Informational Publication 2018(2)
Building
Contractors’
Guide to
Sales and Use
Taxes
State of Connecticut
Department of Revenue Services
Issued: 12/19/2018 Replaces: IP 2006(35)
2 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
This document is not intended to be used as a legal
ruling, but as a general guide for the proper treatment
of sales and use taxes as they relate to the construction
industry.
Not every potential tax situation is covered in this
guide. If you have questions about the taxability of
goods or services you provide, contact the Department
of Revenue Services (DRS).
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 3
Table of ConTenTs
The Basics
15
Contractor’s Labor Subject to Tax .............................. 15
Contractor’s Labor Not Subject to Tax ....................... 15
15
Tax Held in Trust ......................................................... 16
16
16
16
Contracts With Exempt Organizations ........................ 16
Contracts With Governmental Agencies ..................... 17
Federally Recognized Indian Tribes ........................... 17
Connecticut Innovations, Inc. (CII) ............................ 17
Low and Moderate Income Housing ........................... 17
Waste Treatment Facilities .......................................... 18
Air Pollution Control Facilities ................................... 18
Out-of-State Contracts ................................................ 19
.................................. 19
Renovation Construction Projects ............................... 19
New Construction Projects .......................................... 19
Construction Projects That Involve Renovation
and New Construction ............................................. 19
Recurring Taxable Services Provided to Real Property
Purchased by Direct Payment Permit Holders ........ 20
20
20
21
21
Subcontractor ........................................................... 21
to Subcontractor ....................................................... 22
Temporary Personnel Agency Services ....................... 22
23
23
Bond Requirements of Nonresident Contractors ........ 24
24
I 8
8
8
(TSC) 8
9
9
Lump Sum or Fixed Fee Contract ................................. 9
Cost Plus Contract ......................................................... 9
Time and Material Contract With an Upset or
Guaranteed Price That May Not Be Exceeded ........ 10
10
10
10
Temporary Sheds, Buildings, and Trailers .................. 10
10
Installation of Systems ................................................ 11
Repair or Maintenance of Tangible
Personal Property ..................................................... 11
Warranty Contracts ...................................................... 11
12
Service Contract .......................................................... 12
Equipment Rental ........................................................ 12
12
New Construction .................................................... 12
Owner-Occupied Residential Property .................... 13
Commercial Property ............................................... 13
Industrial Property ................................................... 13
Income-Producing Property ..................................... 13
Public Right-of way ................................................. 13
13
Services Taxable to All Real Property ........................ 13
Services Taxable to Certain Real Property .................. 13
Site Improvements ...................................................... 14
14
14
14
4 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
(See Central Air Conditioning
and Ventilation Systems)
............................................................... 26
....................... 26
(See Kitchens and Telephone,
Audio-Visual, and Computer Cable or Wiring)
.................................................. 27
.................................................... 27
(See Telephone, Audio-Visual, and Computer
Cable or Wiring)
(See also Standard Units of Equipment) .......... 28
(See also Standard Units of Equipment) ...... 28
.................................................... 29
............................................................................ 29
(See Bathrooms, Kitchens, and Standard
Units of Equipment)
........................................................................ 29
(See Janitorial Services)
(See Floor Coverings)
.............................................. 30
............................................... 30
........................................................................ 31
.......................................................... 31
(See also Heating Systems and Ventilation Systems) ........ 31
(See Telephone, Audio-Visual, and Computer
Cable or Wiring)
............................................................................... 32
....................................................................... 32
.......................................................................... 33
(
For asphalt, tar, macadam, and poured concrete areas, see
Paving
)
(
For brick, stone areas, or concrete pavers, see Landscaping
and Horticulture Services
)
(See Interior Sheet Metal and Ventilation Systems)
......................................................................... 33
(
Complete wiring or rewiring of structures or the upgrading
of the electrical service of a structure
)
........................................................... 33
(See also Inclined Stairway Chairlifts) ............................ 34
................................................................. 35
....................................................... 35
................................................. 35
.................... 35
(See also Gutters) .............. 36
................................................................. 36
(
See also Landscaping and Horticulture Services,
Silt Fencing and Underground Pet Barrier Systems
)........... 36
(Cleaning, deodorizing, and removal
of water or debris) ............................................................ 37
........................................................................ 37
.............................................................. 37
............................................................ 38
(See Heating Systems)
.................................................................. 38
.................................................... 39
.......................................................... 39
(See Sheds and Gazebos)
(See also Exterior Sheet Metal Work
and Maintenance Services to Real Property) .................... 40
(See Standard Units of Equipment)
(See Environmental Services)
(See also Clean Rooms/HVAC Systems) ........................... 40
............. 41
......................................... 41
(See Maintenance Services to Real
Property and Painting, Staining, Varnishing, and
Waterproong)
.......................................... 43
(See Structural Inspections)
........................................................ 44
(Duct work) ................................... 44
(See also Maintenance Services to Real Property) ........... 44
.......................................................................... 45
................................ 45
The Details
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 5
............................................... 46
....................... 46
........................................................ 47
....................................................................... 47
....................... 48
.................................................................. 48
(See Brickwork/Stonework)
.......................................................... 49
........................................................ 49
........................................................... 49
..................................................... 49
............................................................. 49
(See Landscaping and Horticulture Services)
(See also Maintenance Services to Real Property) .......... 50
(See Exterminating)
......................................................................... 51
