by a hospital, except that "sale" and "selling" does not include such patient care services for which payment is received by the hospital during the period commencing July 1, 2001, and ending June 30, 2003;

(FF) Health and athletic club services, exclusive of (i) any such services provided without any additional charge which are included in any dues or initiation fees paid to any such club, which dues or fees are subject to tax under section 12-543, and (ii) any such services provided by a municipality or an organization that is described in Section 501(c) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended;

(GG) Motor vehicle storage services, including storage of motor homes, campers and camp trailers, other than the furnishing of space as described in subparagraph (P) of subdivision (2) of this subsection;

(HH) Packing and crating services, other than those provided in connection with the sale of tangible personal property by the retailer of such property;

(II) Motor vehicle towing and road services, other than motor vehicle repair services;

(JJ) Intrastate transportation services provided by livery services, including limousines, community cars or vans, with a driver. Intrastate transportation services shall not include transportation by taxicab, motor bus, ambulance or ambulette, scheduled public transportation, nonemergency medical transportation provided under the Medicaid program, paratransit services provided by agreement or arrangement with the state or any political subdivision of the state, dial-a-ride services or services provided in connection with funerals;

(KK) Pet grooming and pet boarding services, except if such services are provided as an integral part of professional veterinary services, and pet obedience services;

(LL) Services in connection with a cosmetic medical procedure. For purposes of this subparagraph, "cosmetic medical procedure" means any medical procedure performed on an individual that is directed at improving the individual's appearance and that does not meaningfully promote the proper function of the body or prevent or treat illness or disease. "Cosmetic medical procedure" includes, but is not limited to, cosmetic surgery, hair transplants, cosmetic injections, cosmetic soft tissue fillers, dermabrasion and chemical peel, laser hair removal, laser skin resurfacing, laser treatment of leg veins and sclerotherapy. "Cosmetic medical procedure" does not include reconstructive surgery. "Reconstructive surgery" includes any surgery performed on abnormal structures caused by or related to congenital defects, developmental abnormalities, trauma, infection, tumors or disease, including procedures to improve function or give a more normal appearance;

(MM) Manicure services, pedicure services and all other nail services, regardless of where performed, including airbrushing, fills, full sets, nail sculpting, paraffin treatments and polishes;

(NN) Spa services, regardless of where performed, including body waxing and wraps, peels, scrubs and facials; and

(OO) Car wash services, including coin-operated car washes.

(38) "Media payroll services company" means a retailer whose principal business activity is the management and payment of compensation, fringe benefits, workers' compensation, payroll taxes or assessments to individuals providing services to an eligible production company pursuant to section 12-217jj.

(39) "Certified competitive video service" means video programming service provided through wireline facilities, a portion of which are located in the public right-of-way, without regard to delivery technology, including Internet protocol technology. "Certified competitive video service" does not include any video programming provided by a commercial mobile service provider, as defined in 47 USC 332(d); any video programming provided as part of community antenna television service; any video programming provided as part of, and via, a service that enables users to access content, information, electronic mail or other services over the Internet.

(40) "Directory assistance" means an ancillary service of providing telephone number information or address information.

(41) "Vertical service" means an ancillary service that is offered in connection with one or more telecommunications services, offering advanced calling features that allow customers to identify callers and to manage multiple calls and call connections, including conference bridging services.

(42) "Bed and breakfast establishment" means any private operator-occupied house, other than a hotel or lodging house, with twelve or fewer rooms in which persons are lodged for hire and a full morning meal is included in the rent.

(b) Wherever in this chapter reference is made to the sale of tangible personal property or services, it shall be construed to include sales described in subdivision (2) of subsection (a) of this section, except as may be specifically provided to the contrary.

This act shall take effect as follows and shall amend the following sections:

Section 1

July 1, 2018

12-39h

Sec. 2

July 1, 2017, and applicable to taxable years commencing on or after January 1, 2017

12-701(a)(20)(A)

Sec. 3

October 1, 2017

12-409(c)

Sec. 4

January 1, 2018

12-414

Sec. 5

October 1, 2017

12-707

Sec. 6

January 1, 2018

12-705

Sec. 7

January 1, 2018

12-706

Sec. 8

January 1, 2018

12-707(g)

Sec. 9

July 1, 2017, and applicable to information returns due for calendar years commencing on or after January 1, 2017

New section

Sec. 10

July 1, 2017

12-35(b)

Sec. 11

October 1, 2017

New section

Sec. 12

from passage

12-3c

Sec. 13

October 1, 2017, and applicable to sales occurring on or after October 1, 2017

12-408(1)(B)

Sec. 14

October 1, 2017, and applicable to sales occurring on or after October 1, 2017

12-411(1)(B)

Sec. 15

October 1, 2017, and applicable to sales occurring on or after October 1, 2017

12-407

FIN

Joint Favorable Subst.

