Senator Witkos Works to Keep Consumer Products Exempt from Double Taxation

September 13, 2012

Hartford – State Senator Kevin Witkos (R-8) today called on Governor Dannel P. Malloy to maintain the status quo of effectively exempting certain consumer products containing petroleum by not enforcing a state statute requiring retail businesses to collect the gross receipts tax on these products.

“After recently learning about this requirement, I am concerned that the double taxation on important consumer products, such as a quart of motor oil, could harm both the consumer and the businesses that offer these products,” said State Senator Kevin Witkos. “I shared my concerns with the Governor today with the hope that these products will continue to remain effectively exempt from the gross receipts tax.”

Section 12-587 (b) (1) of the Connecticut General Statutes states that “[A]ny company which is engaged in the refining or distribution, or both, of petroleum products and which distributes such products in this state shall pay a quarterly tax on its gross earnings derived from the first sale of petroleum products within this state.”

Despite several exemptions listed in subsection (b) (2), there is no mention of products such as petroleum jelly, mineral spirits and lubricants, meaning that these products would be taxable. Businesses would be required to collect both the gross receipts tax and the sales tax on petroleum products. After July 1, 2013, the gross receipts tax will increase to 8.1%, meaning that these consumer products will soon be taxed at a rate of 14.45%.

“Businesses will be required to spend an excessive amount of time determining which items are subject to the tax and which are not,” wrote Senator Witkos. “Have the taxes been paid yet or should they be charged at the register? The unfunded mandate on our small businesses only exacerbates the difficulty that Connecticut businesses must endure to simply stay alive.”

This year’s state budget included funding for 15 new positions at the state Department of Revenue Services to ramp up enforcement and collection activities. The increase of $903,575 will create five positions in each of the following divisions: the Business and Employment Tax Audit (BETA) Unit, the Sales Tax Third Party/Cash Business Audit Program and the Collection and Enforcement Division.

If the enforcement of this statute moves forward, Senator Witkos promised to submit legislation exempting these consumer products from the gross receipts tax in the upcoming legislative session.