(See Maintenance Services to Real Property)
(See Standard Units of Equipment)
....... 51
.............................................................. 51
(See Landscaping and Horticulture Services)
............................................................................ 52
............................................................. 52
................................................................... 53
(See Hot Tubs, Spas, and Saunas)
.............................. 53
(See also Standard Units of Equipment) ........................... 54
.................................................. 54
......................................................... 54
(See Interior Sheet Metal or Exterior Sheet Metal Work)
............................................................................... 55
................................................................................ 55
........................... 55
..................................................................... 56
(See Maintenance Services to Real Property)
(See Hot Tubs, Spas, and Saunas)
(See Landscaping and Horticulture Services for
exterior sprinkler systems) ................................................ 56
(See Painting, Staining, Varnishing,
and Waterproong)
....................................... 56
(See Standard Units of Equipment)
(See Brickwork/Stonework)
..................................................... 57
................................................................... 57
(See also Hot Tubs, Spas, and Saunas) ............................. 58
(See also Home Entertainment/Home Theater Systems) ... 59
(See also Environmental
Services) ............................................................................ 60
...................................................... 60
(
See also Fencing
) .. 60
......................................... 60
(See Painting, Staining, Varnishing, and Waterproong)
(See also Clean Rooms/HVAC Systems) .......................... 61
.................................................................. 61
(For exterior walls, see Landscaping and
Horticulture Services) ....................................................... 62
(See also
Roof Warranties) ............................................................... 62
................................................................. 62
(See Painting, Staining, Varnishing, and Waterproong)
........................................................................... 63
............................................................ 63
.......................................................................... 64
........................................................... 65
....................................................... 65
(See Telephone, Audio-Visual,
and Computer Cable or Wiring)
............................................................. 67
.... 95
................................................................... 98
........................................ 104
6 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
notes
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 7
The basiCs
8 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
Connecticut building contractors and out-of-state contractors
performing services in Connecticut are generally required
to collect sales tax on their sales and pay sales or use tax on
their purchases. This guide provides more information about
(1) when a contractor needs to pay tax on their purchases
of services and materials, and (2) when a contractor needs
to collect sales tax from their purchaser on their sales of
contracting services and related materials.
Contractors are relatively unique in that they are both
the consumer of materials and retailers of their services.
Therefore, contractors must generally:
1. Pay sales and use tax on materials, supplies, and
equipment used in their construction contracts;
2. Charge and remit sales tax on their taxable services and
certain sales of related materials.
Generally, services to existing commercial, industrial, and
income-producing property are taxable. Some services to
residential property are also taxable.
All contractors must register with the Department of
Revenue Services (DRS) if they are conducting business
in Connecticut. Taxes for which they may be liable include,
but are not limited to, sales and use taxes, withholding
tax, corporation business tax, and business entity tax. See
, Getting Started in
Business.
OBTAINING A SALES AND USE TAX
PERMIT
All contractors, including subcontractors, must obtain a
Connecticut Sales and Use Tax Permit from DRS prior to
providing any services in Connecticut, even if the services
provided are not taxable or if the contract is with a tax-
exempt entity.
To register a business, visit the Department of Revenue
Services at . Use the
(TSC) to complete , Business Taxes
Registration Application online. When registering online
an electronic direct payment from a savings or checking
account must be made for the Sales and Use Tax Permit
fee. Credit or debit card payments are not accepted for
registration fees. A business may also apply in person at
In addition to obtaining a Sales and Use Tax Permit, a
nonresident contractor is required to meet requirements
imposed on such contractors. See Page 23 for more
information on nonresident contractor bond requirements.
When purchasing an existing business, the new business
may not use the Sales and Use Tax Permit issued to the
previous owner. A new Sales and Use Tax Permit must
be obtained. See ,
Successor Liability and Request for Tax Clearance.
KEEPING GOOD RECORDS
Every contractor must keep accurate and complete records
of all transactions subject to tax and all purchases made
by the business for resale, if applicable. These records
returns and must be available if the business is audited.
These records must be kept for at least six years. Contractors
making purchases on resale must maintain records that show
how sales or use tax was later paid on those purchases.
Other records the business must keep include:
• Records of sales (sales receipts, cash register tapes,
guest checks, invoices, etc.);
• Purchase records (invoices, cash disbursement journal);
• State and federal tax returns including schedules and
worksheets;
• Documents that show price changes;
• General ledger;
• Sales, purchases, accounts receivable, and accounts
payable journals;
• Resale and exemption certificates and records of
See Conn. Agencies Regs. § 12-2-12 for more recordkeeping
and record retention requirements.
FILING TIMELY RETURNS THROUGH THE
TAXPAYER SERVICE CENTER (TSC)
, Connecticut Sales and Use Tax Return must
no business activity was conducted for a particular period.
Form OS-114 is the last day of the month following the end of
tax is due, additional charges for penalty and interest will apply.
INTRODUCTION
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 9
electronically and make a tax payment by electronic funds
transfer. See , Filing
and Paying Connecticut Taxes Electronically.
The (TSC) is a free service
on the DRS website at that enables
through the TSC. Upon completing the return, the taxpayer
will automatically be directed to the payment page where
checking or savings account information may be entered.
will be received that can be printed for the taxpayer’s
records. Processed or scheduled payments may be viewed
from the main menu of the TSC.
FILING AN AMENDED RETURN
Check the box indicating that this is an amended return
for the reporting period.
An amended return claiming a refund of taxes already paid
the return. If tax was incorrectly collected from a customer,
the business must prove the sale was not subject to sales and
use taxes, or sales tax was otherwise paid in error, and prove
the tax was returned to the customer (such as a canceled
check or receipted bill). Alternatively, the business may
provide DRS with copies of letters or memoranda issued
to its purchasers in which it promises either to refund the
tax to them, or for current, active customers of the retailer,
to credit the refund amounts against amounts due from the
purchasers.
