Connecticut Sales Tax Rate Changes for Digital Goods and Software

Effective October 1, 2019, Connecticut is raising its sales and use tax rate for sales of software and digital goods from 1% to 6.35%. These changes can affect individuals and businesses differently.

Businesses selling or purchasing software

Vendors of electronically accessed or transferred software can continue to apply the 1% rate rather than the higher 6.35% rate, as long as certain new conditions are met.

Individual consumers purchasing software

Individual consumers will be taxed at 6.35% on software purchases.

Digital goods sold to businesses and consumers

Digital goods formerly taxed at 1% will be taxed at 6.35% for individuals and businesses. Digital goods include audio works, visual works and audio-visual works. Some examples are stock photographs, clip art, movies, podcasts, audio books, games, smartphone applications, and “in-app” purchases.

Access to online professional or academic research databases remain taxable at 1%. Exemptions remain for newspapers, magazines and college textbooks.

If you would like to learn more about how these changes may impact your business, please contact a Sax advisor at (973) 472-6250 or contact our firm’s in-house advisor on sales and use tax and state tax nexus, Peggy Tilles ([email protected]).

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