Hiring your first employee in Connecticut

What do you have to register for before your first payroll?

One application with the Department of Revenue Services, Form REG-1 filed through myconneCT, opens withholding, sales and use tax, corporation business tax, pass-through entity tax and the rest of the DRS list at once, so you do not register separately for those. It stops there. Unemployment insurance is a separate registration with the Department of Labor in its own ReEmployCT system. CT Paid Leave is a third registration, with the Connecticut Paid Leave Authority at ctpaidleave.org, and it is the one out-of-state employers most often miss because it is a quasi-public authority rather than a department. Workers compensation is not a state account at all, it is a policy you buy from a private insurer. Budget for four errands, not one, and note that the DRS application charges a fee for some tax types, so have bank details ready.

Does Connecticut require income tax withholding?

Yes. You register with the Connecticut Department of Revenue Services, before your first connecticut payroll; the duty attaches to anyone who maintains an office or transacts business in connecticut and is an employer for federal withholding purposes.

Circular CT puts it plainly: you must withhold whether or not your payroll department sits in Connecticut. All wages of a Connecticut resident are subject to withholding even when the resident works outside the state, with a credit mechanism if you also withhold for another qualifying jurisdiction where you do business. A nonresident is caught only on wages for services performed in Connecticut, and you withhold on all of that person's wages unless they hand you Form CT-W4NA apportioning them. The reverse trap is the convenience of the employer test: a resident of a state that applies one is treated the same way for work done for a Connecticut employer, so a remote worker can create Connecticut withholding without ever crossing the border. There is no published fee for the withholding registration itself, but once registered you file and pay electronically and keep filing even in periods with nothing withheld.

What unemployment insurance does Connecticut charge a new employer?

A new Connecticut employer pays 1.9% on the first $27,000 each employee earns, so roughly $513 per employee in the first year. For 2026 the Department of Labor publishes a new employer rate of 1.9% and a taxable wage base of $27,000, up from $26,100. Read the 1.9% as a floor rather than the whole bill. The same reforms set a fund solvency rate, called the fund balance tax rate in the employer guide, at 1.0% for 2026, and the guide says that rate is added to the charged rate of all employers to obtain the contribution rate, which is why the published minimum and maximum contribution rates for 2026 are 1.1% and 9.9% rather than 0.1% and 8.9%. The Department does not state anywhere we could find whether a newly liable employer's 1.9% already includes that 1.0% or has it added on top, so plan for up to 2.9% until your first rate notice arrives. Two Connecticut specifics matter more than the rate. You become liable once you pay $1,500 of wages in any calendar quarter, or employ at least one person for part of a day in each of twenty different weeks, in the current or preceding year, and liability then reaches back to the first day of the year or of business. And Connecticut does not recognise professional employer organisations for unemployment tax: it is a client reporting state, so wages of workers a PEO supplies you are reported under your own name, number and rate, not the PEO's. Both the rate and the wage base are reset every January, and the wage base is now indexed rather than fixed.

Do you need workers compensation insurance in Connecticut?

Yes, from your first employee. Connecticut sets no headcount to reach, so there is no free window before coverage is required.

There is no free headcount. The Workers Compensation Act defines an employer as any person or entity using the services of one or more employees for pay, so coverage is required from the first person you pay. The statutory exclusions are narrow and specific: work of a casual nature outside the employer's trade or business, a family member living in the employer's house, domestic service in a private dwelling for not more than twenty-six hours a week, and a corporate officer who elects out in writing to both the employer and the administrative law judge. Sole proprietors, partners and LLC members are outside the Act for themselves but must cover anyone else. The penalty for going without is assessed by an administrative law judge after a hearing: not less than $500 per employee or $5,000, whichever is less, and up to $50,000, plus a further $100 for every day of continued noncompliance, with an aggregate cap of $50,000. Unpaid penalties can be doubled by civil action after ninety days.

How quickly must you report a new hire in Connecticut?

Within 20 days of the date of hire, which is the first day compensated services are performed. Reports go to the Connecticut Department of Labor.

Connecticut folds new hire reporting into a form you already have to collect: you report by sending the employee's completed Form CT-W4 to the Department of Labor within 20 days of the date of hire. Employers who file by secure FTP report on a shorter 14 day cycle. Someone returning to your payroll after a separation of 60 days or more counts as a new hire. The catch for anyone using contractors is that Public Act 03-89 treats an independent contractor as an employee for this purpose: you must report a 1099 worker whose services are valued at $5,000 or more and who is not itself registered with the Department of Labor for unemployment tax or an employee of a registered employer.

Does Connecticut have paid family leave or state disability insurance?

CT Paid Leave is funded entirely by workers, so the employer rate is genuinely zero, but you are the one legally required to take the deduction, register with the Authority and remit. The Board held the rate at 0.5% for 2026, which is also the statutory ceiling: the law caps the contribution at one half of one per cent and stops it at the Social Security contribution and benefit base, $184,500 for 2026, giving a maximum of $922.50 per employee for the year. Almost every employer with one or more employees in Connecticut is covered, with no small employer exemption, and a private plan can be substituted only with approval. Contributions are remitted quarterly; the Authority does not charge penalties or interest if payment arrives by the last day of the month following the quarter, after which it can charge the greater of 10% of the amount owed or $50, plus 1% non-compounding monthly interest. Note that Connecticut has no separate state temporary disability insurance scheme of the New York or New Jersey kind: this single programme is the whole of the state paid leave cost. The Authority may revise the rate each 1 November for the following January, so re-check it every autumn.

