Connecticut charges a 6.35% sales tax on most retail transactions, but many purchases are exempt. Some exemptions depend on the product, such as groceries and prescription medication. Others depend on who’s buying. For example, a registered nonprofit or a business buying inventory for resale can skip the tax on purchases that would be taxable for anyone else.

Below, we’ll discuss who qualifies for a Connecticut sales tax exemption, which products and services are tax-free regardless of the buyer, and how to collect and apply the right exemption certificate at checkout.

Key takeaways

• Some exemptions apply based on the product being sold, and others depend on the buyer’s status (e.g., nonprofit, reseller).

• A business needs the correct certificate on file before it treats any sale as tax-free.

• If Connecticut’s Department of Revenue Services (DRS) later determines an exemption didn’t apply, it’s usually the business that owes the back tax, not the buyer.

What is a Connecticut sales tax exemption?

A Connecticut sales tax exemption removes the tax obligation on a qualifying transaction in the state, either because of what’s being sold or because of who’s buying it. Connecticut charges a uniform 6.35% sales and use tax across the state on most retail transactions. That rate is reduced for certain product categories, such as meals and data processing services. Some categories are entirely tax-free in Connecticut.

Who qualifies for a Connecticut sales tax exemption?

Connecticut exempts several types of businesses from paying sales tax. Here are the common ones:

• Resellers: Businesses that buy inventory they plan to resell don’t pay sales tax on those goods, since Connecticut collects the tax once, from the end customer, rather than at every step of the supply chain.

• Manufacturers: Machinery used directly in manufacturing and its repair or enhancement can qualify for exemption, although general office supplies and overhead purchases still get taxed at the standard rate.

• Government entities: The purchases of federal and state governments are exempt.

• Qualifying nonprofits: Organizations with 501(c)(3) status and supporting documents don’t pay sales tax on purchases exclusively tied to their exempt purposes.

• Contractors on qualifying projects: A contractor who’s working on a certain government or nonprofit construction job can buy materials tax-free, provided they hold the certificate that matches that specific project.

None of these exemptions apply automatically. A business must verify the purchaser’s status and collect the right certificate before treating a sale as exempt. And if Connecticut later determines the claim didn’t hold up, the business, not the buyer, will likely owe the back tax.

What common products and services qualify for a Connecticut sales tax exemption?

Product-based exemptions in Connecticut apply no matter who’s buying. The state treats most of these categories as necessities rather than discretionary spending:

• Groceries and most unprepared food, aside from certain types of food such as coffee and tea, candy, soft drinks, and restaurant meals

• Prescription medication, along with syringes and needles

• Children’s clothing, as well as adult clothing and footwear under $50

• Newspapers and magazine subscriptions

• Most consumer utilities such as electricity, gas, and water purchases

• Professional, medical, and personal services

• Data processing services and certain repairs

How do businesses apply a Connecticut sales tax exemption at checkout?

To handle an exemption correctly, collect the right certificate before or at the time of sale. The Department of Revenue Services (DRS) publishes separate exemption certificates for different purposes, including manufacturing machinery, new-construction services, and government purchases. A business that accepts such a claim must match the certificate to the correct basis. Accepting a resale certificate for what’s obviously a personal purchase creates liability for the business despite the buyer’s signature.

When businesses process exemptions at scale, manually checking each certificate quickly becomes unmanageable. Automated tax handling can help. A business that sells both exempt and taxable products to the same customer (e.g., a manufacturer that buys production machinery from one supplier and office furniture from another) needs its checkout flow to apply the exemption at the line item level rather than to the whole order. If it overcharges tax, it will need to issue a refund later and explain the error. If it collects too little, the business must cover the difference out of pocket.

What records must businesses keep for Connecticut sales tax exemptions?

Connecticut requires businesses to keep records for at least three years from the extended due date of the return, and the DRS will request them if it audits a business. A business that accepted a certificate two years ago and no longer has it on file can’t defend the exemption during an audit. The state could then assess back tax on that transaction if there’s no proof that the claim was legitimate at the time.

Here’s what matters for proof:

• The certificate itself: This includes the buyer’s signature, the exemption type claimed, and the date it was issued or last renewed.

• Transaction-level linkage: A business needs to keep records that show which transactions a certificate applied to; having a general certificate on file doesn’t automatically justify every exempt sale to that buyer if some purchases fell outside the document’s scope.

• Audit trail for corrections: This covers cases where a business initially charged tax and later refunded it after receiving a valid certificate, and the reverse.

A tool such as Stripe Tax can make managing sales tax exemptions easier. While it doesn’t store those certificates for you, it can solve a major challenge by letting you set up tax exemptions for individual customers or products.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful application programming interface (API).

Stripe Tax helps you monitor your obligations and alerts you when you exceed a tax registration threshold based on your Stripe transactions. It can also register to collect tax on your behalf in the US, automate US filings in the Dashboard, and manage global filings through trusted partners. Stripe Tax automatically calculates and collects sales tax, value-added tax (VAT), and goods and services tax (GST) on:

• Digital goods and services in all US states and over 100 countries

• Physical goods in all US states and 42 countries

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration, or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: If you need to register for a sales tax in the US, let Stripe manage your tax registrations. You’ll benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations. If you need help registering outside of the US, Stripe partners with Taxually to help you register with local tax authorities.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax automates US filings in the Dashboard, powered by TaxJar. For global filings, Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business.

Learn more about Stripe Tax, or get started today.

FAQs about Connecticut sales tax exemptions