The Connecticut Department of Revenue recently announced the revocation of Special Notice 92(19) (“Notice”). As of December 19, 2013, the Notice may no longer be relied upon by taxpayers. The Notice was issued in 1992 on the heels of the United States Supreme Court decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992).
Prior to Quill, 1989 Conn. Pub. Acts 41, Sections 1 and 2 required out-of-state retailers with only an economic presence in Connecticut to collect use tax. In Quill, the Supreme Court held that physical presence with a taxing jurisdiction was required before the jurisdiction could impose use tax collection requirements. The Notice brought Connecticut’s sales and use tax requirements consistent with Quill by announcing that the Department would not enforce the 1989 Act.
Now with the Notice revocation, what does this mean for mail order retailers and the collection of Connecticut’s use tax? Is the state taking an economic nexus position? Connecticut may be inviting a taxpayer with a lot at stake to file a test case. Alternatively, Connecticut may believe that the Marketplace Fairness Act of 2013 may become law in 2014 and is simply removing potential barriers to its enforcement.
Without any further guidance, retailers have no concrete sense of what will constitute nexus with the state for sales and use tax purposes and whether the state will now assert that, despite Quill, a mere “economic presence” will trigger the requirement to collect and remit sales tax. If that’s the case, out-of-state retailers should proceed cautiously in Connecticut.