Connecticut ~ Multiple Taxes: Changes to Property Tax Exemptions, Cigarette Dealer Penalties, Cigar Tax Enacted

Connecticut Gov. Dannel Malloy has signed a budget bill that changes the property tax exemption for manufacturing machinery and equipment, makes changes to penalties imposed on cigarette dealers and those using dyed diesel fuel, caps the tax imposed on cigars, and makes other miscellaneous changes.

Property Tax Exemption for Manufacturing Machinery and Equipment

Effective July 1, 2011, and beginning with the October 1, 2011 assessment year, manufacturing machinery and equipment, including machinery and equipment used in connection with biotechnology, is exempt from Connecticut property taxes regardless of when acquired. The requirement that the machinery and equipment be new has also been eliminated.

Cigarette Dealer Penalties, Cigar Tax

Penalties for certain cigarette dealers who continue to sell cigarettes or taxed tobacco products after their licenses expire or that possess cigarettes that do not have required Connecticut tax stamps have been reduced, effective July 1, 2011. If a cigarette dealer operates for no more than 90 days after his or her license expires, the penalty is reduced to an infraction, with a $90 fine (currently, $500 or imprisonment for not more than three months, or both). Further, if it is a dealer’s first violation and he or she possesses no more than 600 unstamped cigarettes, the penalty is reduced to an infraction, with a $90 fine (currently, $1,000 or imprisonment for not more than one year, or both).

The Connecticut tobacco products tax on cigars is capped at 50 cents per cigar effective July 1, 2011. Prior legislation (Act 11-6 (S.B. 1239)) increased the tax on tobacco products from 27.5% to 50% of the wholesale price.

Dyed Diesel Fuel Penalties

A fine of up to $1,000 is imposed on anyone who uses dyed diesel fuel in a motor vehicle, other than a passenger or combined passenger-commercial vehicle, on a public highway effective July 1, 2011.

Reciprocal Tax Agreements, Tax Security Requirements

Effective June 21, 2011, certain notice and certification requirements are eliminated when the Department of Revenue Services withholds a taxpayer’s Connecticut tax refund at the request of another state. The requirement that the officer’s certification include a detailed statement showing the tax, interest, and penalty for each taxable period is eliminated. Further, provisions have also been amended to provide that the department must notify a taxpayer that a certification is received from another state only if the taxpayer is otherwise entitled to a Connecticut tax refund. The requirement that the commissioner include a copy of the other state’s certification with the notice is also eliminated.

Provisions regarding tax security requirements for nonresident contractors have also been amended effective October 1, 2011. Among other amendments, the department must, upon request, verify whether nonresident contractors and subcontractors are registered with the department for tax purposes, whether they have filed all tax returns, and whether, if required, they have posted a bond with the department.

Miscellaneous Tax Changes

Electricity generated by a resources recovery facility is exempt from the temporary tax on electric generation facilities imposed by Act 11-6 (S.B. 1239) effective July 1, 2011.

Also, effective July 1, 2011, the Commissioner of the Connecticut Department of Social Services must determine the revenue period for the tax on hospital net patient revenue enacted by Act 11-6 (S.B. 1239). Under Act 11-6 (S.B. 1239), hospitals must submit the revenue for the calendar quarter ending on the last day of the preceding month.

Provisions in the bill pertaining to income taxes (TAXDAY, 2011/06/22, S.9) and sales and use tax (TAXDAY, 2011/06/22, S.8) were reported separately.

Act 11-61 (H.B. 6652), Laws 2011, effective as noted above

AUTHOR

Wolters Kluwer Tax and Accounting

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