Connecticut legislation went into effect on 10/1/2019 which impacted our sales of computer software and SaaS tax codes--including the widely used SW052000.
This new legislation includes in the definition of tangible personal property (TPP): digital goods and canned or prewritten computer software, including canned or prewritten software that is electronically accessed or transferred. Software purchased by a business for use by such business, and any additional content related to such software, is still not considered TPP.
As business-to-consumer transactions for canned or prewritten software accessed or transferred is now fully taxable, Avalara has updated many of our taxability rules for those codes from taxing at the CT reduced rate of 1%, to now be fully taxable at the 6.35% standard CT rate.
Business-to-consumer: transactions for canned or prewritten software, either accessed or transferred, is now fully taxable in CT.
Business-to-business: transactions that involve canned or prewritten software, either accessed or transferred, will continue be taxable at the reduced CT rate of 1%. To support sales made at the reduced rate, Connecticut requires the purchaser provide information to the retailer that identifies:
- Business name
- Business address
- Name and title of the person placing the order
- Sufficient facts that the purchaser is a business
Additional information can be found in Special Notice SN 2019(8), Sales and Use Taxes on Digital Goods and Canned or Prewritten Software.
Some of our tax codes for software have been updated to indicate within their description whether they are intended for business-to-business use or for business-to-customer use.
If a code's description does not indicate whether it is for business-to-business or business-to customer use, we will assume a business-to-consumer scenario and will default to taxing at the full 6.25% in CT. A custom rule to return the 1% rate will be needed for any circumstances where you are selling to a purchaser that meets the "business-to-business" requirements listed above. For steps to create a custom rule, please see: Create a custom tax rule.