If the business has not refunded the tax to its purchasers
before DRS issues the refund to the business, then within
120 days after DRS issues the refund, the business must
prove it has refunded or credited the refund amounts to its
purchasers. A business must immediately return to DRS
any amounts not refunded or credited to the business’s
purchasers within 120 days after DRS issues a refund.
Businesses should keep their records and any other
documentation to justify any adjustments for three years.
For information about DRS policies on issuing refunds of
sales and use taxes, see , Sales and
Use Tax Refund Policy.
SALES TAX REQUIREMENTS FOR
DIFFERENT TYPES OF CONSTRUCTION
CONTRACTS
There are three major types of construction contracts. This
by the contractor on purchases made for these contracts,
and how sales tax should be collected by the contractor, if
applicable.
Lump Sum or Fixed Fee Contract
This type of contract provides for a single price for the
total work to be performed on a construction project. Such
contracts are generally not subject to adjustment because
of higher than anticipated costs incurred by the contractor.
The contractor agrees to install a new roof on a
building for $10,000. The contractor cannot charge extra even
if more material is used or more time is spent than expected.
Contractors pay sales or use tax on their purchase of
materials for completion of the contract. Contractors must
charge sales tax to the purchaser on the stated contract
price, if the contractor’s service is subject to tax and the
purchaser is not exempt. The contract should state whether
the total contract price is inclusive or exclusive of sales tax,
if applicable.
Cost-Plus Contract
This type of contract provides for reimbursement of
stated dollar limitation.
The contractor agrees to install a new roof on a
building. The contract states the property owner will reimburse
the contractor for the cost of materials used and labor costs,
a maximum number of labor hours.
Contractors pay sales or use tax on their purchase of
materials for completion of the contract. Contractors
must charge sales tax from the purchaser on the total
consideration paid, if the contractor’s service is subject to
tax and the purchaser is not otherwise exempt.
10 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
CONTRACTORS COLLECTING SALES TAX FROM PURCHASERS
Time and Material Contract With an Upset or
Guaranteed Price That May Not Be Exceeded
The contractor is paid on the basis of direct labor hours at a
over which the contractor cannot charge.
A time and material contract with an upset or guaranteed
price that may not be exceeded provides for:
•
includes wages, overhead, general and administrative
• Materials at cost, including, if appropriate, material
handling costs as part of material costs;
• A ceiling price the contractor exceeds at its own risk.
The contractor agrees to install a new roof on a
building. The contractor will be paid at the rate of $75 per hour
plus the cost of materials, with the entire cost to the property
owner for time and materials not to exceed $10,000.
Contractors pay sales or use tax on their purchase of
materials for completion of the contract. Contractors must
charge sales tax to the purchaser on the total consideration
paid, if the contractor’s service is subject to tax and the
purchaser is not exempt.
In order to determine whether a contractor is required
to collect sales tax on a sale made to a purchaser, three
questions must be answered: (1) what type of service is
being performed, (2) what type of property is receiving
the service, (3) whether the purchaser is exempt from
sales tax.
TANGIBLE PERSONAL PROPERTY OR
REAL PROPERTY
property or real property. Sales of tangible personal property
of services to commercial, industrial, or income-producing
applies. Sales of certain services are subject to tax for all
types of real property.
TANGIBLE PERSONAL PROPERTY
The term tangible personal property refers to goods that
are not part of real property. Examples of tangible personal
property are furniture, curtains, and certain appliances.
The sale of tangible personal property is taxable. However,
separately stated charges to install tangible personal
property are not taxable, provided that such installation
is not itself a service to existing commercial, industrial or
income-producing real property.
Conn. Gen. Stat. § 12-407(a)(8)(B)
and (9)(B)); Conn. Agencies Regs. § 12-426-18(e).
Temporary Sheds, Buildings, and Trailers
placed onto sites for use during construction projects are
generally considered to be and remain tangible personal
property. Prefabricated gazebos and storage sheds are
generally considered to be and remain tangible personal
property.
INSTALLATION VERSUS REPAIR
OR MAINTENANCE OF TANGIBLE
PERSONAL PROPERTY
This section covers services performed on systems that are
integrated into real property, which contain core units that
enable them to function. For example:
alarm systems
central vacuuming units
refrigeration units
modular lighting units
plumbing systems, which contain:
pumps
tanks
water heaters
heating and cooling systems, which contain:
central air conditioning units
furnaces (boilers and burners)
These services may include installation of the units or
systems into the real property or may include repair or
maintenance of these units, including their electrical or
electronic devices.
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 11
Most contractors provide installation, repair and
which type of job is being done.
Installation of Systems
The installation of these systems is considered a service to
real property. Contractors are the consumers of the materials
used when installing these systems and, therefore, must pay
tax on their purchases.
Contractors do not collect tax on their services when
installing a system in:
• New construction
• Owner-occupied residential property
Contractors must collect tax on their services when
installing a system in:
• Existing commercial real property
• Existing industrial real property
• Existing income-producing real property
Repair or Maintenance of Tangible Personal
Property
Repairing or maintaining units, or their electrical or
electronic parts, is a taxable service to tangible personal
property. Contractors providing repair or maintenance
services must separately state the charge for integral parts
and the charge for maintenance or repair services on the
bill to the customer. Any fees, such as service call charges,
pickup or delivery charges, are taxable as charges for repair
or maintenance services to tangible personal property. The
total bill is taxable.
Maintenance or repair service providers are the consumers
of supplies used in performing their services. Therefore,
sales of tangible personal property, other than integral parts,
to a contractor who uses the property in repairing tangible
personal property are taxable retail sales to the contractor.
