Connecticut SaaS sales tax at a glance
| Detail | Value |
|---|---|
| Is SaaS taxable? | Taxable |
| Downloaded software | Taxable (1% for business use) |
| Base state sales tax rate | 6.35% (1% for business use) |
| Typical combined rate | 6.35% |
| Local tax rates? | No |
| Economic nexus threshold | $100,000 in sales and 200 transactions |
| Reference period | The 12-month period ending on September 30 |
| Revenue authority | Connecticut Department of Revenue Services |
Is SaaS taxable in Connecticut?
The rule
Connecticut treats SaaS as a computer and data processing service taxed at 1% when bought for business use, and as tangible personal property taxed at 6.35% when bought for personal use.
The main exception
If any physical item ships with the software, even a box, CD or card carrying an access key, the whole sale is taxed at 6.35% instead of 1%.
What to do
Collect each business buyer's name, address, the name and title of the person ordering and confirmation that it is a business, so you can support the 1% rate.
Is your product taxable in Connecticut?
Whether a particular product is taxed in Connecticut can depend on two things: how the software reaches the customer and how you write the invoice.
Does it matter how the software reaches the customer?
In Connecticut, downloaded software is taxable (1% for business use). Software counts as downloaded when the customer installs a copy, such as a desktop app, an agent or an offline client, even if most of the product runs online.
Does it matter how you write the invoice?
In Connecticut, setup, implementation and training fees are not taxable if separately stated. Listing them on their own invoice lines, rather than inside one software price, is what lets them be treated separately.
How are other software products and services taxed in Connecticut?
SaaS rarely ships alone. This is how Connecticut treats the products and charges that usually sit next to it on an invoice.
| Product or charge | Treatment |
|---|---|
| Downloaded software | Taxable (1% for business use) |
| Custom software | Taxable At 1% as a computer and data processing service |
| Cloud infrastructure and platforms (IaaS, PaaS) | Taxable At 1% as a computer and data processing service |
| AI tools and API access | Taxable (1% for business use) |
| Digital goods (e-books, music, video) | Taxable At 6.35% |
| Maintenance and support | Taxable |
| Setup, implementation and training | Not taxable If separately stated |
Does Connecticut tax B2B and B2C SaaS differently?
Yes. In Connecticut, SaaS bought for business use is taxed at 1%, and SaaS bought for personal use is taxed at 6.35%.
How much sales tax do you charge on SaaS in Connecticut?
SaaS is taxed at a base rate of 6.35% (1% for business use), and the typical combined rate is 6.35%.
Do cities or counties tax SaaS differently?
No. Connecticut has no local sales tax, so the state rules apply everywhere.
General sales tax rates, including any local rates, are in our Connecticut sales tax guide.
Do you need to register for sales tax in Connecticut?
Physical and economic nexus
Registration follows nexus. Once you have nexus in Connecticut and sell something taxable there, you need to register. Nexus comes from a physical presence, such as an office, staff or inventory in the state, or from passing an economic threshold.
In Connecticut, the economic nexus threshold is $100,000 in sales and 200 transactions over the 12-month period ending on September 30. Exempt sales still count toward it. Our Connecticut nexus guide covers the rules in full.
Which address sets the rate
For remote sellers, the rate is based on where your customer is, not where your business or servers are. Connecticut has no multiple points of use certificate, so the full charge is taxed at the customer's location.
Buyers who do not pay tax
Some buyers can give you a certificate instead of paying tax. In Connecticut, that includes resellers, qualifying nonprofits, and government agencies. Collect the certificate at the time of sale and keep it, because in an audit it is the only thing standing between you and the tax.
How to register, collect and file in Connecticut
Register
If you need to register, do it with the Connecticut Department of Revenue Services through the myconneCT online portal. Note your account number and the filing frequency you are given, since both decide when and how you file.
Collect the right amount
Charge tax only on what Connecticut taxes. Collecting tax that is not owed creates its own refund and audit problems.
- List services on their own invoice lines, so each charge is taxed on its own terms.
- Describe each product on the invoice the way it actually reaches the customer: online access, a download or something shipped.
- Recheck the treatment whenever you add a desktop app, a hardware option or a new add-on, since each can change what is taxable.
File and keep records
Your filing frequency is assigned when you register: monthly, quarterly or annually, depending on how much tax you collect. Returns are due by the last day of the month after each period ends.
You must file a return for every period, even when no tax is due.
Keep invoices, exemption certificates and returns for at least six years. That paperwork is what decides the taxable amount if you are audited years later.
What should SaaS businesses watch when selling in Connecticut?
Past sales where no tax was charged
If you should have been collecting and were not, the Connecticut Department of Revenue Services can assess the unpaid tax plus a late-payment penalty of 15% or $50 (whichever is greater), and interest of 1% a month.
A voluntary disclosure agreement can reduce penalties if you come forward first. Work out which past sales were taxable before you come forward, so you know the size of the exposure.
Rule changes worth tracking
Nothing enacted or pending changes how Connecticut taxes SaaS.
The rules verified date at the top of this page shows when these rules were last checked.
How does Galvix help SaaS businesses manage Connecticut sales tax compliance?
We handle this
Sales tax in Connecticut is one line in a much larger problem. Most SaaS companies sell into 30 or 40 states, each with its own answer, threshold and filing calendar.
- We map each of your products and add-ons against every state's rules, including the ones that can change the answer in Connecticut.
- We watch your sales against every threshold and tell you before you cross one, not after.
- We handle registrations wherever you need one.
- We file and remit on each state's schedule, zero returns included.
- We collect and store exemption certificates so they are there when an auditor asks.