Governor Malloy has declared the state of Connecticut open for business. But many small businesses find when they come in contact with state government, their first experience is frustration. WNPR’s Harriet Jones looks at just how well the state is doing in streamlining its approach to business.
This is Larry’s Auto Power in Groton, and that’s a race car engine on the test block.
“We do street performance engine rebuilding, racecar engine building.”
Gary Espinosa bought this business 22 years ago, and his client list is a who’s who of the racing world.
“We’ve done race engines for Dennis Gada, big name in the racing community locally. We were doing some road course engines for Paul Newman when he was alive, which was a really neat deal. We’ve done stuff for Ted Christopher.”
18 months ago, he decided to move from rented premises in Stonington to a business park in Groton where he could build his own customized machining and testing facility. The bonus, he discovered is that this is an enterprise zone, and if the state Department of Economic and Community Development would certify him as a manufacturer, he could get an 80 percent abatement on his property taxes. He applied for that program, and received a state identification number as a manufacturing business. The Connecticut Department of Revenue Services runs a separate program that offers a sales tax exemption for manufacturers.
“We had asked and believed we were receiving good advice on what our tax situation was going to be. And we were told we could use it for manufacturing which meant that we didn’t have to pay sales tax. We had our documents, we had our papers signed.”
Espinosa was investing in expensive new equipment to outfit his new facility, and he gave his state number to his suppliers, so that he could make the purchases free of sales tax. Then he was told the Department of Revenue Services was putting his business through a sales tax audit. That’s when he learned that, as far as the DRS is concerned, he is not a manufacturer.
“And at that point they informed us that the two different departments don’t work off of the same identification codes – they have different standards. So we were a little bit in shock, but at that point we realized we were about to learn a lot about what we didn’t know.”
He says while individuals at the DRS did their best to work with him, they were about to get a huge bill from the state.
“With everything that we had to tackle it was $12,000 that we didn’t have sitting there - $12,000.”
That $12,000 included penalties for late payment, despite the fact that Espinosa had acted in good faith.
“The way that I look at it is if I was told initially that when I purchased the equipment I was going to have to pay the sales tax, then I would have divided it up monthly, and I would have paid my sales tax monthly, and I’m sure at that point it wouldn’t have been the difference, but I wouldn’t have had this huge bill at the end.”
Espinosa’s frustrating and expensive experience with state government is far from unique according to Louis Bach of the Connecticut Business and Industry Association who says confusion is common for small businesses.
“For them, time is money. They have a business to run and streamlining communications between different agencies would be critical.”
He says a new approach is needed.
“Our members would very much like to be able to call either Secretary of State’s or DECD and be pointed in the direction, sort of along the lines of a hotel concierge. Essentially something that will allow them to make one phone call, take care of what they need to do, and then get right back to business.”
The Secretary of the State, Denise Merrill is in complete agreement. She says she’s road-tested state services for small business herself.
“I tried it myself when I was first getting into this, I thought, well let me try, and see if I can figure it out. And I’ve been around state government a long time. I found a lot of things, but I didn’t quite know how they fit together.”
In fact she found 22 separate web pages in different agencies devoted to helping small business, but few of them connected to each other. Now she’s sponsored legislation that would take a first step towards streamlining the state’s approach. Merrill’s bill would assign a unique number to each business registered with her office. That number would create a unified file across all state agencies that, when it’s accessed on the state’s computer system, would show all the different ways in which the company is interacting with the state, whether it’s licensing, permits, tax credits or a host of other services. And as for that business concierge, well, in fact it does already exist in Connecticut – it’s just a very well kept secret.
“There’s three things we need to know – what business structure are they forming, what is it that they’re doing and do they hire employees. If we know those three things, then we can tell them everything that they need to know.”
Elizabeth Wallace is director of the Smart Start business registry and CT CLIC, the Connecticut Licensing Info Center. CLIC is a service of the Connecticut Economic Resource Center, a public-private partnership agency that was started 18 years ago by the Rowland administration to be a one-stop shop for businesses interacting with the state. The trouble is, according to CEO Bob Santy, most state agencies don’t advertise the center’s services when they get a call from small businesses.
“What you really need is wherever they call, the people have the presence of mind to say ok, I’ve answered your question about registering with the Secretary of the State’s office, or I’ve answered your question about a DEP permit. Now you should call 1-800-392-2122, because they have information on every other program that you might need.”
Santy says the other frustration in trying to help businesses is the state’s antiquated computer system.
“They can access information online, they cannot register, they cannot file applications online, so we’re a generation behind many other states in the technology necessary for companies to actually do their transactions online. That’s the next step.”
Santy has been advising the Secretary of the State on creating a new business portal, and he says he’d like to see the Resource Center’s years of experience put to good use, rather than have the state reinvent the wheel. For WNPR, I'm Harriet Jones.