Connecticut restaurant taxes and payroll: meals tax, tipped wages, and paid leave

Connecticut layers its own rules on top of the federal ones: a higher tax rate on meals, fixed cash wages for tipped staff, an employee-paid leave program, and depreciation rules that don't follow federal bonus depreciation. Almost all of it is statewide, so a bar in Bridgeport and a bistro in Greenwich charge the same meals tax and pay the same tipped wages. In Fairfield County, what varies by town is local administration: each town's assessor and mill rate for business equipment, and the local sign-offs on a liquor permit.

Key numbers: 7.35% meals tax, no local add-on · minimum wage $16.94 in 2026 and $17.48 from Jan. 1, 2027 · tipped cash wage $6.38 servers, $8.23 bartenders · CT Paid Leave 0.5%, employee-paid · paid sick leave for employers with 1+ employees from Jan. 1, 2027 · 2026 UI wage base $27,000, new-employer rate 1.9% · personal property declarations due Nov. 1.

Connecticut's meals tax

Connecticut taxes meals and bar drinks at 7.35%, which is the 6.35% sales tax plus an extra 1% in effect since October 1, 2019. No Connecticut town adds a local meals or sales tax, so the rate is the same in Stamford, Norwalk, Danbury, and everywhere else.

• Meals are food sold ready to eat by a restaurant, caterer, or grocery store, including packaged takeout and to-go orders.
• Drinks include alcohol, soft drinks, and other beverages of the kind served at bars and soda fountains.
• Mandatory service charges added in place of a tip are taxable unless the restaurant keeps none of the charge and pays all of it to the staff who served the meal. Using the charge to cover payroll counts as keeping it.
• Free staff meals aren't taxed, as long as employees aren't charged and nothing is deducted from their pay.

Each location needs its own $100 sales tax permit. Form OS-114 is due on the last day of the month after each monthly, quarterly, or annual period.

Tipped minimum wages in Connecticut

You can pay servers $6.38 an hour and bartenders $8.23 an hour in cash, as long as tips bring each employee up to the full minimum wage: $16.94 in 2026 and $17.48 from January 1, 2027. The cash wages are fixed by statute and not indexed, so the tip credit grows whenever the minimum wage rises.

Employees eligible for the tipped wage

Bartenders can be paid the tipped wage, as can employees who customarily receive tips while serving patrons at tables or booths. The restaurant wage order classifies counter staff as non-service employees, and the Connecticut Supreme Court upheld the Labor Department's position that the tip credit doesn't apply to delivery drivers. Counter staff, such as baristas at a counter-service cafe, generally get the full minimum wage even if they receive tips.

Required records and notices

The rules focus on proving that tips covered the credit:

• Record tips daily, weekly, or biweekly, with an attestation from each tipped employee showing the tips received and the payroll week-ending date. The attestation can be written or electronic, including one made through your POS.
• No credit is available while you are closed. Time worked when the restaurant isn't open to patrons doesn't qualify.
• Under the 2-hour/20% rule, if a server spends 2 hours or more, or more than 20% of a shift if that's less, on non-service work, you lose the tip credit for that day unless that time is segregated and recorded. Rolling silverware and stocking service areas count as service duties.
• At hire, give written notice of the pay rate, hours, and pay schedule, and post the restaurant wage order (Form DOL-79). Connecticut has no separate tip-credit notice, but federal rules require telling tipped employees about the tip credit in advance.

Payroll taxes on tips in Connecticut

Reported tips are also wages for Connecticut payroll purposes.

• Under CT Paid Leave, you withhold 0.5% of wages, including reported tips, up to the Social Security wage base of $184,500 in 2026. The program is employee-funded, the rate stays 0.5% for 2027, and contributions are due by the last day of the month after each quarter.
• For unemployment insurance, the 2026 wage base is $27,000 and the new-employer rate is 1.9%, or up to $513 per employee. Tips employees report to you count as wages, so tipped staff reach the base sooner. CT DOL hadn't published 2027 rates as of November 15, 2026.
• Tips stay Connecticut wages on the W-2 and for income tax withholding.

Paid sick leave from 2027

From January 1, 2027, Connecticut's paid sick leave law covers employers with one or more employees, so it applies to any restaurant with at least one Connecticut employee. Coverage is based on payroll for the week that includes January 1. In 2026 the threshold is 11 employees.

• Employees accrue 1 hour per 30 hours worked, up to 40 hours a year, usable from their 120th day of employment. Seasonal employees working 120 days or less a year are excluded.
• Sick hours are paid at the greater of the employee's normal hourly wage or the state minimum wage. No tips are earned on a sick day, so budget a server's sick hours at $17.48, not $6.38.

The federal no-tax-on-tips deduction and Connecticut tax

The federal deduction of up to $25,000 of qualified tips provides no Connecticut income tax benefit. It is taken on Schedule 1-A, after adjusted gross income, and Connecticut's income tax starts from federal AGI with no matching subtraction. The same tips are therefore taxed at Connecticut's regular rates of 2% to 6.99%. Our no tax on tips guide covers the federal side.

