Connecticut – 2011 Changes That Affect Nonresident Contractors

SALT Report 1173 – The Connecticut Department of Revenue Services has issued guidance regarding changes to the law that, for sales and use tax purposes, requires nonresident contractors to provide bonds and verify their tax status. The CDRS now categorizes nonresident contractors in two ways: verified and unverified.

A verified contractor is a nonresident contractor or subcontractor who:

  • Is registered for all applicable taxes with CDRS for at least three years preceding the contract
  • Has filed all required tax returns with CDRS
  • Has no outstanding tax liability
  • Has submitted Form AU-960, Nonresident Contractor Request for Verified Contractor Status; and
  • Has been verified by CDRS and meets the above requirements
An unverified contractor is a nonresident contractor or subcontractor who:
  • Has not been verified with CDRS and has not fulfilled any of the above requirements
  • Is required to file a single surety bond for 5% of the contract price if the project is $250,000 or more
  • Must hold back 5% of the amount due to an unverified subcontractor until that subcontractor submits Form AU-968 Surety Bond and Release, which authorizes the release of all or a portion of the amount due to the unverified subcontractor
Any person doing business with an unverified prime or general contractor is required to obtain proof that the contractor has filed a bond with CDRS, but will no longer be required to withhold an amount from the payment due.
These changes supersede Special Notice 2005(12), Nonresident Contractor Bonds and Deposits, and modifies and supersedes Informational Publication 2006(35), Building Contractors’ Guide to Sales and Use Taxes.
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