 

The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.


OFA Fiscal Note

State Impact: See Below

Municipal Impact: None

Explanation

The bill makes a number of tax law changes related to the Department of Revenue Services' (DRS), including to enforcement. Provisions of the bill resulting in a fiscal impact are outlined below:

Section 1 changes the order in which the DRS commissioner must apply partial tax payments. To the extent this results in less interest being due, this results in a minimal revenue loss.

Section 2 requires taxpayers who receive compensation from a nonqualified deferred compensation plan attributed to services performed in the state to include such income for Connecticut income tax purposes, which results in a potential revenue gain.

Section 4 provides flexibility to DRS in deciding when to end the requirement that certain taxpayers remit the sales tax. To the extent this increases sales tax compliance, this results in a revenue gain.

Section 5 authorizes the DRS commissioner to require employers and payers to post a bond to secure withholding tax payments. To the extent this increases tax compliance, this results in a revenue gain.

Section 10 authorizes DRS to include in its tax warrants a continuous order to withhold intangible personal property for up to 180 days following the date the warrant was issued. To the extent this increases tax compliance, this results in a revenue gain.

Section 11 results in a potential revenue gain by requiring hosting platforms (e.g., Airbnb and VRBO) to collect and remit use tax on room occupancy in the same manner as a hotel or lodging house operator. The actual revenue gain would depend upon the number of rentals provided through such platforms, with the exception of Airbnb which currently is collecting the room occupancy tax on rentals.1

Sections 13 through 15 apply a uniform 11% room occupancy tax on rent received by bed and breakfast establishments which is not anticipated to have a net impact to the state.

The Out Years

State Impact: See Above

Municipal Impact: None

OLR Bill Analysis

sHB 7312

AN ACT CONCERNING THE DEPARTMENT OF REVENUE SERVICES' RECOMMENDATIONS FOR STATE TAXATION AND COLLECTION AND IMPROVING TAX GAP COMPLIANCE.

TABLE OF CONTENTS:

SUMMARY

§ 1 — ORDER OF APPLYING PARTIAL PAYMENTS

Changes the order in which the DRS commissioner must apply partial tax payments

§ 2 — INCOME TAX ON NONQUALIFIED COMPENSATION

Subjects certain deferred compensation attributed to services performed in the state to personal income tax

§ 3 — SALES TAX PERMIT RENEWALS

Requires sales tax permits to be renewed every two years instead of every five

§ 4 — WEEKLY SALES TAX REMITTANCE

Specifies methods for weekly sales tax remittance

§ 4 — FILING SALES TAX RETURNS ON ANNUAL, QUARTERLY, OR MONTHLY BASIS

Codifies the DRS rule for determining when the sales tax must be annually remitted

§ 5 — SECURITY REQUIREMENT FOR WITHHOLDING TAX

Authorizes the DRS commissioner to require employers and payers to post a bond or other security to secure withholding tax payments

§§ 6 & 8 — INCOME TAX WITHHOLDING FOR PENSION AND ANNUITY PAYMENTS

Requires, rather than allows, income tax withholding for pension and annuity payments

§ 7 — INFORMATION RETURNS BY PAYERS OF NONPAYROLL AMOUNTS

Advances the date by which payers of nonpayroll amounts that are not subject to income tax withholding must submit information returns to DRS

§ 9 — INFORMATION RETURNS ON CREDIT AND DEBIT CARD SALES (1099-K FORMS)

Requires certain entities to file with DRS copies of the annual federal information returns that report the payment transactions they process for Connecticut retailers

§ 10 — DRS TAX WARRANTS

Allows certain DRS tax warrants to provide for a continuous order to withhold intangible personal property for up to 180 days

§§ 11 & 14 — ROOM OCCUPANCY TAX COLLECTION BY HOSTING PLATFORMS

Requires “hosting platforms” to collect and remit occupancy taxes

§ 12 — PERIODIC CRIMINAL BACKGROUND CHECKS FOR CURRENT DRS EMPLOYEES

Requires current DRS employees to undergo periodic criminal background checks

§§ 13-15 — BED AND BREAKFAST OCCUPANCY TAX RATE

Imposes a uniform occupancy tax rate on rent charged at bed and breakfast establishments

SUMMARY

This bill makes various tax law changes, many of which concern the Department of Revenue Services' (DRS) tax enforcement mechanisms and powers.

