What qualifies for Connecticut’s sales and use tax-free week?

Connecticut will provide a gas tax holiday from April 1 through June 30, 2022, when fares on public buses will also be suspended. Additionally, there will be a sales tax holiday for clothing and footwear April 10–16, 2022.

These last-minute tax changes are due to the enactment of House Bill 5501, which Governor Ned Lamont signed into law March 24, 2022.

The state’s 25-cent-per-gallon excise tax will not apply to fuels or gasohol sold or used by a distributor in Connecticut beginning April 1, 2022. Unless another emergency measure is passed during the next two months, the tax will resume July 1, 2022.

Because this tax is paid by retailers upon receipt of the fuel, to ensure consumers also benefit from the gas tax holiday, HB 5501 specifies that “each retail dealer shall reduce the per-gallon price of fuels or gasohol … in an amount equal to the amount of the reduction in such tax.” Failure to pass the tax savings on to the consumer “shall be deemed an unfair or deceptive trade practice.”

Georgia and Maryland are also suspending gas taxes this spring, and several other states are looking to reduce prices at the pump in one way or another. Legislation under consideration in California would suspend California motor fuel taxes for six months or cap fuel tax rate adjustments. Colorado Governor Jared Polis wants to put the brakes on a gas tax increase he signed into law last year.

Congress is also pursuing a federal gas tax holiday. Yet not all states are interested in reducing fuel taxes, which fund necessary transportation services. In some states, like California and Oklahoma, state fuel taxes will automatically increase if federal fuel taxes dip below a certain amount.

From April 10 through April 16, 2022, Connecticut sales and use tax will not apply to sales of “any article of clothing or footwear intended to be worn on or about the human body” that’s priced less than $100. This includes eligible clothing sold by remote internet sellers and marketplace facilitators.

The temporary sales tax exemption does not apply to items “carried on or about the human body but not worn on the body in the manner characteristic of clothing,” including:

• Jewelry
• Handbags
• Luggage
• Umbrellas
• Watches

This new sales tax holiday is in addition to Connecticut’s annual sales tax holiday, which will be held August 21–27, 2022.

Finally, HB 5501 suspends fares on all public bus transportation in the state April 1–June 30, 2022. The bill doesn’t go into details, other than to say that two months of free public bus transportation services will cost the state $8.1 million.

Senators Martin Looney and Bob Duff said House Bill 5501 “will provide genuine, tangible financial relief for Connecticut residents.” Waving bus fares ensures people who don’t drive benefit from some savings along with their driving counterparts. Suspending the tax on clothing and footwear will particularly benefit “low and moderate-income people,” who may be struggling to meet rising prices.

Representative Vincent Candelora said he hopes “this is just a first step” and that more relief measures will be adopted “during this time of runaway inflation.” The inflation rate reached 7.5% in February 2022. Connecticut has a state sales tax rate of 6.35% and no local sales tax.

While suspending sales and excise taxes benefits consumers, it complicates tax compliance for retailers. Tax compliance software can help businesses in fuel and retail industries simplify compliance year round.

Cover photo by Canva