Connecticut Contractor Taxes and Licensing: What Every Trade Should Know

Connecticut taxes many contractor services at 6.35%, and the type of property decides it. Labor on existing commercial, industrial or rental property is generally taxable, while labor on new construction or an owner-occupied home of up to three units usually isn't. You pay tax on materials either way, and residential contractors register with the Department of Consumer Protection.

How does Connecticut treat contractors differently?

Connecticut puts sales tax on a long list of services, and building work is on it. The Department of Revenue Services (DRS) builds the rule around who owns the property and how it's used, not just the trade. Its Building Contractors' Guide (IP 2018(2)) says services to existing industrial, commercial and income-producing property "are generally taxable, unless the purchaser is exempt." Re-roof a landlord's rental and the labor is taxed. Re-roof the house the owner lives in and it usually isn't.

Registration starts before the first job. DRS says building contractors and subcontractors "must obtain a Sales and Use Tax Permit from DRS prior to providing any services," even if those services aren't taxable or the customer is exempt. Out-of-state outfits face extra steps covered below.

Do Connecticut contractors charge sales tax on labor?

Sometimes. The general rate is 6.35%, per DRS. IP 2018(2) says your labor is taxable when the work is on existing commercial, industrial or income-producing real property, or when it's one of the services taxable to all real property. Labor isn't taxable on new construction or owner-occupied residential property (outside that "all property" list), among other exceptions such as charitable organizations and qualifying government agencies.

• Owner-occupied residential, per DRS: used only as a residence, one to three dwelling units, and the owner lives there or will after the work.
• Taxed on all property: carpet cleaning, exterminating, house washing, janitorial, landscaping, locksmith services, maintenance, snow plowing, pool cleaning and maintenance, and window cleaning.
• Taxed on existing commercial, industrial or income-producing property: a long list that includes air conditioning, carpentry, electrical, heating, plumbing, painting, roofing, siding, flooring, masonry and paving.
• New construction includes a new building, an addition that expands cubic footage, and gutting a building's entire interior. Use CERT-104 to document the share of work that is new construction.

DRS defines the taxable service charge as everything above your cost of materials plus the tax you paid on them: labor, markup, overhead, tool rental and reimbursed expenses. You can show the tax separately or bill one total marked "sales tax included on services." Either way, tax you collect is held in trust and all of it goes to DRS; you can't offset it against tax you paid on materials. Compare other states in sales tax on labor vs. materials.

What about materials, permits and out-of-state purchases?

IP 2018(2) says contractors "are considered to be the consumers of the materials and supplies" they use, so you pay sales tax when you buy and can't use a resale certificate. The exceptions are narrow: you run a store that sells building supplies, or you sell specific materials to the owner and list the charge, the exact quantity and a separate install price on the invoice. Tools, ladders and scaffolding are always taxable to you.

• Use tax: if you buy from an out-of-state vendor that doesn't collect Connecticut tax, or pay less than 6.35% elsewhere, you self-assess the difference on your sales tax return.
• Exempt customers: on jobs for qualifying exempt organizations, give your suppliers CERT-141, Contractor's Exempt Purchase Certificate, for materials that stay in the project.
• Condo associations: tax applies to the share of units that are rentals, documented on CERT-103.

Nonresident contractors have bond rules. An unverified prime contractor must file a surety bond for 5% of the project price with DRS when the whole project is $250,000 or more, and a prime must hold back 5% from an unverified subcontractor until the sub provides Form AU-968. See use tax for contractors for tracking purchases.

What licenses and registrations does Connecticut require?

DCP says HIC registration covers anyone who contracts with a consumer for work on residential property. It doesn't cover your own home, subcontracted work, work under a trade license, commercial property, contracts under $200, routine property maintenance or new homes, which need the New Home Construction Contractor registration instead. An LLC must register as an LLC; an individual registration doesn't cover it. Towns still issue building permits. Read more in our contractor license guide.

How are Connecticut contractors taxed on income?

Owners of sole proprietorships, LLCs and S corporations report business profit on their Connecticut income tax return. The 2026 Form CT-1040ES rate table for single filers starts at 2.00% on the first $10,000 of taxable income, steps through 4.5%, 5.5%, 6.0%, 6.5% and 6.9%, and reaches 6.99% above $500,000.

• Estimated payments: DRS says you must make them if your Connecticut tax after withholding and any pass-through entity tax credit is $1,000 or more. 2026 installments are due April 15, June 15 and September 15, 2026, and January 15, 2027.
• Pass-through entity (PE) tax: DRS now says the PE Tax "is optional." Partnerships and S corporations that want it elect each year by checking the box on a timely filed CT-1065/CT-1120SI, and the election is irrevocable. Electing entities make estimates if the required annual payment is $1,000 or more.
• Corporations and LLC filings: C corporations file the corporation business tax with DRS, and entities file annual reports with the Secretary of the State. Check with each office for current amounts.

Plan your quarterly payments with quarterly estimated taxes for contractors and the quarterly estimated tax calculator.

Who has to carry workers' comp in Connecticut?

The Workers' Compensation Commission says "all employers in the State of Connecticut are required to have workers' compensation insurance," with few exceptions. The owners are treated differently. A sole proprietor isn't covered unless they accept the Act's provisions. Partners, corporate officers and LLC members may elect to be excluded, using the Commission's coverage election forms (6B, 6B-1 and 75).

In practice: hire a helper and you need a policy. If you're a one-person LLC or corporation, decide on purpose whether to cover yourself, and keep the election form on file. The Commission notes insurers may charge fees for an uninsured contractor at audit, so collect certificates from your subs. See workers' compensation basics.

Working near the borders? See our guides for New York, Massachusetts and Rhode Island.