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In recently enacted legislation, a 1.5% surcharge has been imposed on machinery rented in the state for any period less than 31 days. This surcharge will be collected by the lessor. The lessor then must file an annual report by February 15th of each year detailing the amount collected from this surcharge. If the amount received is less than the amount the lessor paid in property taxes or vehicle registration and titling fees, no further action is required. If the amount of surcharge collected is greater than these taxes, the excess amount must be remitted to the state. The surcharge is in addition to any tax otherwise applicable to such a transaction. A piece of machinery is defined as being “heavy equipment without an operator that may be used for construction, mining or forestry.” This includes bulldozers, cranes and other such equipment. (Connecticut Senate Bill 1230, Effective July 1, 2005)


A financial services company appealed a prior decision that stated they could not claim a refund of Connecticut sales and use tax remitted to the state on behalf of customers that eventually defaulted on automobile loans that the taxes were collected on. The financial service company purchased the loans from the automobile dealers. However, under the language of Connecticut law, the auto dealers were considered to be the proper sellers of the vehicles that were sold and remitted the taxes to the state. The Supreme Court found on appeal that the dealer statute was not applicable to the financial services company. For this reason, the transaction fell outside the guidelines set in the statute for the exemption. (DaimlerChrysler Services North America, LLC v. Commissioner of Revenue Services, Connecticut Supreme Court, June 28, 2005)


Clothing or footwear less than $300. Does not include protective, athletic gear or accessories. See Details


Connecticut has introduced legislation that would require remote sellers with significant connection to an in-state seller to collect tax on sales into Connecticut. The primary purpose of this bill is to require Internet retailers with brick-and-mortar affiliates in Connecticut to collect and remit Connecticut sales tax. Remote sellers with the following types of affiliate relationships, who are involved in the processing of orders for customers located in Connecticut, would be deemed “engaged in business in the state.” If HB 6965 is enacted, the affiliate relationship under the new definition of “engaged in business in the state” would be created by a substantial ownership situation where either the remote seller has substantial ownership of an in-state retailer, or where the in-state retailer has substantial ownership of the remote seller. Also to qualify under the new definition, the in-state and remote retailers would be required to sell similar products using a similar business name, or the in-state retailer would need to be involved with advertising for the remote seller linked to in-state sales. If enacted, this bill would come into effect on October 1, 2005 and would apply to all sales occurring on or after that date. (HB 6965, Connecticut House of Representatives, introduced March 22, 2005)


The Connecticut Department of Revenue Services issued a ruling stating that a company that provided goods as well as services was not entitled to take the benefit of the manufacturing exemption. The taxpayer manufactured its own asphalt, which it would either supply to its customers and the customers would apply themselves or the taxpayer would supply and apply the asphalt at the customer location. The situation that the taxpayer would merely supply the asphalt without application accounted for 20% of its total sales. The Department stated that the company would not qualify as a manufacturing plant for purposes of the manufacturing machinery exemption of Conn. Gen. Stat. Section 12-412(34) due to the fact that over 50% of the company’s sales resulted from the taxpayer supplying and applying the asphalt. The Department stated that since the taxpayer consumes the asphalt in rendering its paving services, the predominant purpose of the taxpayer creating the asphalt is not to create a product to be sold, but to create tangible personal property consumed in the rendering of services. Since this occurs in 80% of the sales transactions, the 50% qualifying rule does not apply, therefore, the manufacturing exemption is not applicable. (Ruling No. 2005-1, Connecticut Department of Revenue Services, January 13, 2005)



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