Among other things, the bill (1) shortens the validity period of sales tax permits; (2) establishes methods for weekly sales tax remittance; (3) requires, rather than allows, income tax withholding for certain pension and annuity payments; (4) requires certain entities to file copies with DRS of the annual federal information returns that report the payment transactions they process for Connecticut retailers; (5) authorizes the commissioner to require taxpayers to post a bond or security with the commissioner to secure withholding tax payments; and (6) requires certain room- and house-sharing websites to collect and remit use tax on room occupancy in the same manner as a hotel or lodging house operator and obtain a permit to do so.

EFFECTIVE DATE: Various; see below.

§ 1 — ORDER OF APPLYING PARTIAL PAYMENTS

The bill changes the order in which the DRS commissioner must apply partial tax payments. Under current law, the commissioner must apply partial payments first to any penalties, then to interest, and the remaining balance to the tax. Under the bill, the commissioner must still apply the payment to the penalties first, but any remaining balance must be applied first to the tax and then to the interest.

EFFECTIVE DATE: July 1, 2018

§ 2 — INCOME TAX ON NONQUALIFIED COMPENSATION

The bill requires taxpayers to include in Connecticut adjusted gross income, to the extent it is not properly includable in gross income for federal income tax purposes, compensation that is deferred under a nonqualified deferred compensation plan of a nonqualified entity. A nonqualified deferred compensation plan is an arrangement between an employer and an employee or service provider to pay compensation in the future, thus deferring the tax liability on the compensation. Such plans exclude qualified employer plans (e.g., 457(b) plans) and bona fide vacation leave, sick leave, compensatory time, disability pay, and death benefit plans (26 U.S.C.A. §§ 457A & 409A). A nonqualified entity is generally a foreign corporation.

Federal law generally provides that any compensation that is deferred under a nonqualified deferred compensation plan of a nonqualified entity is includable in gross income when the compensation is no longer subject to a substantial risk of forfeiture (26 U.S.C. § 457A). Under federal law, such deferred compensation earned and deferred before January 1, 2009 must be recognized for federal tax purposes by 2017.

EFFECTIVE DATE: July 1, 2017, and applicable to tax years commencing on or after January 1, 2017.

§ 3 — SALES TAX PERMIT RENEWALS

For sales tax permits issued on or after October 1, 2017, the bill shortens the period, from five to two years, during which they are valid.

EFFECTIVE DATE: October 1, 2017

§ 4 — WEEKLY SALES TAX REMITTANCE

Period for Weekly Remittance

By law, a person or entity (i.e., taxpayer) required to collect the sales tax must remit it on a monthly, quarterly, or annual basis, depending on the amount of sales tax they collect. But the DRS commissioner can require taxpayers to remit the tax every week if they fail to remit it on time (i.e., weekly remittance).

Current law requires these taxpayers to do so for one year. The bill instead allows the commissioner to decide when to end weekly remittance and notify them to that effect. He must base this decision on evidence that a taxpayer continuously remitted the tax every week on time.

Taxpayers that remit the tax every week can still file claims for refunds and exercise the other rights the law affords them.

Methods for Weekly Remittance

The bill specifies the methods taxpayers must use to remit sales taxes when the commissioner requires them to do so weekly. They must remit the tax through a certified service provider or establish a separate bank account for depositing the tax payments. The commissioner must inform taxpayers of these options when he sends the notice requiring them to remit the tax every week.

The bill requires the notice to include a:

The commissioner cannot use the bill's methods for weekly sales tax remittance to enforce the collection of other taxes.

Certified Service Provider

If the taxpayer chooses a certified service provider, the taxpayer must return the form to the commissioner within two business days after receiving the notice. Taxpayers that miss this deadline must establish a bank account as described below. Otherwise, a taxpayer has 30 days from the commissioner's notice to contact a certified service provider and begin weekly remittance. Upon request, the taxpayer must provide the commissioner (1) a copy of the contract with the provider, (2) a statement authorizing the commissioner to contact the provider for information about the taxpayer, and (3) any other information the commissioner needs about the taxpayer's arrangement with the provider.

