Connecticut Sales and Use Tax Protest

CONNECTICUT SALES AND USE TAX PROTEST

Filed with the Department of Revenue Services — Appellate Division

TABLE OF CONTENTS

1. Sender / Taxpayer Information
2. Addressee and Caption
3. Subject and Identification of Assessment
4. Statement of Timeliness
5. Statement of Facts
6. Grounds for Protest
7. Wayfair / Economic Nexus Defenses
8. Request for Oral Hearing
9. Refund Claim and Reservation of Rights
10. Burden of Proof
11. Relief Requested
12. Verification and Signature
13. Exhibit and Schedule List
14. Connecticut Practice Notes
15. Sources and References

1. SENDER / TAXPAYER INFORMATION

[TAXPAYER FULL LEGAL NAME]

Connecticut Tax Registration No.: [________________________________]

FEIN (last 4): [____]

Sales Tax Permit No.: [________________________________]

Mailing Address: [STREET], [CITY, STATE ZIP]

Telephone: [NUMBER] | Email: [EMAIL]

2. ADDRESSEE AND CAPTION

Department of Revenue Services

Appellate Division

450 Columbus Boulevard, Suite 1

Hartford, CT 06103-1837

Date: [__/__/____]

Sent via: ☐ U.S. Certified Mail, Return Receipt Requested ☐ myconneCT secure messaging ☐ Hand Delivery ☐ Email to [email protected]

3. SUBJECT AND IDENTIFICATION OF ASSESSMENT

Re: Protest of Notice of Deficiency Assessment — Connecticut Sales and Use Tax

To the Appellate Division:

The above-named Taxpayer ("Taxpayer") hereby submits this written protest pursuant to Conn. Gen. Stat. § 12-418 against the deficiency assessment issued under Conn. Gen. Stat. § 12-415 (the "Assessment") and respectfully requests reconsideration, abatement, and/or modification of the Assessment for the reasons set forth herein.

4. STATEMENT OF TIMELINESS

4.1. The Notice of Deficiency Assessment was served on Taxpayer on [DATE OF NOTICE].

4.2. This Protest is filed on [DATE], which is within the sixty (60)-day period prescribed by Conn. Gen. Stat. § 12-418(1).

4.3. By filing this Protest, Taxpayer expressly preserves all rights to (a) administrative reconsideration; (b) judicial appeal to the Superior Court for the Judicial District of New Britain (Tax Session) under Conn. Gen. Stat. § 12-422; and (c) any related refund claim under Conn. Gen. Stat. § 12-425.

5. STATEMENT OF FACTS

5.1. Taxpayer is a [Connecticut domiciled / foreign / out-of-state remote] [retailer / marketplace facilitator / service provider] with its principal place of business at [ADDRESS] and [describe business — e.g., online retailer of consumer electronics; SaaS provider; restaurant; construction contractor].

5.2. Taxpayer [holds / does not hold] a Connecticut Sales and Use Tax Permit issued under Conn. Gen. Stat. § 12-409.

5.3. For the audit period [___], Taxpayer [filed / did not file] Forms OS-114 (Sales and Use Tax Return) reporting gross sales of $[AMOUNT] and tax due of $[AMOUNT].

5.4. On [DATE], DRS issued the Assessment based on [brief description — e.g., disallowance of resale exemption certificates, recharacterization of services as taxable computer/data processing, statistical sampling of sales records, assertion of economic nexus under § 12-407(a)(12)(L), use-tax assessment on out-of-state purchases].

5.5. Taxpayer disagrees with the Assessment on the grounds set forth in Section 6 below.

5.6. Throughout the audit, Taxpayer cooperated with DRS, produced [identify documents], and participated in the closing conference held on [DATE].

6. GROUNDS FOR PROTEST

Taxpayer protests the Assessment on the following independent grounds:

6.1. Items Were Non-Taxable

The transactions assessed are not "sales at retail" of tangible personal property or enumerated taxable services within the meaning of Conn. Gen. Stat. §§ 12-407(a)(2), 12-407(a)(37), and 12-408. Specifically, [describe — e.g., sales for resale; sales of nontaxable consulting services; SaaS that is not a "computer and data processing service"; sales of exempt food, prescription drugs, clothing under $50 (where applicable), or other statutorily exempt items].

