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Business entity tax tends to discourage people from starting micro business or part time business on the side. If you want to sell Crafts on ETSY for instance as a side deal the $125.00 is a real bummer. I have actually personally shut down a small side business thanks to the cost of business entity and insurance in the state. Sounds small potatoes but lots of business does start this way.
Not every state charges property tax on personal property. If you run a business that does not have an exemption for the majority of your equipment it makes other states more attractive. A deduction does not make up for the cost of the tax.
If a person can not afford $250 to open a business they shouldn't be in business. That's redonkulous.
Personal property taxes are enforced and collected by the individual towns not the state. IRS has also changed rules regarding deductions if a person is using part of their house to run a business. This doesn't apply to S or C Corp but it is very helpful for the small business owner. This is why all small business people that are making significant revenue need to hire CPAs/accountants as soon as possible. Average person is not going to know these tax rules.
Businesses do not pay taxes. Taxes are built into the price of their products and devices. In theory if taxes were too high in Ct consumers would purchase products and services in other states. This is why there isn't much of a sales tax spread among the surrounding states. If Ct raised sale tax to 12% for example all the highways outta of CT would be jam packed with cars every weekend by people seeking lower sales taxes.
However, if someone was buying a 20k diamond they could drive to Delaware or New Hampshire (pay cash) and save $1,550* on sales tax. To someone with this much cash the trip probably makes sense. I'm sure this happens since if you go to Delaware or New Hampshire on the weekend all the stores are jam packed with cars from out of state.
CT has a 7.75% sales tax on "luxury items" above a certain dollar amount. That's how I got $1,550
Taxes are a balancing act. In economic theory if they are too high consumers seek alternatives. High taxes can also create a black market which we can see in NYC with the cigarette taxes.
Another company staying and expanding in Stamford. Gartner Inc., a research and advisory firm in finance, IT, customer service, human resources, legal, marketing and sales has plans to add 400 workers. The state is providing a $5 million loan for the expansion. Gartner has 1,500 workers in Connecticut out of a total of 15,000 worldwide. Nice that they decided to expand here. Jay
If a person can not afford $250 to open a business they shouldn't be in business. That's redonkulous.
Personal property taxes are enforced and collected by the individual towns not the state.
Businesses do not pay taxes. Taxes are built into the price of their products and devices. In theory if taxes were too high in Ct consumers would purchase products and services in other states. This is why there isn't much of a sales tax spread among the surrounding states. If Ct raised sale tax to 12% for example all the highways outta of CT would be jam packed with cars every weekend by people seeking lower sales taxes.
However, if someone was buying a 20k diamond they could drive to Delaware or New Hampshire (pay cash) and save $1,550* on sales tax. To someone with this much cash the trip probably makes sense. I'm sure this happens since if you go to Delaware or New Hampshire on the weekend all the stores are jam packed with cars from out of state.
CT has a 7.75% sales tax on "luxury items" above a certain dollar amount. That's how I got $1,550
Taxes are a balancing act. In economic theory if they are too high consumers seek alternatives. High taxes can also create a black market which we can see in NYC with the cigarette taxes.
I'm actually mostly in agreement with you but the facts on the ground is compared to many other states running a business is more costly and complicated in CT then it is in some other states.
On the Personnel property taxes yes those are local taxes but a number of states made laws barring local municipalities from collecting them on anything but real estate property.
Yes customers pay tax, but things other then the sales tax a re hidden costs that tend have different effects depending on the business. If you run a business and you only compete really against people in your state (say maybe a plumber) then all the tax flows thru to the customer about the same for you and your competitor. But when you compete against other companies in other states you now either bury those costs in your margins or you hope your customers don't shop on price alone. If I make X in CT and my major competitors are in FL, it's likely that they will either have better margins allowing for more R and D and advertising which allows faster growth then my company or they will under cut and pull volume.
So I'm not a slash and burn on taxes and regs kind of guy. I just think it's a balancing act. And if we aren't honest that these differences exist we can't really talk about then truthfully and how they effect things.
On the $250 thing we aren't concerned with most business here it's people that start a side business that may grow into something bigger. That $250 might push say a car detailer to stay out of the system and on cash rather then paying into the system which drops our collection rate and it also makes it a bigger decision when it comes to growth. Or maybe you make shelves and sell them at fairs etc, lots of people have side gigs. Again there is a breaking point between growing a business and cash in your pocket. Like I said I had a business that grossed a few thousand a year on the side. One of the reasons I closed it was between the liability insurance and business entity and property tax, I was out 15-20% before I did anything. Seems the solution on business entity would be an exemption on companies with small gross income.
On the $250 thing we aren't concerned with most business here it's people that start a side business that may grow into something bigger. That $250 might push say a car detailer to stay out of the system and on cash rather then paying into the system which drops our collection rate and it also makes it a bigger decision when it comes to growth. Or maybe you make shelves and sell them at fairs etc, lots of people have side gigs. Again there is a breaking point between growing a business and cash in your pocket. Like I said I had a business that grossed a few thousand a year on the side. One of the reasons I closed it was between the liability insurance and business entity and property tax, I was out 15-20% before I did anything. Seems the solution on business entity would be an exemption on companies with small gross income.
I don't think the $250 is going to prevent any one from starting a business. Its more likely that people don't know about it, but get hit with it later. Mainly because they were trying to stay under the Govt's radar.
State of CT has sales tax audit teams that go out to businesses unannounced. They especially like to audit cash businesses. Ct also goes out to flea markets to check for sales tax permits. Not sure if its the same Dept that does this. Anyone who tries to fly under the Govt radar won't stay invisible for long IMO.
