Having the same issue here as well. Can confirm the fix below by lagnone_splunk worked for me.
update. As of DBConnect 2.0.4 MSSQL is supported with the MSSQL drivers http://docs.splunk.com/Documentation/DBX/latest/DeployDBX/Troubleshooting#Can.27t_use_Windows_authentication_for_Microsoft_SQL_Server_with_Microsoft_JDBC_Driver_for_SQL_Server
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