6.2. Valid Exemption Certificates on File

Taxpayer obtained, in good faith, properly completed exemption or resale certificates (CERT-100, CERT-119, CERT-141, CERT-128, etc.) from each customer whose transactions are at issue, in conformity with Conn. Agencies Regs. § 12-426-1 and DRS guidance. Pursuant to § 12-410(4), these certificates relieve Taxpayer of the obligation to collect tax. Copies are attached as [Exhibit ___].

6.3. Statistical Sampling Methodology Is Flawed

The auditor's statistical sample is not representative of Taxpayer's transactions because [describe sampling defects — e.g., excluded credits/returns, biased stratification, insufficient sample size, mathematical error in projection]. Taxpayer's reverse-audit work shows the projected error rate overstates true liability by approximately $[AMOUNT].

6.4. Improper Application of Use Tax

The use-tax portion of the Assessment is improper because [describe — e.g., property was acquired in a state with substantially similar tax that was paid; the property was for resale and not for use in CT; the property qualifies for a § 12-412 exemption; the property never entered Connecticut].

6.5. No Economic Nexus

Taxpayer did not exceed the dual statutory threshold of Conn. Gen. Stat. § 12-407(a)(12)(L) — at least $100,000 in gross receipts from sales into Connecticut AND at least 200 retail sales — during any 12-month period ending on September 30 immediately preceding the assessment periods. See Section 7 below.

6.6. Marketplace-Facilitator Defense

For sales made through a marketplace facilitator that has elected or is required to collect Connecticut tax under Conn. Gen. Stat. § 12-408(4) and § 12-411b, the marketplace facilitator is the "retailer" obligated to collect and remit. Taxpayer's "marketplace seller" liability is excluded from the Assessment under § 12-411b(c).

6.7. Penalty Waiver — Reasonable Cause

Pursuant to Conn. Gen. Stat. § 12-415(7) and § 12-735(c), the negligence penalty (15% under § 12-415(7)) and any late-payment penalty must be waived because Taxpayer's conduct was due to reasonable cause and was not the result of negligence or intentional disregard of the law. [Specific reasonable cause facts.]

6.8. Statute of Limitations

The Assessment is barred in whole or part by the three-year limitation in Conn. Gen. Stat. § 12-415(f), or, where a longer period is asserted, by the absence of any fraud, willful evasion, or unfiled-return circumstance triggering an extended period.

6.9. Constitutional Defenses

Taxpayer reserves and asserts all available constitutional defenses, including (a) the substantial-nexus requirement of Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), as modified by South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018); (b) fair apportionment; (c) non-discrimination against interstate commerce; (d) fair relation to services provided by the State; and (e) Due Process and Equal Protection under the Fourteenth Amendment and Article First of the Connecticut Constitution.

7. WAYFAIR / ECONOMIC NEXUS DEFENSES

7.1. Statutory Threshold

Conn. Gen. Stat. § 12-407(a)(12)(L) defines a "retailer engaged in business in this state" to include any retailer that, during the 12-month period ending on September 30 immediately preceding the monthly or quarterly period for which liability is asserted, satisfies both of the following: (i) gross receipts from sales into Connecticut of at least $100,000; and (ii) at least 200 retail sales into Connecticut. Connecticut deliberately retains a conjunctive ("AND") economic-nexus test, in contrast with many states that have moved to a receipts-only threshold.

7.2. Application to Taxpayer

For each of the relevant 12-month measurement periods, Taxpayer's actual Connecticut activity was as follows:

7.3. Click-Through and Affiliate Nexus

Taxpayer further denies that Connecticut click-through nexus or affiliate-nexus provisions (Conn. Gen. Stat. § 12-407(a)(12)(K) and (a)(15)) are satisfied because [no in-state affiliate solicits sales / no commission-based referrer arrangement / total commission-attributable receipts are below the statutory floor].

7.4. Marketplace Facilitator Allocation

For sales through marketplace facilitators (e.g., Amazon, eBay, Etsy, Walmart Marketplace), Conn. Gen. Stat. § 12-408(4) and § 12-411b assign the collection obligation to the facilitator. Such sales must be excluded from Taxpayer's nexus measurement to the extent the facilitator collected and remitted tax. See DRS Special Notice [2019(8) / current version].

