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Our state sales tax rate is about to increase. How do we handle custom orders with paid deposits, which are picked up when new rate is in effect?

Full Question: I believe our CT sales tax has been increased to 6.35% as of today, July 1. I have existing orders placed by customers who paid a deposit, including 6% sales tax. Many of these orders will be completed and ship or be picked up on July 1st or later, and the balance payments are run at that time, currently calculated to include 6% sales tax. What are we responsible to do? I'm sure our customers do not expect to pay more now, for something they ordered previously, and we cannot absorb all this new tax.

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Answer:

Diane Yetter photoConnecticut has issued transition rules related to the tax increases. The following are the transition rules for Sales, Leases or Rentals of Tangible Personal Property: The new 6.35%, 7% and 9.35% rates of tax are applicable to sales, leases or rentals of tangible personal property occurring on or after July 1, 2011, except that the new rates will not apply to any sale of tangible personal property under a binding sales contract without an escalator clause that was entered into prior to July 1, 2011, where delivery is made within 90 days after July 1, 2011. So, if you have a binding sales contract without an escalator clause and the contract was entered into prior to July 1 and delivery will be made by September 30, then you can charge the prior rate of 6%. If you do not meet these criteria then you are required to charge the new rate on the transaction.

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