Connecticut treatment of bonus depreciation and §179

Connecticut doesn't follow federal bonus depreciation and only partly follows §179, so a buildout written off in year one federally is mostly deducted over the next four years in Connecticut.

• Pass-through owners, and the pass-through entity tax if elected, add back 100% of federal bonus depreciation in the year taken, then subtract 25% of that add-back in each of the next four years.
• For Section 179, 80% of the federal deduction is added back and 25% of the added-back amount is deducted in each of the next four years, under both the income tax and the corporation business tax.
• C corporations compute Connecticut depreciation as if bonus depreciation didn't exist.

For example, if an LLC restaurant takes $300,000 of bonus depreciation in 2026, its owners add back $300,000 on their 2026 Connecticut returns and subtract $75,000 in each of 2027 through 2030. A $100,000 §179 deduction means an $80,000 add-back in 2026 and a $20,000 subtraction in each of the next four years.

Personal property declarations

A business owning taxable personal property on October 1 must file a declaration with the town assessor by November 1, and the statute specifically names the furniture and fixtures of restaurants and taverns.

• List kitchen equipment, furniture, POS hardware, and leasehold improvements not classified as real property.
• File with the assessor of the town where the property is located, so a group with locations in Norwalk and Fairfield files in both towns.
• Property is assessed at 70% of its value and taxed at that town's mill rate.
• A late declaration or omitted property adds a 25% penalty to the assessment. You can request an extension of up to 45 days in writing by November 1.

This year's deadline was November 2, 2026, because November 1 fell on a Sunday. The next one is November 1, 2027, for property owned on October 1, 2027.

Connecticut liquor permits

Restaurants and bars need an on-premises permit from the Department of Consumer Protection (DCP), and the application is filed online. You pay a $100 nonrefundable application fee, and DCP invoices a permit fee that depends on the permit type. The application needs sign-offs from your town clerk, zoning officer, fire marshal, and health department. New applicants complete DCP's Liquor Law Education Program and post a public placard notice, which gives neighbors a chance to object. DCP estimates about 3 weeks from a complete application to a provisional permit and about 3 months to a final permit. The liquor permit doesn't replace your sales tax permit.

A worked example: a Stamford bistro

This is a hypothetical illustration, not a client result. A Stamford bistro employs Maya, a server, and Luis, a bartender.

A table's check is $240 of food and wine, so the meals tax is $240 × 7.35% = $17.64. The guest's $48 tip isn't part of the taxable sale. A private party is billed $1,000 of food and drinks plus a mandatory 20% service charge of $200. If the bistro uses the charge to cover wages, tax is due on $1,200, or $88.20. Tax is due on only $1,000, or $73.50, if the bistro keeps none of the charge and pays all $200 to the party's servers on top of their wages. In both cases, the $200 is wages for federal purposes, not tips.

Maya works 30 hours in a busy week, earns 30 × $6.38 = $191.40 in cash wages, and reports $720 of tips. Her $911.40 total is well above the 30 × $16.94 = $508.20 minimum. In a slow week with $250 of tips, her total is $441.40, so the bistro pays her another $66.80. Luis works 35 hours at $8.23, or $288.05, and needs at least 35 × $8.71 = $304.85 in tips for the bistro to take the full tip credit.

CT Paid Leave withholding on Maya's busy week is $911.40 × 0.5% = $4.56. Because her cash wage is above $5.15, all $720 of her tips count toward the federal FICA tip credit, which comes to $720 × 7.65% = $55.08.

In 2027, Maya's maximum tip credit rises to $11.10 an hour, and 5 hours of sick leave cost the bistro at least 5 × $17.48 = $87.40.

Common mistakes

1. Paying counter staff, baristas, or delivery drivers the tipped wage.
2. Taking the tip credit before opening, or on days with too much non-service work.
3. Skipping tip attestations for each pay period.
4. Treating a mandatory service charge as a tip, when it is wages federally and usually taxable at 7.35%.
5. Telling staff the federal tip deduction lowers their Connecticut tax.
6. Forgetting the 25% bonus depreciation subtractions in later years.
7. Missing the November 1 personal property declaration.
8. Paying 2027 sick leave at the tipped cash wage.

How Summer Associates helps

Summer Associates, a Stamford tax firm whose practitioners are enrolled agents, reviews tip reporting and payroll setup for Connecticut restaurants, including CT Paid Leave on tips, checks how service charges are reported on sales tax returns, tracks Connecticut depreciation add-backs year to year, and coordinates that work with the federal FICA tip credit.

This guide is general education based on federal and Connecticut law as of 2026-11-15. State rules differ and facts matter. Before acting, get advice for your situation from Summer Associates or another qualified advisor.