7.5. Substantial Nexus Under Wayfair

Even where statutory thresholds are met, the imposition of collection obligations must satisfy the substantial-nexus and Due Process requirements articulated in Wayfair, including [absence of retroactive application; safe-harbor for small sellers; reasonable transition rules]. Taxpayer reserves all Wayfair-based defenses.

8. REQUEST FOR ORAL HEARING

Pursuant to Conn. Gen. Stat. § 12-418(2), Taxpayer:

☐ Requests an in-person oral hearing at the DRS offices in Hartford.

☐ Requests a telephonic or video hearing.

☐ Waives an oral hearing and requests determination on the written record.

Counsel of record is available on [PROPOSED DATES] and requests at least [14] days' written notice of the hearing date, as required by § 12-418(2).

9. REFUND CLAIM AND RESERVATION OF RIGHTS

9.1. To the extent any portion of the disputed amount has been paid (whether voluntarily, under protest, or pursuant to an installment plan), Taxpayer hereby asserts a contemporaneous claim for refund under Conn. Gen. Stat. § 12-425 in the amount of $[AMOUNT] plus statutory interest.

9.2. This refund claim is filed (a) within three (3) years from the last day of the month succeeding the period for which the overpayment was made, or (b) within six (6) months after the Assessment becomes final, whichever applies, as required by Conn. Gen. Stat. § 12-425.

9.3. Taxpayer reserves the right to amend, supplement, or expand this Protest and refund claim, including the right to assert additional grounds upon issuance of any further notices or upon receipt of additional information from DRS.

10. BURDEN OF PROOF

10.1. Taxpayer acknowledges that, as the protesting party, it bears the burden of proving the Assessment incorrect by a preponderance of the evidence. See, e.g., Schlumberger Tech. Corp. v. Dubno, 202 Conn. 412 (1987); Leonard v. Commissioner, 264 Conn. 286 (2003).

10.2. Where Taxpayer obtained an exemption certificate in good faith, however, the burden shifts to DRS to demonstrate non-qualification under Conn. Gen. Stat. § 12-410(4) and Conn. Agencies Regs. § 12-426-1.

10.3. Should the Appellate Division issue an adverse Notice of Determination, Taxpayer reserves the right to take a de novo appeal to the Superior Court (Tax Session, Judicial District of New Britain) under Conn. Gen. Stat. § 12-422 within one (1) month of the mailing of such determination.

11. RELIEF REQUESTED

Taxpayer respectfully requests that the Appellate Division:

• A. Abate the Assessment in its entirety;
• B. In the alternative, reduce the Assessment to $[AMOUNT] as supported by the evidence;
• C. Waive all penalties pursuant to Conn. Gen. Stat. §§ 12-415(7) and 12-735(c);
• D. Recompute interest accordingly;
• E. Refund any overpaid tax with statutory interest under § 12-425; and
• F. Grant such other and further relief as is appropriate.

12. VERIFICATION AND SIGNATURE

I, [NAME], declare under the penalties of false statement (Conn. Gen. Stat. § 53a-157b) that I am the [Taxpayer / authorized officer of Taxpayer / authorized representative under Form LGL-001], that I have read the foregoing Protest, and that the statements herein are true and correct to the best of my knowledge, information, and belief.

Date: [__/__/____]

[________________________________]

[NAME], [TITLE]

Counsel for Taxpayer (if represented):

[LAW FIRM NAME]

By: [________________________________]

[ATTORNEY NAME], Conn. Juris No. [####]

[STREET ADDRESS] | [CITY, CT ZIP]

Telephone: [NUMBER] | Email: [EMAIL]

A duly executed Form LGL-001 (Power of Attorney) is enclosed.