The maintenance or repair service provider may purchase
integral part
means a part, such as a circuit board, heating element,
control panel, or gear that retains its separate identity even
after being incorporated into repaired equipment. The term
integral part does not include materials such as lubricants,
coolant, stain, paint, varnish, glue, solder and wire that
do not retain their separate identity after being used to
repair tangible personal property, but are consumed by the
contractor.
A contractor that both installs and repairs or maintains these
units or systems may purchase inventory items used in both
installation and repairs on a resale basis. For example, if
the contractor purchases piping, the purchase may be made
in the installation of a water system and the repair of an
existing water system.
• If the item is used in an installation, the contractor
self-assesses use tax on the contractor’s purchase price.
• If the item is used in a repair, the contractor collects
sales tax from its customer on the item.
purchase items that can only be used in an installation (for
example: furnaces, central air conditioning, or water heater
units).
Conn. Gen. Stat. § 12-407(a)(37)
(Q) and (CC)
Warranty Contracts
A warranty contract is a contract that provides for repair
services to be performed on an item of tangible personal
property only in the event of a future malfunctioning.
The sale of a warranty contract to service any item of
tangible personal property is taxable. The sales tax applies
to the charge for a warranty contract regardless of whether
it is separately stated from the charge for the sale of the
item or the warranty contract is purchased in a separate
transaction from the sale of the item.
When repair services
are performed under a warranty contract at no additional
charge to the customer, the services are not taxable because
the tax is considered to have been paid on the services
when the warranty contract was purchased. However, any
additional amount a warrantor charges a customer that is not
covered under the warranty contract, such as a charge for a
deductible, is subject to tax. The warrantor may purchase
integral parts and repair labor used to service an item of
tangible personal property under a warranty contract on
resale from suppliers or third party repairers.
See the definition of integral part on this page and
Conn. Agencies Regs. § 12-407(2)(i)(DD)-1, Repair or
maintenance services to tangible personal property and
contracts of maintenance, repair, or warranty.
12 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
EQUIPMENT RENTAL OR SERVICE
CONTRACT
The rental of equipment is a taxable transaction, whereas
only certain services are taxable. However, sometimes it is
equipment and a contract for services.
The terms of the contract, not the billing method, determine
if the transaction is for equipment rental or for a service.
Service Contract
A contract is for service if the equipment owner:
•
• Maintains complete control over the equipment;
• Retains discretion over how and when to perform the job.
A bulldozer
service receives a job order to tear up an existing parking lot at
a shopping center. It dispatches a bulldozer and an operator to
handle the job. When the work is completed, it bills as follows:
Bulldozer 3 hrs @ $100 $ 300.00
Operator 3 hrs @ $40 $ 120.00
Subtotal $ 420.00
Sales Tax ($420 x 6.35%) $ 26.67
$ 446.67
The entire charge is subject to tax because the renovation of
commercial income-producing property is a taxable service.
When performing a taxable service the entire charge is taxable
whether or not the charge for the operator is separately stated.
A crane
service receives a job order to unload two freight cars of lumber.
The crane service dispatches a crane and an operator to handle
the job. When the work is completed, it bills as follows:
Mobile Crane 3 hrs @ $100
$ 300.00
Operator 3 hrs @ $40 $ 120.00
$ 420.00
This again is a service contract, not the rental of equipment. The
control of the actual operation. Since the unloading of freight
is not a taxable service, the charge is not subject to tax.
Equipment Rental
When the contractor is merely supplying equipment, with or
without operators, to a certain site and the customer controls
how and when to perform the contract, the contract is for
the rental of equipment.
A
contractor receives a request to supply a bulldozer and a
truck without an operator. When the equipment is released the
contractor bills as follows:
1 bulldozer 20 hrs @ $100
$ 2,000.00
1 truck 20 hrs @ $50 $ 1,000.00
Subtotal $ 3,000.00
Tax ($3000 x 6.35%) $ 190.50
$ 3,190.50
This is a rental of equipment and the entire charge is subject to
6.35% tax.
A crane
service receives a job order to provide a crane to unload two
freight cars of lumber. The crane service dispatches a crane and
an operator to handle the job. When the crane and the operator
arrive at the job site, the freight company instructs the operator
on how and when to unload the lumber. The freight company
oversees the crane operator’s work and makes adjustments as
necessary. When the work is completed, it bills as follows:
Mobile Crane 3 hrs @ $100 $ 300.00
Operator 3 hrs @ $40 $ 120.00
Subtotal $ 420.00
Tax ($300 x 6.35%) $ 19.05
$ 439.05
This is a rental of equipment and the charge for equipment is
subject to the 6.35% tax. However, the charge for the operator
is not taxable provided the lessor supplies the operator for the
leased property and the amount charged for the compensation
of the operator is reasonable and is separately stated on the
invoice.
Conn. Agencies Regs. § 12-426-25
TYPES OF REAL PROPERTY
Real property is land, buildings, and materials permanently
of real property:
Types of new construction are:
• The construction of a new building;
• The construction of a new addition that expands the
cubic footage of an existing building;
• The replacement of the entire internal structure of
a building. This includes removing and replacing
and electrical systems. Everything in the interior of a
the rafters of the roof must be removed;
A clothing store is a tenant of one space in a strip
completely gutted its space, but the other spaces in the strip
mall were left untouched. As the strip mall is only one building
and only a portion of the building was gutted, the work done
on the tenant’s space does not qualify as new construction.
A manufacturer contracts to have 90% of the
square footage of its recently purchased facility gutted,
electrical and mechanical systems. The manufacturer plans to
have both manufacturing and R&D operations take place in the
the section to be used for manufacturing than the section to be
used for R&D, the manufacturer is leaving the internal walls,
operations will take place. This contract does not qualify as new
construction because 10% of the building will not be gutted.
