I'm in the process of starting an Internet business, and am thinking about establishing the primary office for it in Connecticut. I am a New York resident. This would be an S-Corporation. Most likely I will incorporate in Delaware, but would file as a foreign corp in CT. I read the guidelines and examples in the instructions to Schedule CT-SI, but I am still unclear on the regulations regarding Connecticut-source income.

This company will be in the business of reselling tickets to entertainment and sporting events over the Internet. The web server that runs the website for the business will be located in the state of Kansas.

My question is, what would qualify as Connecticut-source income that the business would have to pay CT income tax on? I assume that if a transaction is made on the website where a seller outside Connecticut sells a ticket for an event outside Connecticut to a buyer outside Connecticut, there would be no Connecticut-source income generated in that scenario. So if this represented 100% of the business in a year, there would be no CT source income, correct?

What if there's a transaction where the seller is outside CT, but the buyer of the ticket is in CT? Is the profit the company earns on that considered CT-source income? And, vice-versa, if the seller is in CT but the buyer is outside CT, would the profit the company earns on that transaction be CT-source income?

To the extent there is any CT-source income, can I deduct that amount from my NYS tax return so that I'm not paying double taxes on the same income?

#1;Corect; the S corp conducting business in CT incorporated or chartered in DE is considered a foreign corporation. As your corp will conduct business in CT other than in which it is incorporated, DE, you'll need to determine what qualifications or registrations are required by CT state. You want to do business in CT, but are registered as a Domestic Corporation in DE. In order to legally conduct business in CT, you must register with the CT Secretary of State as a Foreign Corporation. The process of registering as a Foreign Corporation in Connecticut is called Connecticut Corporation Foreign Qualification.




#2; Yur corp that is doing business in CT or has income from an CT source is required to file a return to CT. Doing business in CT means being engaged in any profit-seeking activity in CT. Youare clearly doing business in CT since you have an office in CT. So, as a foreign Corp that either does business in CT or that derive income from sources within the CT , the corp is subject to CT tax laws. If you are engaged in intrastate business and derive income from other states besides Connecticut, you must allocate the amount of income derived from the state of Connecticut in order to determine your Connecticut state taxes. Please contact the dept. of rev. of CT for more info in detail; DRS: Contact DRS

#3;As mentioned above, doing business in CT means being engaged in any profit-seeking activity in CT. You are clearly doing business in CT since you have an office in CT.

#4;As there is no reciprocal agreement between NYS and CT, as a non resident of CT , you need to report your CT source income to CT and as a full time resident of NYS, you need to file yur NYS return to claim your CT tax on your NYS return.