Businesses operating in Connecticut are required to apply the upwardly revised sales tax rates by the Department of Revenue Services (DRS) from October 1, 2019. Currently, the sale of meals and certain beverages applies the overall sales tax rate of 7.35% (6.35% standard tax rate plus 1% tax). Notably, the outlined list of taxable meals and beverages are generally sold at convenience stores and gas stations, which requires compliance.
At first, governor Ned Lamont was considering overall taxing of grocery items but limited the tax provision to only prepared meals. That said, the following is an overview for gas stations and convenience stores to take into account when selling items.
Taxable Meals at Gas Stations and Convenience Stores
In general, every meal is taxed at 7.35% during a sale. Define a meal as a food product that is prepared, served, or furnished for immediate consumption, including take-out and to-go meals.
A meal is taxable if:
- Sells as food or beverage at the seller's location for consumption by humans
- The food products are usually sold in portions intended for immediate consumption at the seller's establishment
Taxable meals include:
- A whole or by-the-slice pizza
- Sandwiches, wraps, and grinders
- Bagels, muffins, and pastries
- Soups in containers weighing 8 ounces or less
- Cakes and pie slices
- Greens-based salads and lettuce in containers weighing 8 ounces or less
- Ice cream cones or cups and other frozen desserts
- Hot dogs on a bun or heated
- Smoothies
Taxable Beverages at Gas Stations and Convenience Stores
If an establishment provides any type of beverages usually served from a bar or soda fountain, it is subject to sales tax, including:
- Coffee or tea
- Fruit juices
- Soda and soft drinks
- Beer
- Carbonated water
- Milkshakes
- Alcohol such as vodka, gin, and rum
- Wine
Note: Convenience stores and, by extension, gas stations and grocery stores fall under the category of an eating establishment as per the DRS. This means if a gas station installs a cafe serving hot meals, it must collect sales taxes on the meals.
How to Stay Compliant With Sales Taxes in Connecticut
Gas stations and convenience stores usually have many customer walk-ins due to the wide variety of goods and services sold. Often this leads to business owners being overwhelmed with keeping up with calculating and submitting the correct amount of sales taxes on a broad category of taxable items.
However, it's possible with proper record-keeping systems and expert help to keep track of every taxable item, whether it's a small bag of chips or a cup of hot coffee.
We advise you to avoid the following sales tax audit triggers in your best interests:
- Know your nexus, so you have a clear understanding of your sales and use tax obligations.
- Keep track of the taxability of items. This avoids calculating and remitting the wrong sales tax amounts.
- Avoid filing and paying sales taxes late.
- Always properly maintain your business records to make the filing of sales and income taxes easier. You can consider automating your sales, such as with a point-of-sale system for the correct capturing of sales details.
- Have all relevant exemption and resale certificates on file
Overall, sales tax audits are a fact of life, and you're likely to be the next subject even if you always accurately file sales taxes. For this reason, it's wise to always have clean records just in case an audit happens.
What to Do if Audited by the DRS
If you're notified of the audit, don't panic; instead, begin preparing as soon as possible before the material day arrives. One of the first steps to take is gathering the relevant business records which the auditor will likely ask for. These include your sales and purchase invoices, sales and use tax returns, general ledger, exemption certificates, and financial statements. Perform a check-up of these documents to ensure there are no loopholes such as incomplete or missing records. You can consult a sales tax professional to guide you on what to submit.
Once you're confident that all your records are in order, including the exemption certificates, stay the course until you get a favorable audit outcome.
We Can Help Gas Stations and Convenience Stores With Taxes
Through our assistance as sales tax experts, we will ensure your business avoids being tagged for incorrect filing, omissions, or any violations that could trigger a sales tax audit. We also offer reliable sales tax audit assistance, including appealing any audit assessment by the Connecticut Department of Revenue.
Get in touch with us for a free consultation if you have any questions or concerns.