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 13
• Site improvements to real property that put the property
to a new use (see Site Improvements on Page 14);
•
structure. For information about the special rules that
apply to this type of construction, see ,
Certified Rehabilitation Certificate for Certified
Historic Structures;
•
building, if there has been no previous use of this space,
(storage is considered a use).
Occupancy (C.O.) is issued.
A , Services Certicate for New Construction,
is used to establish the percentage of construction services
that is attributable to new construction.
• Is used exclusively for residential purposes;
• Consists of one to three dwelling units (up to a three
family house);
• The owner resides or will reside at the property upon
completion of the work.
Property where the buying, selling,
or leasing of goods or services usually takes place. Examples
stations.
Property where manufacturing or
fabricating activities take place. An example is a factory. The
grounds surrounding the factory, warehouse, and shipping
dock are all part of the industrial property.
Property held for or used
in the production of income. Examples include land used
for agricultural production and rental property such as
an apartment building or nonowner-occupied residential
property.
Property such as a state or municipal
street and adjacent area. This property is not considered
commercial, industrial, or income-producing property. Services
to mains, lines, poles, pipes, and other facilities located along,
above, or under a public right-of-way are generally not taxable.
Conn. Gen. Stat. § 12-407(a)(37)(I)
and Conn. Agencies Regs. § 12-407(2)(i)(I)-1
TYPES OF SERVICES
Services to existing industrial, commercial, and income-
producing property are generally taxable, unless the
purchaser is exempt from sales and use tax.
Services Taxable to All Real Property
Some services are taxable in all cases, whether performed
on new construction, owner-occupied residential property,
existing commercial property, existing industrial property,
or existing income-producing property. These services
include, but are not limited to:
Carpet cleaning Maintenance
Exterminating Snow plowing and removal
House washing Swimming pool cleaning
Janitorial Swimming pool maintenance
Landscaping Window cleaning
Locksmith services
Additional information about these and other services can
be found in the Details section of this guide beginning on
Page 25.
Conn. Gen. Stat. § 12-407(a)(37)(T),
(V), (W), (X), (Y), (Z), and (AA)
Services Taxable to Certain Real Property
Services are generally taxable to existing commercial,
industrial, or income-producing property, even if they are
not taxable when performed on owner-occupied residential
property or new construction. These services include, but
are not limited to:
Air conditioning Paving
Carpentry Plastering
Carpeting Plumbing
Construction management Property management
Demolition Refuse removal
Electrical Roong
Elevator or escalator work Sandblasting
Excavating Siding
Exterior sheet metal work Staining
Flooring Structural inspection
Foundation work Ventilation
Heating Wallpapering
Masonry Welding
Painting
Conn. Gen. Stat. § 12-407(a)(37)(I)
14 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
Site Improvements
Site improvements are improvements made to real property
other than buildings. Certain site improvements put the
property to a new use and are considered new construction.
The construction of roadways, parking lots, in-ground
swimming pools, tennis courts, and decks put the property
to a new use.
Walkways, driveways, and patios must be made of poured
concrete or asphalt to be considered nontaxable new
construction instead of a taxable landscaping service.
These services can be considered new construction work
whether or not these improvements are in connection with
the construction of a new building.
Other site improvements merely enhance an existing use
of the property and are not considered new construction.
The installation of wells, septic systems, utility lines, storm
water drainage systems, and outdoor lighting systems do
not put the property to a new use. Such services are not new
construction unless the construction of the improvement is
A , Services Certicate for New Construction,
is used to establish the percentage of construction services
that is attributable to site improvements.
AMOUNT SUBJECT TO TAX
Once contractors have determined the type of property and
type of service they are providing, they need to determine
the amount of the bill that is subject to sales tax.
SERVICE CHARGE
A contractor’s service charge, sometimes referred to as
the labor charge, is determined by subtracting the cost
of materials (including tax paid on materials) from the
total contract price. In other words, every cent above the
contractor’s cost of materials physically incorporated into
the real property, plus the tax paid on those materials, is
considered the service charge.
The service charge includes:
• The actual labor charge;
•
•
• Overhead expenses;
• Tool or equipment purchase or rental, including tax
paid on the rental;
• Reimbursed expenses incorporated into the bill
(whether or not the charges are separately stated).
REIMBURSED EXPENSES
Generally, reimbursed expenses associated with a taxable
service are subject to tax even if separately stated on the
invoice. When a business provides a taxable service in
Connecticut and bills the customer for both the service
and any reimbursable expenses used and consumed by the
service provider in providing its services, such as postage,
delivery charges, food, travel, and lodging, the entire bill
is subject to sales tax.
A security company is hired to provide a taxable
guard service in Connecticut and presents the following bill.
Guard services
$ 2,000.00
Travel and meals $ 300.00
$ 2,300.00
The entire bill of $2,300.00 is subject to the 6.35% tax.
A landscaping company performs its taxable
service for a company located in Connecticut and presents
the following bill:
Landscaping services
$ 10,000.00
Travel $ 1,000.00
Meals $ 300.00
Lodging $ 900.00
$ 12,200.00
The entire bill of $12,200 is subject to the 6.35% sales tax
There is an exception to this general rule:
When the seller of services incurs any expense that is for
the reimbursement of the expense is not subject to tax.
Examples are when a building contractor pays for a building
permit for the building owner, town recording fees, and
travel tickets purchased by the service provider for travel
by the service recipient and used by the service recipient.