Do you need a sales tax permit in Connecticut?

Connecticut is one of the few states that charges for the permit: $100 to register to collect sales and use tax, payable when you file the registration. After that the Sales and Use Tax Permit expires every two years and is renewed and posted to you at no cost as long as the account is active and in good standing with no outstanding returns or liabilities. Operating without one is expensive and is both a civil and a criminal matter: a civil penalty of $250 for the first day and $100 for each day after, and a fine of up to $500 or up to three months imprisonment for each offence. DRS publishes no bond or security deposit requirement for a sales tax registrant, so none is recorded here. Closing down is a positive act: you close the account in myconneCT, file returns through the date of closure, and destroy the permit.

Does a marketplace like Amazon or Etsy handle the tax for you?

Connecticut has required marketplace facilitators to collect and remit on the sales they facilitate since 1 December 2018. A facilitator is anyone who facilitated at least $250,000 of retail sales in the prior twelve months through a forum, collects the money and takes a fee, whether it sits inside or outside Connecticut. The rule that catches sellers here is the opposite of the comfortable one: your marketplace sales still count toward your own registration threshold, so a seller entirely covered by Amazon or Etsy collection can still be required to register. If you do register but sell only through facilitators, tick the marketplace-only box on Form REG-1 and DRS puts you on an annual filing frequency. You still report the sales, as gross receipts with the facilitated portion deducted on the same line as a sale for resale, and you protect yourself either by a contract that says the facilitator will collect, or by requesting Form DRS-055, Certificate of Collection, from it. Be careful with the guidance document itself: OCG-8 is still written around the pre-July 2019 threshold of 200 sales and $250,000, which the statute has since lowered.

If your sales drop, when can you stop collecting?

Connecticut publishes no trailing nexus policy as such, but the statute builds one into the definition of a retailer. An out-of-state seller is a retailer if it had at least $100,000 of gross receipts and made 200 or more retail sales into Connecticut during the twelve-month period ended on the 30 September immediately before the monthly or quarterly period being tested. The test is therefore taken once a year against a fixed window, not continuously: cross the line in the year to 30 September and you collect through the following year regardless of what happens to your sales, and you only fall out at the next 30 September measurement. Falling below the line does not close anything either. The permit stays live and returns stay due until you close the account in myconneCT, so treat deregistration as a separate decision from the threshold test. Note that the current $100,000 and 200 sales figures come from the statute; several DRS guidance pages still carry the higher $250,000 figure that applied before July 2019.

Does Connecticut charge a tax on revenue rather than profit?

Connecticut has no general gross receipts tax in the mould of Washington's business and occupation tax or Ohio's commercial activity tax, and the $250 biennial business entity tax that used to catch every LLC was repealed for periods beginning after 2019. What replaces it is the corporation business tax, charged at 7.5% on net income with a minimum tax of $250, a capital base component being phased out, and a 10% surtax on companies with $100 million or more of total income or that file as part of a combined unitary group, which the legislature has extended through the income year beginning in 2028. Two narrower gross earnings taxes do exist and are easy to walk into because they appear on the same DRS registration form as sales tax: the petroleum products gross earnings tax at 8.1% of gross earnings from the first sale of petroleum products in Connecticut, which reaches distributors and importers rather than only refiners, and the utility companies tax on gas and electric companies. A trucking business should also look at the separate highway use fee.

Do you have to register your out-of-state company in Connecticut?

A foreign LLC files a Foreign Registration Statement for $120. A foreign stock corporation files an Application for Certificate of Authority for $385, which the form itself says includes a $285 license fee; a foreign nonstock corporation pays $40 for the same filing.

Connecticut sets no deadline in days. The rule is simply that a foreign LLC may not transact business in the state until it registers, and the sanction is procedural rather than financial: an unregistered foreign LLC cannot maintain an action or proceeding in a Connecticut court until it registers, it is deemed to have appointed the Secretary of the State as its agent for service, and the Attorney General can seek an injunction. There is no per-day fine in the LLC act. The real money is in the years after, and it is lopsided by entity type: a foreign LLC's annual report is $80, but a foreign stock corporation's is $435, far above what most states charge and above Connecticut's own domestic rate. Getting out costs $120 for an LLC certificate of withdrawal and nothing for a corporation. Registering with the Secretary of the State is a separate step from your DRS, Department of Labor and CT Paid Leave accounts and registers you for no tax at all.

Where these figures come from

Every number on this page was read on Connecticut's own agency pages, its statute, or a current-year official form, and this record was last reviewed on 2026-09-08. Where a state's explainer page disagreed with its statute or its current form, we followed the statute or the form and said so in the relevant section, because a state's consumer-facing pages are often the last thing updated when a figure changes.

Anything we could not confirm on a primary source is left blank rather than estimated. A missing figure on this page means we could not verify it, not that it is zero.

This is general information, not legal or tax advice. Rules change and your circumstances matter. Confirm anything you are about to act on with the agency named beside it.