Do Nonresidents Pay Connecticut Income Tax on Powerball Tickets Purchased in Connecticut?

Yes, nonresidents are generally required to pay Connecticut income tax on multistate lottery winnings, including Powerball, if they purchase the winning ticket here.  Specifically, nonresidents must pay Connecticut income taxes on the winnings if (1) they meet the gross income test (i.e., have taxable income that reaches the filing thresholds listed below) and (2) the amount paid is reportable to the IRS (i.e., $600 or more and at least 300 times the amount of the wager).
For the 2016 tax year, the filing threshold is:

• $12,000 for married people filing separately,
• $15,000 for single filers,
• $19,000 for heads of household, and
• $24,000 for married couples filing jointly or surviving spouses.

By law, the Connecticut Lottery Corporation withholds state income tax from payments of reportable Connecticut lottery winnings, including Powerball winnings (Conn. Agencies Regs. § 12-705(b)-2).

For further information, a 2015 Department of Revenue Services informational publication explains the income tax treatment of state lottery winnings received by residents and nonresidents. 

Lawsuit Challenges Princeton’s Property Tax Exemption

About two dozen Princeton homeowners recently joined four other residents in a five-year-old lawsuit challenging Princeton’s property tax exemption, Bloomberg Businessweek reports. The suit argues that the university made $524 million in licensing income, mostly from a patent that lead to the creation of a cancer-fighting drug.

The plaintiffs claim that the school should pay as much as $40 million a year in property taxes, a sum that “would be enough to cut homeowners’ tax burden by about one-third.” The school counters that it is the borough’s biggest taxpayer, making its tax rate the lowest in Mercer County. The school pays about $8 million in property taxes on graduate student residences and other nonacademic property, plus voluntarily contributes about $3 million toward emergency services and public works.

(A 2014 OLR report summarizes the arguments the homeowners and university made in the court documents they filed in 2013 with New Jersey’s Tax Court, which refused to dismiss the case. At that time, the court did not set a trial date and the parties were negotiating out of court.)

A Brief Overview of State Severance Taxes

Severance taxes are taxes imposed on natural resources removed from the soil or water.  They are usually associated with oil, natural gas, coal, and ores, but can also be applied to other natural resources including salt, timber, fish, phosphates, sulfur, clay, sand, gravel, and cement compounds.  The revenues from these taxes are “intended to compensate a state and its citizens for depletion of their natural resource wealth, and to mitigate social and environmental effects” (National Conference of State Legislatures (NCSL), Tax Policy Handbook for State Legislators, Third Edition, February 2010).

The taxes are based on either the value of the resource extracted or produced or the production volume.  The value-based taxes are imposed as a fixed percentage of the value, while the volume-based taxes are imposed as a flat rate per unit of measure.  In either case, the tax rates are often graduated. 

This table from the Council of State Governments’ The Book of States 2015 lists the 39 states that impose at least one severance tax and generally provides the rate and basis for each tax.

Connecticut is among the 11 states that do not impose a severance tax.  The other states are Delaware, Georgia, Hawaii, Iowa, Massachusetts, Missouri, New Jersey, New York, Rhode Island, and Vermont.

Sales Tax on Boats and Related Services

With boating season upon us, here’s a quick run-down of how Connecticut treats boats and boat-related services for sales tax purposes.

Boat sales: subject to 6.35% tax if the purchaser is a Connecticut resident.  Nonresidents that do not have a home in Connecticut and do not register their boats here are exempt.  So are boats docked in the state for less than 60 days.

Boat repair and maintenance: exempt if separately stated from other costs, but parts and materials are taxable.

Fabrication labor (i.e., labor to customize or assemble components onto a boat): exempt if separately stated from other costs, but parts and materials are taxable.

Contracts for boat maintenance, repair, and warranty: exempt, but parts and materials used to fulfill the contracts are taxable.

Boat brokerage services: exempt.

Boat mooring and storage services: taxable from June 1 through September 30; exempt from October 1 through May 31.

Sources: CGS §§ 12-412(60), 12-408(1)(E), 12- 411(1)(D), 12- 412(116), 12-407(2)(M); DRS Informational Publication 2006(12)

Sales Tax on Automobile Repair Paint

OLR Report 2016-R-0029 identifies the circumstances under which auto paint suppliers charge sales tax on paint sold to auto repairers.  Suppliers must charge sales tax if the auto repairer purchases the paint for any purpose other than repairing a specific customer’s vehicle.  The repairer must first present the supplier with a sales and use tax resale certificate, which indicates that the paint is for a particular vehicle and the repairer will subsequently charge the customer for the paint and the sales tax.

This rule reflects a distinction the regulations make between “integral” and “non-integral” parts.  Integral parts, such as filters, belts, and hoses, retain their identity after an auto repairer installs them in a vehicle.  Non-integral parts, such as masking tape and sealants, are consumed by the service provider in repairing the motor vehicle and therefore do not retain their individual identity after use.

Suppliers do not collect sales tax on integral parts as the repairer will install them in a vehicle and charge the customer for the parts and sales tax.  Suppliers do collect sales tax on non-integral parts because the repairer purchases them for use on several vehicles.

For more information, read the full report here.

Alberta, Canada Changes its Economic Development Game Plan

http://bit.ly/255GjY2

Connecticut isn’t the only jurisdiction reeling from the shock waves of volatile tax revenues. Alberta, Canada is being hammered by the economic swings of its oil and natural gas industry, one of the province’s economic mainstays. In the wake of rising unemployment, Alberta adopted last October a $178 million plan to give businesses and nonprofit organizations up to $5,000 for each new employee they hire, up to a $500,000 maximum per employer.

