Stay up to date with sales tax: Join our mailing list!

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)


The Connecticut Department of Revenue Services has issued Informational Publication 2004(29), which replaces Informational Publication 99(19). The publication includes instructions on obtaining a sales and use tax permit, accounting methods, bad debts, types of construction contracts (including lump-sum, cost-plus, and time and material contracts), a discussion on real property, service charges, materials used in construction contracts, nontaxable contracts, exclusion for hazardous waste and other contaminant services, tangible personal property, installation versus repair or maintenance of tangible personal property, equipment rental or service contract, condominiums, construction contracts with direct payment permit holders, and bond requirements of nonresident contractors. (Informational Publication 2004(29), Connecticut Department of Revenue Services, December 15, 2004)


Connecticut Policy Statement 2004(3) clarifies the definitions of computer and data processing services, canned or prewritten software, and custom software as defined in Sec. 12-407(a)(35). This statement also reiterates that there is a 1% sales and use tax on computer and data processing services, other than Internet access services, which came into effect on July 1, 2001. Specific computer and data processing services discussed include:

• Creation and maintenance of web sites. This service is not taxable under Sec. 12-407(a)(37)(A) when services are performed on a specific client’s web site. Charges for access to web sites maintained by others would be a taxable service.

• Sale, installation, maintenance, and repair of computer hardware. The sale of computer hardware is taxable at the 6% rate attributable to tangible personal property. Likewise, any charges for installation of the hardware are taxable at 6% unless separately stated and provided the hardware is sold instead of leased. If the hardware is leased, all installation charges are taxable, regardless of whether or not they are separately stated. Under 12-407(a)(37)(CC) the repair of maintenance of tangible personal property is taxable. Therefore, the repair of maintenance of computer hardware is also taxable.

• Sales of computer software. Canned software qualifies as tangible personal property and is taxable at the 6% rate. Custom software, which undergoes special processing, designing, developing, or adapting, is considered a computer or data processing service and is taxable at the 1% rate. (Connecticut Policy Statement 2004(3))


In a policy statement, the state of Connecticut looks at the tax issues surrounding the internet. Charges for internet access services are exempt from tax as of July 1, 2001. If a Connecticut retailer accepts online orders and ships or delivers them to a Connecticut address, the retailer is responsible to collect tax on the transaction. If a purchaser of property is not assessed tax by the retailer, they are responsible to self-assess the appropriate 6% tax. Electronically delivered software is taxable at 1%. Creation and maintenance of web sites is an exempt service. Web site providers may also be considered agents for sellers in the state, depending on the scope of the services provided. If the web site provider located in Connecticut performs other services, such as billing or collecting billing, it could be considered an agent. (Policy Statement 2004(2), Connecticut Department of Revenue Services, Nov 3, 2004)


In a policy statement, the State of Connecticut has clarified the definition of safety apparel and provided examples of equipment that is exempt from tax. Safety equipment is equipment that is worn by an employee and is designed to protect them from bodily harm. Safety equipment does not include apparel designed to protect the product being worked on, such as clean room equipment. The exemption applies to apparel that is both sold and leased. Included in the policy statement are rules that retailers can apply to purchases to aid in determining exemption. (Policy Statement 2004(4), Connecticut Department of Revenue Services, November 3, 2004)



Scroll to Top