13. EXHIBIT AND SCHEDULE LIST

14. CONNECTICUT PRACTICE NOTES

• Sixty-day deadline is jurisdictional. Section 12-418 requires the written protest within 60 days of service of the Notice. Missing the deadline forfeits administrative review and limits the taxpayer to a refund-claim challenge under § 12-425 (after payment in full).
• Service date matters. The 60-day clock runs from the date the Notice is served (typically the mailing date). Where the notice arrives via myconneCT, the portal posting date may serve as the service date — confirm in the assignment letter.
• Negligence penalty is automatic. Conn. Gen. Stat. § 12-415(7) imposes a 15% penalty (or $50, whichever is greater) on deficiencies attributable to negligence or intentional disregard of the chapter or regulations. Always seek waiver under § 12-735(c) on reasonable-cause grounds.
• Economic nexus — CT keeps the conjunctive AND. Unlike many states post-Wayfair, Connecticut retains the dual-prong test of $100,000 in receipts AND 200 transactions. Confirm the current statutory text in § 12-407(a)(12)(L); legislative changes have been proposed periodically. Marketplace-facilitator sales may be excluded from the seller's nexus count where the facilitator is collecting under § 12-408(4)/§ 12-411b.
• Click-through and affiliate nexus. Pre-Wayfair "click-through" provisions remain on the books and continue to apply where in-state affiliates solicit sales for commissions exceeding statutory thresholds (§ 12-407(a)(12)(K)). These can produce nexus even where the economic-nexus thresholds are not met.
• Deposit / bond. Section 12-418(3) does not require a deposit to file the protest, but DRS may require a bond or deposit to suspend collection for assessments that have already become final or for jeopardy assessments under § 12-417.
• Statistical sampling. DRS sales/use audits routinely use stratified random sampling. Demand the sampling plan in writing, the right to review and validate sample selection, and the right to perform a complementary "reverse audit" for unrecovered exemptions. Sampling errors are common and material.
• Resale and exemption certificates. A good-faith certificate received within 90 days of sale (or as otherwise permitted) shifts the burden to DRS. Maintain a tickler for certificate renewals; CERT-100 (resale) and CERT-119 (charitable) require careful tracking.
• Use tax. A common audit issue is unreported use tax on out-of-state purchases for in-state use. Credit for tax paid to other states is available under Conn. Gen. Stat. § 12-430(3) where the foreign jurisdiction's tax is "substantially similar."
• Refund claim deadline. Section 12-425 imposes a hard three-year limit measured from the last day of the month succeeding the overpayment period. After a final § 12-415 assessment, the deadline shrinks to six months.
• Tax Session venue. All Connecticut tax appeals are docketed in the Superior Court for the Judicial District of New Britain. The Tax Session is presided over by a single judge specially assigned to tax matters.
• Interest rates. Underpayment interest is 1% per month (§ 12-415(7) / § 12-419); refund interest is 2/3 of 1% per month under § 12-425(2).

15. SOURCES AND REFERENCES

• Conn. Gen. Stat. Ch. 219 (Sales and Use Taxes) — https://www.cga.ct.gov/current/pub/chap_219.htm
• Conn. Gen. Stat. § 12-407 (Definitions; economic nexus) — https://law.justia.com/codes/connecticut/title-12/chapter-219/section-12-407/
• Conn. Gen. Stat. § 12-415 (Deficiency assessment) — https://law.justia.com/codes/connecticut/title-12/chapter-219/section-12-415/
• Conn. Gen. Stat. § 12-418 (Written protest) — https://law.justia.com/codes/connecticut/title-12/chapter-219/section-12-418/
• Conn. Gen. Stat. § 12-422 (Appeal to Superior Court) — https://law.justia.com/codes/connecticut/title-12/chapter-219/section-12-422/
• Conn. Gen. Stat. § 12-425 (Refunds) — https://law.justia.com/codes/connecticut/title-12/chapter-219/section-12-425/
• DRS Penalty Waiver, OIC, Protest Portal — https://portal.ct.gov/drs/myconnect/penalty-waiver-request-and-offer-of-compromise
• PS 2007(2) — Your Rights as a Connecticut Taxpayer — https://portal.ct.gov/drs/publications/policy-statements/2007/ps-20072-your-rights-as-a-connecticut-taxpayer
• Form APL-002 (Appellate Division Protest Form) — https://portal.ct.gov/-/media/drs/fillable_forms/2019forms/apl-002-fillable.pdf
• South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018)
• Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977)
• Schlumberger Tech. Corp. v. Dubno, 202 Conn. 412 (1987)
• Leonard v. Commissioner of Revenue Services, 264 Conn. 286 (2003)
• Sales Tax Institute — Connecticut Economic Nexus Provisions — https://www.salestaxinstitute.com/resources/connecticut-enacts-economic-marketplace-reporting-nexus-provisions

Disclaimer: This template is provided for informational purposes only and does not constitute legal advice. An attorney licensed in Connecticut must review and customize this document before filing. Laws, regulations, and DRS procedures change frequently; verify all authorities before use.