The distinction between expenses that are used and
consumed by a service provider and expenses that are used
way related to whether the service recipient is contractually
obligated or otherwise required to reimburse the service
provider for the expenses. Instead, as explained above, the
taxability of an item that is the basis for an expense incurred
by a service provider depends on how the item is used.
the general rule is that if a service is taxable, the reimbursed
expenses associated with it are also taxable.
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 15
LABOR CHARGE
Contractor's Labor Subject to Tax
A contractor’s labor is subject to tax when the service is to:
• Existing commercial real property;
• Existing industrial real property;
• Existing income-producing real property;
• Any real property if it is one of the services
listed in
Services Taxable to All Real Property on Page 13.
Contractor’s Labor Not Subject to Tax
A contractor’s labor is not subject to tax when the service
is performed on:
• New construction (except for services listed in Services
Taxable to All Real Property);
• Owner-occupied residential property (except for
services listed in Services Taxable to All Real Property);
• Charitable or religious organizations;
• Qualifying governmental agencies or their agents;
• Real property owned by federally recognized Indian
tribes when the service is performed in federally
recognized Indian country;
• Low and moderate-income housing;
• Contracts performed out-of-state;
• Hospitals and certain other exempt entities;
• Real property located within a public right-of-way.
For more information on nontaxable contracts, see Types
of Nontaxable Contracts on Page 16.
CONTRACTOR'S BILL TO THE FINAL
CUSTOMER
The general contractor has two options to choose from when
Option One
The general contractor breaks the bill to the property owner
into three components:
• Materials consumed, including tax paid on the materials;
• Service charges, including the markup on materials,
overhead expenses, reimbursed expenses, labor charges,
• Sales tax on the service portion of the bill, if applicable.
The contractor bills its customer:
Taxable labor $ 600.00
Materials $ 400.00
Sales tax on labor ($600 x 6.35%) $ 38.10
$ 1,038.10
Sales tax separately stated is held in trust and must be remitted
by the contractor. In this example, the contractor must remit
$38.10 in tax with its return.
Option Two
The general contractor does not break the bill down. Only
a total charge is shown on the bill. The bill includes:
• Materials consumed, including tax paid on the materials;
• Service charges, including the markup on materials,
overhead expenses, reimbursed expenses, labor charges,
• The phrase "sales tax included on services", if
applicable.
The contractor bills its customer:
Total labor and materials is $1,063.50
(sales tax included on services)
The contractor must remit the sales tax on the service portion
of the bill only with its return. If the contractor has already
paid $12.70 in tax to its vendors on material purchases of $200,
the sales tax on the $800 service portion of the bill is $50.80.
Sales tax on the service portion of the bill may be backed
out by multiplying the entire service charge by .9403. The
result equals gross receipts from services. Subtract the gross
receipts from services from the entire service charge. See
Examples 3 and 4 in the Appendix.
Regardless of the option chosen, the general contractor
must keep accurate records of the actual costs of materials
and service, including all subcontracting costs. The general
service portion of the contract.
The purchaser of a taxable good or taxable service is
responsible for paying use tax to DRS unless the retailer
provides the purchaser with a receipt that shows sales tax
was charged in one of the manners described above. See
Paying Sales or Use Tax on Purchases on Page 20.
A sales invoice or an American Institute of Architects
for Payment and/or a Continuation Sheet, is an acceptable
receipt. A contract does not constitute a receipt.
16 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
Tax Held in Trust
Some contractors have made the mistake of incorrectly
reimbursing themselves for tax they paid on materials out of
the tax they collect from their customers. Conn. Gen. Stat.
§ 12-408(2) provides that tax collected by a retailer is held
in trust for the state and the entire amount of tax collected
must be remitted to DRS (even if the tax was charged in
error) or refunded to the customer.
Conn. Gen. Stat. § 12-408(2);
§ 12-411(2)
CONDOMINIUMS
If a condominium unit is occupied by the owner, it is
considered residential real property. When a unit is rented, it
is considered income-producing real property for the owner,
but would still be treated as residential real property if the
tenant purchases the service directly from the contractor.
Therefore, if the contractor performs a service directly for
the owner of the condominium unit and the service is a
service to real property, the taxability depends on whether
the unit is owner-occupied or rented.
If the contractor performs the service directly for a condominium
association and the service is a service to real property,
including common areas, under Conn. Gen. Stat. § 12-407(a)
(37)(I), tax applies to the percentage of the service charge that
equals the percentage of the total units that are rental units. See
Services Taxable to Certain Real Property on Page 13.
A condominium complex has a total of one hundred
units. Forty of the units are owner-occupied and sixty are rental
units. The sixty units are income-producing real property. If the
contractor is performing a taxable service for the association,
60% of the service charge would be taxable. The contractor
must obtain from the condominium association a completed
, Residential Condominium Association. CERT-
103 requires the association to provide a breakdown of the
day of the calendar year.
Often an association contracts with a property management
company to oversee the day-to-day operations of the
association. The taxable portion of the management fee is
equivalent to the percentage of rental units. The property
contractor providing a taxable service as long as the service
will be resold to the association. The property management
company must collect tax on the taxable services it resells.
Some services, such as landscaping and snow plowing,
performed by a contractor to a residential condominium
association or to the owner of a condominium unit are 100%
taxable, regardless of the percentage of the owner-occupied
units. The contractor must charge tax on the entire bill for
these services. For examples of these services, see Services
Taxable to All Real Property on Page 13.
EXEMPT PURCHASERS
Some purchasers of otherwise taxable contracting services
are exempt from sales tax.