The provider must electronically remit the taxes. The commissioner may allow the provider to keep a portion of the sales tax it remits on the taxpayer's behalf, up to the amount the provider charged the taxpayer for its services.

Bank Account

Establishment. A taxpayer that chooses not to remit the taxes through a provider must do so by establishing a bank account exclusively for that purpose within 30 days after the commissioner's notice. The account must be separate from the taxpayer's other accounts, bear the taxpayer's name, and be designated as “Trustee, Special Fund in Trust of the State of Connecticut, Department of Revenue Services, Under Section 12-408 of the Connecticut General Statutes.”

If the commissioner requests it, the taxpayer must provide the name of the financial institution where the taxpayer established the account, the account number, and any other account information the commissioner requires.

Deposits. After establishing the account, the taxpayer has up to two days to deposit in the account the taxes it collected or received on a given day. The taxpayer may deposit no other funds in the account except for its maintenance. Money in the account constitutes a fund in trust for the state, is deemed property of the state, and is payable only to DRS. No liens can be placed on the account.

Withdrawals. The taxpayer must obtain the commissioner's approval before withdrawing funds from the account for purposes other than remitting sales taxes. A taxpayer withdrawing funds without the commissioner's prior approval is guilty of larceny with each unauthorized withdrawal constituting a separate offense.

Account Status. A financial institution must provide an account's status to the commissioner within five business days of his request.

Failure to Remit Taxes. The bill authorizes the commissioner to withdraw funds from the account if the taxpayer fails to remit the tax and the commissioner determines that it might not be collected. In these cases, the commissioner may serve notice on the institution where the account was established and withdraw enough funds from the account to pay the outstanding tax, excluding associated penalties and interest charges, which the commissioner may collect by other means the law provides. The institution must immediately pay the commissioner requested amount, and he must apply it to the outstanding tax.

If the institution refuses to pay the requested amount, the commissioner may ask the attorney general to take an action in the Superior Court for the Hartford Judicial District to compel the institution to pay the amount. The state may seek, and the court may impose, penalties against the institution for failing to meet its obligations under the bill.

Taxpayer Rights. The bill allows taxpayers to file a claim against the commissioner if he withdraws funds from an account that contains funds deposited for purposes other than remitting taxes.

The commissioner must notify taxpayers about this right at the same time he notifies the institution about the withdrawal. He must do so by providing a notice, which he may deliver in person, leave at taxpayer's dwelling or usual business place, send by first class mail to the taxpayer's last-known address, or send by email or fax.

Claim Process. The taxpayer has up to 10 business days from the receipt of notice to file a claim on a form the commissioner prescribes. If the taxpayer misses the 10-day deadline, he or she waives any demand against the state.

Within 10 business days of receiving a claim, the commissioner must determine if it is valid. If he determines that it is, he must return only those funds that are not remitted taxes. These funds are not the state's property and cannot be used to offset the taxpayer's other tax liabilities.

If the commissioner determines the claim is not valid, he must send a notice to the taxpayer to that effect. The taxpayer may protest the denial by notifying the commissioner in writing within five days and specifying the grounds for the protest. The commissioner has up to 10 days from the taxpayer's protest notice to reconsider the denial. He must notify the taxpayer in writing about his decision. If the commissioner denies the claim or returns part of the money, he must specify his findings of fact and the basis for his decision.

The taxpayer may appeal the decision to the Superior Court for the New Britain judicial district, as the law specifies. The appeal is subject to the requirements of the Uniform Administrative Appeals Act.

Penalty Waivers

The bill prohibits the commissioner from waiving any penalties imposed on taxpayers that must remit the sales tax on a weekly basis.

Electronic Filing

Taxpayers that must remit sales taxes weekly must continue to file their tax returns on a monthly or quarterly basis. The bill requires them to do so electronically.

EFFECTIVE DATE: January 1, 2018

§ 4 — FILING SALES TAX RETURNS ON ANNUAL, QUARTERLY, OR MONTHLY BASIS

The bill codifies the DRS's current requirements for remitting sales taxes on an annual basis. The requirement for annual remittance applies to taxpayers that collect and remit less than $1,000 in sales taxes for the 12-month period beginning July 1 and ending June 30. These taxpayers must also file their tax returns annually by January 31 for sales reported during the previous calendar year.

