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February 27, 2019


Connecticut governor Ned Lamont proposed a two year $43.1 billion budget last week with the goal of modernizing the Sales Tax Base and bringing Connecticut's tax code into the 21st century - and make it fairer - by capturing a growing share of the digital economy and expenditures on consumer-oriented services.   The end result is to have goods and services to be taxed equally.  He plans to eliminate sales tax exemptions on everything from legal services to vegetable seeds. Lamont aims to improve the state's sales tax base by imposing a 6.35 percent levy on a laundry list of goods and services. The governor's budget will hopefully alleviate the multi-billion dollar shortfalls that are projected over the next several years as the gap between spending and revenue projections widens.

While the budget will indeed retain the existing sales tax exemption on food, it eliminates it for newspapers, textbooks, and non-prescription drugs, to name a few. The proposed budget also eliminates the annual sales-tax-free week in August, imposes higher taxes on electronic cigarettes, and creates a 10-cent plastic bag surcharge. It also eliminates an increased exemption from the personal income tax for Social Security and pension income.

Lamont's budget also calls for increasing taxes on digital downloads and hotel rooms. It maintains a contentious tax imposed on hospitals across the state and requires cities and towns to cover part of the cost of the state's teacher retirement fund. Lamont has said that stabilizing the underfunded teacher pension fund is an "urgent priority" for him.

For additional information or if you have any questions about how this major tax change could impact you or your business, please contact your UHY LLP professional in one of our many locations.

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