So after launching this program, the business community weighed in on it. “Quite frankly, businesses and industry provided us feedback,” the provincial government’s economic development and trade minister told the press, “to say ‘You know what, that isn’t quite going to give you the outcomes you’re looking for,” according to press reports cited in the State Science and Technology Institute’s April 21, 2016 SSTI Digest. So, the government changed its game plan and now concentrates its resources on diversifying its industries.

That plan is mapped out in the 2016 Alberta Jobs Plan, the centerpiece of which is a 30% tax credit for investing in small and medium-size information technology, clean technology, health technology, interactive digital media and game products, and post-production visual effects and digital animation. The credit’s price tag: $90 million over two years.

But the plan has more: $10 million in new funding for Alberta Innovates, a quasi-public agency that runs business incubators aimed at encouraging innovation and job growth. The plan also provides:

• $25 million to support apprenticeship and training programs,
• $25 million to spur knowledge economy innovation and growth,
• $10 million to support the Agrivalue Processing Business Incubator Program, and
• $10 million for promoting industrial diversification on a regional basis.

Should States Tax Feminine Hygiene Products?

According to a recent Governing article, five states (Maryland, Massachusetts, Minnesota, New Jersey, and Pennsylvania) say no and others may soon join them.  The article highlights a push among states to lift the sales tax on feminine hygiene products, a move that also sparked a broader conversation about women’s health issues. 

Media coverage last year sought to make people more aware of the issue, the article claims. As an example, it cited Cosmopolitan’s online drive petition to exempt tampons from the sales tax. The magazine claimed that women spend more than $70 a year on these products. The petition stated that, “these items are a necessity—not an option, not a luxury item—and should be treated as such.”   

While some state legislators want to lift the sales tax from hygiene products, others want to make them more affordable, especially to low-income women. California state Representative Cristina Garcia told Governing, “If you’re living dollar-to-dollar, budgeting $7 to $10 a month for these products can be tough.” One way to make the products more affordable to these women is to allow them to buy the products with food stamps. That option though requires changing federal law, which specifies the things people can buy with food stamps.

A quick search of the National Conference of State Legislatures’ database found that nearly a dozen states, including Connecticut, are looking at bills this year to exempt feminine hygiene products from taxation.

Click here to read the full article.   

Connecticut's Income Tax Checkoff Program

OLR Report 2016-R-0034 explains Connecticut's income tax checkoff program.  It provides the (1) legislative history and rationale for the accounts eligible to receive income tax contributions and (2) amount of money they have received under the program.

Under the checkoff program, taxpayers can voluntarily contribute any portion of their state income tax refund to seven designated state accounts.  The accounts, administered by various state agencies, fund a range of charitable, environmental protection, research, and education programs including grants to military families, organ donors and recipients, and AIDS and breast cancer researchers.  In total, taxpayers have contributed over $6 million under the income tax checkoff program from 1993 through 2014.

Connecticut's checkoff program accounts are:

• Organ Transplant Account (created in 1993)
• Endangered Species, Natural Area Preserves, and Watchable Wildlife Account (1993)
• AIDS Research Education Account (1993)
• Breast Cancer Research and Education Account (1997)
• Safety Net Services Account (1997)
• Military Relief Fund (2005)
• CHET (Connecticut Higher Education Trust) Baby Scholars Fund (2014)

For more information, read the full report here.

Is there a “pink tax”?

flickr.com

A recent CNNmoney article highlights the findings of a study by New York City’s Department of Consumer Affairs (DCA) on gender pricing differences for similar products. The article refers to these differences as “the pink tax.”

DCA’s study, entitled From Cradle to Cane: The Cost of Being a Female Consumer, compared 794 products with similar male and female versions sold online and in New York City stores. Products in the study had similar branding, ingredients, appearance, textiles, and construction, attempting to minimize the differences between men’s and women’s products. The industries compared in the study included (1) toys and accessories, (2) children’s clothing, (3) adult clothing, (4) personal care products, and (5) senior home health care products.

The study found that, on average, women’s products cost seven percent more than similar male products. The greatest deviation was in haircare products, where women’s products cost, on average, 48% more. In general, women’s products cost more than similar men’s products 42% of the time, whereas men’s products cost more 18% of the time.

According to the study, its findings suggest that women are paying, over a lifetime, thousands of dollars more than men to purchase similar items. It conceded that there may be legitimate reasons for some of the price differences, but it stated that paying higher prices is often unavoidable for women because they do not choose what textiles or ingredients are used in products marketed to them.

Sunlight Breaking Through Economic Clouds

The Connecticut Economic Digest’s recent review of national and state economic statistics finds reasons for cautious optimism about the national and state economy. The Digest, which is published jointly by the departments of labor and economic and community development, reported that the nation’s Real Gross Domestic Product is expected to increase by almost 3% this year, possibly reflecting the impact of the 11.4 million jobs created since the last recession ended.

The Manufacturing ISM Report on Business and the Purchasing Managers Index also see continuing improvement. The former “reported the 77th consecutive monthly expansion of the overall economy into November 2015,” and the latter’s index “indicated growth in manufacturing for the 34th consecutive month.”

Connecticut’s economy also registered some good, if modest, numbers. Connecticut’s gross state product increased 0.6% in 2014, the latest year available, and the labor department sees personal income increasing 2.5% by March 2016. The economy regained almost 85% of the 119,000 jobs it lost during the 2008-2010 downturn.

But, as the Digest points out, “the state’s fiscal outlook was tempered in 2015 as evidenced by a FY 2014-15 deficit of $113.2 million, based on Generally Accepted Accounting Principles.” Other factors at play include “future Fed interest rate hikes, immigration reform, Eurozone debt, and China’s growth prospects, as well as geopolitical risks to the global economy in the Middle East, Europe, and Japan.”