EFFECTIVE DATE: January 1, 2018

§ 5 — SECURITY REQUIREMENT FOR WITHHOLDING TAX

The bill authorizes the DRS commissioner to require employers and payers to deposit securities (e.g., bonds or cash deposits) with the commissioner to ensure their compliance with withholding tax requirements. The bill gives the commissioner discretion to (1) impose the security requirement when he finds it necessary and (2) determine the type and amount of security required, up to six times the employer's or payer's estimated liability for the prior or future 12-month period.

Under the bill, the commissioner may sell the security at public auction if necessary to recover any taxes, amounts required to be collected, interest, or penalty due. He may serve notice of the sale in person or by mail to the person depositing the security. Mailings must be made to the person's address listed in DRS records, in the same way DRS sends tax deficiency assessment notices. If the security is a state- or federally-issued bearer bond with a prevailing market price, the commissioner may not sell it at private sale for less than its prevailing market price. (The legal effect of this provision is unclear since neither the state nor federal government currently issues bearer bonds.) After the sale, the commissioner must return any surplus above the amounts due to the person depositing the security.

EFFECTIVE DATE: October 1, 2017

§§ 6 & 8 — INCOME TAX WITHHOLDING FOR PENSION AND ANNUITY PAYMENTS

Current law allows Connecticut residents receiving pensions or annuities to instruct the payer of the pension or annuity to withhold Connecticut income tax. The bill eliminates this option and instead requires income tax withholding by certain payers of pensions and annuities. These distributions include those from an employer pension, annuity, profit-sharing plan, stock bonus, deferred compensation plan, individual retirement arrangement, endowment, or life insurance contract.

The withholding requirement applies to payers of pension or annuity distributions that (1) maintain an office or transact business in Connecticut and (2) make taxable payments to resident individuals. Under the bill, such payers must deduct and withhold from the taxable portion of any such distribution, as far as practicable, an amount substantially equal to the tax reasonably estimated to be due from the payee during the calendar year. With the exception of “lump sum distributions,” the method of determining the amount to be withheld must be the same as the method employers use for payroll withholding. A lump sum distribution must be taxed at the highest marginal rate unless (1) any portion of the distribution was previously taxed or (2) it is a rollover effected as a direct trustee-to-trustee transfer. The bill defines lump sum distributions as payments from a payer to a resident payee of the payee's entire retirement account balance, excluding any other tax withholding and administrative charges and fees.

EFFECTIVE DATE: January 1, 2018

§ 7 — INFORMATION RETURNS BY PAYERS OF NONPAYROLL AMOUNTS

Under the bill and current DRS practice, payers making nonpayroll amounts to payees during the calendar year, other than those payers subject to income tax withholding, must provide to each payee, annually by the next January 31, a written statement showing the amount of nonpayroll amounts paid, the amount deducted and withheld from such payments, and any other information the DRS commissioner requires (e.g., federal Form 1099-MISC, Miscellaneous Income). Under current DRS practice, such payers must generally file copies of these forms with DRS by March 31. The bill instead requires them to do so by January 31.

By law, nonpayroll amounts include:

EFFECTIVE DATE: January 1, 2018

§ 9 — INFORMATION RETURNS ON CREDIT AND DEBIT CARD SALES (1099-K FORMS)

Federal law requires certain “reporting entities” to file with the IRS annual information returns that report the payment transactions they process for retailers (i.e., federal Form 1099-K). The bill requires such entities processing payments for Connecticut retailers (i.e., participating payees) to file copies of these information returns with DRS within 30 days after filing them with the IRS, in the manner and form prescribed by the DRS commissioner. DRS currently receives copies of such forms from the IRS about six months after they are filed.

The bill's reporting requirement applies to the same entities subject to the federal reporting requirement (i.e., payment settlement entities, third party settlement organizations, electronic payment facilitators, or other third parties acting on behalf of a payment settlement entity). These entities generally include domestic and foreign entities that process credit, debit, and payment card transactions on behalf of retailers.