As for the business from home some towns have exemptions for "internet based business." Any business that is being run electronically like ebay wont' have the personal property tax on equipment since its only requires a computer.
I can create a LLC LLTC or sole prop in about 20 minutes. Now if someone wants to start an S-corp that is going to require legal help. I don't think 20 mins is much of a burden.
I think one road block CT has for opening a business is that one must purchase a "sales tax permit" for $100. I think this is redonkulous since people have to pay the state for the privilege of collecting and forwarding tax on the states behalf. Now this is really asinine.
I don't think the $250 is going to prevent any one from starting a business. Its more likely that people don't know about it, but get hit with it later. Mainly because they were trying to stay under the Govt's radar.
State of CT has sales tax audit teams that go out to businesses unannounced. They especially like to audit cash businesses. Ct also goes out to flea markets to check for sales tax permits. Not sure if its the same Dept that does this. Anyone who tries to fly under the Govt radar won't stay invisible for long IMO.
As for the business from home some towns have exemptions for "internet based business." Any business that is being run electronically like ebay wont' have the personal property tax on equipment since its only requires a computer.
I can create a LLC LLTC or sole prop in about 20 minutes. Now if someone wants to start an S-corp that is going to require legal help. I don't think 20 mins is much of a burden.
I think one road block CT has for opening a business is that one must purchase a "sales tax permit" for $100. I think this is redonkulous since people have to pay the state for the privilege of collecting and forwarding tax on the states behalf. Now this is really asinine.
Like I said I know from experience on the cash thing. If you work on word of mouth it's hard to catch. I know people who have had cash side business for decades in the state. They detail cars, paint houses, do tile work, landscaping work, sell arts and crafts resale all kinds of stuff etc. I agree forming an LLC in CT is easy. That's not the issue I have done it. The sales tax paper work is a bit of a pain. I know in my town I did have to pay property tax on the computer printer and fax I had. Like I said that's not going to drive out big business but it limits innovation and growth from small business. Lots of business starts as a side gig for a couple hundred a month. $250.00 is a real drag on that. So why not just exempt business under 40,000 a year in gross receipts.
Like I said I know from experience on the cash thing. If you work on word of mouth it's hard to catch. I know people who have had cash side business for decades in the state. They detail cars, paint houses, do tile work, landscaping work, sell arts and crafts resale all kinds of stuff etc. I agree forming an LLC in CT is easy. That's not the issue I have done it. The sales tax paper work is a bit of a pain. I know in my town I did have to pay property tax on the computer printer and fax I had. Like I said that's not going to drive out big business but it limits innovation and growth from small business. Lots of business starts as a side gig for a couple hundred a month. $250.00 is a real drag on that. So why not just exempt business under 40,000 a year in gross receipts.
Someone would have to verify the exemptions. Probably easier to accomplish today with computers, but a lot of Fed / State agencies don't speak with each other. So that means more Govt employees. No ones going to go for that.
As for the people running cash business for years perhaps a few get a way with it. Most of these people get ratted out by the people they are doing business with. When it comes to taxes people get bent way out of shape.
Also, a legit business is going to issue a 1099 to contractors. Those 1099 are cross referenced by the IRS. Not sure if it gets to the state level, but once the IRS is on your back you're going to regret it.
Another monkey wrench is a lot of these "cash business" people are collecting disability payments or hiding income from creditors, ex wifes/husbands, ailmony, etc. If they had to go legit they probably would just shut down. I'll bet at least 25% of flea market sellers are in these groups.
In the long run its not worth the risk to avoid taxes although I'm sure some people make it thru unscathed.
These people are moving back to Connecticut after a stint in Florida. The funny thing is that I know several people that are doing the same thing. They found that the tax and cost of living savings is not that significant and quality medical care, which is so important in your later years, is seriously lacking in the Sunshine State. In addition, people I know have said that they needed to spend a lot on travel to attend important family events (weddings, funerals, graduations, etc.) and to be an active part of their grandchildren's lives. It was not worth it to save what was nothing more than a couple hundred dollars.
And before I get attacked, I realize this is not a big trend BUT it is happening and probably more than some here want to admit. Jay
These people are moving back to Connecticut after a stint in Florida. The funny thing is that I know several people that are doing the same thing. They found that the tax and cost of living savings is not that significant and quality medical care, which is so important in your later years, is seriously lacking in the Sunshine State. In addition, people I know have said that they needed to spend a lot on travel to attend important family events (weddings, funerals, graduations, etc.) and to be an active part of their grandchildren's lives. It was not worth it to save what was nothing more than a couple hundred dollars.
And before I get attacked, I realize this is not a big trend BUT it is happening and probably more than some here want to admit. Jay
Someone would have to verify the exemptions. Probably easier to accomplish today with computers, but a lot of Fed / State agencies don't speak with each other. So that means more Govt employees. No ones going to go for that.
As for the people running cash business for years perhaps a few get a way with it. Most of these people get ratted out by the people they are doing business with. When it comes to taxes people get bent way out of shape.
Also, a legit business is going to issue a 1099 to contractors. Those 1099 are cross referenced by the IRS. Not sure if it gets to the state level, but once the IRS is on your back you're going to regret it.
Another monkey wrench is a lot of these "cash business" people are collecting disability payments or hiding income from creditors, ex wifes/husbands, ailmony, etc. If they had to go legit they probably would just shut down. I'll bet at least 25% of flea market sellers are in these groups.
In the long run its not worth the risk to avoid taxes although I'm sure some people make it thru unscathed.
You only get a 1099 if you earned over $ 600.00 from one source. If you earn $ 599.00 or less from 35 different sources, there isn't any documentation given to you, although you are expected to claim the income on your tax return.
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