TYPES OF NONTAXABLE CONTRACTS
Contracts With Exempt Organizations
The following section describes the types of exempt
issued by the organization to the contractor. The contractor
A contractor performing work for one of these exempt
organizations should issue a , Contractor’s
Exempt Purchase Certicate, to its vendors for purchases
of materials and supplies installed or placed in the project.
Turn-key contracts with governmental or other exempt
entities, in which the exempt entity contracts for a
construction project to be completed by the contractor on
land not owned by the exempt entity during the construction
period, do not qualify for exemption from tax.
• A charitable or religious organization that holds an
Internal Revenue Service § 501(c)(3) or (13) determination
letter or a valid exemption permit issued by DRS.
, Purchases of Tangible Personal
Property and Services by Qualifying Exempt Organizations;
•
homes licensed by the State of Connecticut under Chapter
368v of the Connecticut General Statutes.
, Purchases of Tangible Personal
Property and Services by Certain Hospitals, Nonprot
Nursing Homes, Nonprofit Rest Homes, or Nonprofit
Residential Care Homes;
•
§ 10-397.
, Exempt Purchases by Qualifying
Governmental Agencies;
• Materials Innovation and Recycling Authority
(MIRA) (formerly, the Connecticut Resource Recovery
Authority (CRRA)) or a lessee or operator of a MIRA
project.
, Exemption for Projects of the
Connecticut Resource Recovery Authority and Solid Waste-
to-Energy Facilities. CERT-131 may also be issued for
purchases of services or tangible personal property used
or consumed in operating a solid waste-to-energy facility.
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 17
Contracts With Governmental Agencies
Qualifying governmental agencies issue ,
Exempt Purchases by Qualifying Governmental Agencies,
to the contractor. Qualifying transactions with governmental
agencies include:
• Sales to the United States government and its agencies;
• Sales to the State of Connecticut and its agencies;
• Sales to political subdivisions of Connecticut (cities and
towns and their agencies, including municipal housing
authorities);
• Sales of tangible personal property or services used to
develop property that the State of Connecticut is under
contract;
• Sales in connection with the demolition, remediation
or preparation of Adriaen’s Landing and Rentschler
Field;
• Sales to tax districts.
A governmental agency may
appoint a business to act as its agent to purchase goods
and services. A principal-agent relationship exists between
a business and a governmental agency when all of the
following conditions are met:
• The business is expressly acting as an agent for the
governmental agency. The contract between the
business and the governmental agency must state that
the business is acting as an agent for the governmental
agency;
• All purchases made by the business for the governmental
agency are used exclusively for the governmental
• The governmental agency issues CERT-134 to the
business.
The governmental agency signs
CERT-134, or in the alternative, the business appointed
by the governmental agency (as explained above) signs
CERT-134 as the purchaser and designates itself as agent
of the governmental agency. The business attaches to the
CERT-134 a copy of documentation from the governmental
agency expressly designating the business as agent.
Federally Recognized Indian Tribes
Contractors performing services in Indian country of a
federally recognized Indian tribe must receive a completed
, Exempt Purchases by an Enrolled Member or
by the Tribal Government of the Mashantucket Pequot Tribe
or Mohegan Tribe, from an enrolled member or agent of the
Indian tribe.
Purchases of tangible personal property outside
of Indian country of the tribe by contractors or subcontractors
of the tribe for use in projects for the tribe within Indian
country of the tribe are not subject to Connecticut sales or
use tax provided the contractors or subcontractors comply
with the provisions of Conn. Gen. Stat. §§ 12-407(a)(6) or
12-408c. See
for more information on
purchases of tangible personal property within and outside
of Indian country of the tribe.
Contractors issue , Exempt Purchases by
Contractors in Connection With Construction Projects on
the Mashantucket Pequot or Mohegan Reservations, to
their vendors when making purchases of tangible personal
property where title passes to the contractor in Indian
country of the tribe or where delivery of rented property is
taken by the contractor in the Indian country of the tribe. The
exemption only applies if the equipment is used exclusively
and permanently in Indian country of the tribes and the
entire cost of the purchase is passed on to the tribe or an
enrolled member of the tribe.
Connecticut Innovations, Inc. (CII) (formerly,
Connecticut Development Authority (CDA))
The CII approves certain projects for exemption under
Conn. Gen. Stat. § 32-23h. Participants under this program
and contractors for such projects should contact the CII and
follow CII procedures.
Low and Moderate Income Housing
Sales of tangible personal property and services used in the
construction, rehabilitation, renovation, repair, maintenance,
or operation of low and moderate income housing facilities
are exempt.
The sponsor of a low and moderate income housing facility
must apply to DRS using , Application for a Facility
Approval Letter. The Facility Approval Letter acknowledges
the facility is constructed under the sponsorship of, and
, Sales and Use Tax Exemption
for Low and Moderate Income Housing Facilities.
The sponsoring party issues to the contractor a copy of the
Facility Approval Letter.
To purchase exempt materials
and services used in the construction, rehabilitation,
renovation, repair, maintenance, or operation of the facility,
the contractor must issue , Exempt Purchases
of Tangible Personal Property or Services for Low and
Moderate Income Housing Facilities, to the vendor. The
contractor must obtain a copy of the Facility Approval Letter
18 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
or operator of the facility, and attach it to CERT-126.
The contractor may sell all labor exempt, if the contractor
receives CERT-126 with the Facility Approval Letter
attached from the sponsor, owner, operator, or another
contractor.
Conn. Gen. Stat. § 12-412(29)
Waste Treatment Facilities
There is an exemption for tangible personal property
incorporated into or consumed in the operation of industrial
waste treatment facilities.