Reporting entities that fail to file the returns within the prescribed time are subject to a civil penalty of (1) $50 for each failure if the return is submitted within one month after it was due and (2) an additional $50 for each month or part of a month that the failure continues, up to $250,000 per year per reporting entity. The commissioner may waive all or part of the penalties imposed if the reporting entity's failure to timely file the return was not due to willful neglect, but rather based on reasonable cause. If the commissioner chooses to do so, he must follow the statutory procedure for waiving penalties over $1,000.

EFFECTIVE DATE: July 1, 2017, and applicable to information returns due for calendar years commencing on or after January 1, 2017.

§ 10 — DRS TAX WARRANTS

Existing law allows DRS to issue a tax warrant on the intangible personal property (e.g., bank accounts, receivables, and securities) of a taxpayer who fails to pay state taxes and serve the warrant on a third person (e.g., bank or payment settlement entity) who possesses the property or is obligated to it in some respect.

The bill allows such warrants to include an order to the third person to continually deliver the intangible property that is due and becomes due to the taxpayer during the 180 days immediately following the warrant's issuance date or until the tax is fully paid, whichever is earlier. The bill specifies that such warrants have the same force and effect as executions issued under the existing postjudgment procedures law, as is the case with other DRS tax warrants.

EFFECTIVE DATE: July 1, 2017

§§ 11 & 14 — ROOM OCCUPANCY TAX COLLECTION BY HOSTING PLATFORMS

The bill requires “hosting platforms” (e.g., AirBnB and VRBO) to collect and remit use tax on room occupancy in the same manner as a hotel or lodging house operator and obtain a permit to do so. A person other than a hosting platform may obtain a certificate of authority from the DRS commissioner to collect such tax, as long as the person agrees to collect the tax, according to provisions on retailer collection of use tax, for occupancy of any room in a hotel or lodging house in the state.

Under the bill, if a guest has paid rent to the hosting platform (presumably, this means to the hotel or lodging house operator through the platform) and the platform has collected the tax, the hotel or lodging house operator is not required to collect room occupancy use tax.

Under the bill, a “hosting platform” is a person that offers a website through which (1) hotel or lodging house operators can display available hotel or lodging house rooms to prospective guests, (2) operators and prospective guests can communicate to reach agreement for occupancy in such rooms, and (3) guests can pay rent to the operator. It does not include a person that advertises accommodations exclusively at a hotel or lodging house that holds a sales tax collection permit.

The bill also specifies that “lodging house” includes furnished residences in which people are lodged for hire. Among other things, this change explicitly subjects rent received for lodging in such residences to the room occupancy tax and requires hosting platforms to collect such tax.

EFFECTIVE DATE: October 1, 2017, and applicable to sales occurring on or after that date.

§ 12 — PERIODIC CRIMINAL BACKGROUND CHECKS FOR CURRENT DRS EMPLOYEES

The bill requires current DRS employees periodically to undergo the same criminal background checks the law currently requires for prospective DRS employees. At least once every 10 years, each current DRS employee must:

As with prospective employees, DRS must enforce these requirements consistent with the law prohibiting employers from requiring prospective employees to disclose information in certain erased criminal records (CGS § 31-51i).

EFFECTIVE DATE: Upon passage

§§ 13-15 — BED AND BREAKFAST OCCUPANCY TAX RATE

The bill applies a uniform 11% room occupancy tax to rent received by bed and breakfast establishments (B&Bs) and specifies that rent received by hotels, lodging houses, and B&Bs includes any meals that are included with the occupancy charge. Under the bill, rent received by hotels and lodging houses continues to be subject to the current 15% room occupancy tax.

Under current DRS practice, B&B room occupancy charges that include lodging and meals at a fixed price are allocated according to a specified schedule such that the percentage allocated to meals is taxed at the general 6.35% sales tax rate and the percentage allocated to the room is taxed at the 15% occupancy tax rate (DRS Policy Statement 2003 (1)).

The bill defines a B&B as a private operator-occupied house, other than a hotel or lodging house, with 12 or fewer rooms, in which people are lodged for hire and a full morning meal is included in the rent.

EFFECTIVE DATE: October 1, 2017, and applicable to sales occurring on or after that date.

COMMITTEE ACTION

Finance, Revenue and Bonding Committee

Joint Favorable Substitute

Yea

32

Nay

18

(04/27/2017)

TOP

1 Testimony provided by the Department of Revenue Services on HB 7312 indicates that Airbnb has collected and remitted $11 million in rents under the first year of its agreement with the state, which began as of July 1, 2016.