An industrial waste treatment facility treats industrial
waste so it may be discharged into the waters of the state
or into sewerage systems emptying into those waters. The
primary purpose of the treatment is the reduction, control,
or elimination of pollution of those waters.
The Department of Energy and Environmental Protection
(DEEP) Bureau of Materials Management and Compliance
Assurance – Water Permitting and Enforcement Division
approves these exempt items.
Items that appear on the “List of Approved
Water Pollution Equipment” contained in
, Tax Exemptions for Certain Water
Pollution Control Equipment, will be incorporated
into or used and consumed in the operation of an industrial
waste treatment facility are exempt from tax. The contractor
purchases the items exempt from tax by issuing its supplier
a completed , Purchases of Tangible Personal
Property Incorporated Into or Consumed in Water Pollution
Control Facilities.
If the item is not listed in Policy Statement 2014(1) but the
purchaser intends to use or consume it in the operation of
those facilities, the purchaser must receive written approval
from DEEP indicating the item is approved for use in a
water pollution control facility. The purchaser may then buy
the item exempt by issuing both the approval letter and a
completed CERT-124 to the purchaser’s supplier.
The contractor must pay tax on all materials and supplies
not covered by this exemption.
Services performed in the evaluation, treatment,
containment, or removal of hazardous waste or other contaminants
of air, water, or soil are taxable. See Environmental Services.
Contractors collect tax on labor in a project when
incorporating the exempt materials into:
• New construction
Contractors collect tax on labor in a project when
incorporating the exempt materials into:
• Existing commercial property
• Existing industrial property
• Existing income-producing property.
Conn. Gen. Stat. § 12-412(21)
Air Pollution Control Facilities
There is an exemption for tangible personal property
incorporated into or used in an air pollution control
facility. An air pollution control facility reduces, controls,
or eliminates air pollution. The DEEP Bureau of Air
Management approves these exempt items.
Items that appear on the "List of Approved Air
Pollution Equipment" contained in ,
Tax Exemptions for Certain Air Pollution Control
Equipment, and will be incorporated into or used and
consumed in the operation of an air pollution control facility
are exempt from tax. The contractor purchases the item
exempt by issuing to its supplier a completed ,
Purchases of Tangible Personal Property Incorporated Into
or Consumed in Air Pollution Control Facilities.
If the item is not listed in Policy Statement 99(2), but the
purchaser intends to use or consume it in the operation
of those facilities, the purchaser must receive written
approval from DEEP that the item is approved for use in an
air pollution control facility. The purchaser may then buy
the item exempt by issuing both the approval letter and a
completed CERT-117 to the contractor’s supplier.
The contractor must pay tax on all materials and supplies
not covered by this exemption.
Services performed in the evaluation, treatment,
containment, or removal of hazardous waste or other
contaminants of air, water, or soil are taxable. See
Environmental Services.
Contractors collect tax on labor in a project when
incorporating the exempt materials into:
• New construction
Contractors collect tax on labor in a project when
incorporating the exempt materials into:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Conn. Gen. Stat. § 12-412(22)
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 19
Out-of-State Contracts
There is no Connecticut tax due on the contractor’s
labor performed on a project located outside the State of
Connecticut.
However, Connecticut tax may be due on
materials consumed.
Tangible personal property shipped or brought
into Connecticut that is subsequently transported outside of
Connecticut for use thereafter solely outside Connecticut is
not subject to Connecticut tax. Tangible personal property
purchased from a Connecticut retailer, where title to the
property passes in Connecticut, is subject to Connecticut
tax even if the property is subsequently transported outside
Connecticut for use solely outside Connecticut unless the
Buy Connecticut provision applies.
Under the Buy Connecticut provision, businesses may apply
to DRS for a refund of sales and use taxes paid on tangible
personal property purchased from a Connecticut retailer
when those goods will be shipped outside of Connecticut
by common or contract carrier within three years of the date
of purchase for exclusive use outside Connecticut, or will
be incorporated into other property to be shipped outside
Connecticut for exclusive use outside Connecticut.
This provision also allows the Commissioner of Revenue
purchase the property without payment of the tax otherwise
imposed by the Sales and Use Taxes Act. There is no requirement
to ship tangible personal property by common or contract
carrier if the taxpayer has a Buy Connecticut permit prior to the
purchase. See , The “Buy Connecticut”
Provision.
Purchasing for Contracts With Exempt Entities
For information regarding purchasing materials and services
while engaged in a contract with an exempt entity, see
Page 23, Purchasing Under Contracts With Exempt Entities.
CONSTRUCTION CONTRACTS WITH
DIRECT PAYMENT PERMIT HOLDERS
contractors enter into contracts with direct payment permit
holders.
Direct payment permits allow permit holders to pay use tax
directly to DRS rather than paying the sales tax to their vendors.
Renovation Construction Projects
Contractors that enter into renovation construction contracts
with direct payment permit holders do not pay sales or use
tax on the purchase of materials and supplies to be installed
or permanently placed in the project. A contractor must
pay tax to the vendor when purchasing, leasing, or renting
tools and equipment and when buying items that will be
used or consumed during the project instead of installed or
permanently placed.
The direct payment permit holder issues a copy of its
, Direct Payment Permit, to the general contractor.
The general contractor issues a copy of the direct payment
permit and , Contractor’s Exempt Purchase
Certicate for a Renovation Contract With a Direct Payment
Permit Holder, to its suppliers when purchasing materials
and supplies to be installed or permanently placed in a
renovation project.
General contractors issue a resale certificate to their
subcontractors for renovation labor resold to a direct
payment permit holder.
The general contractor provides copies of the direct
payment permit to all renovation project subcontractors.
The subcontractor issues CERT-133 and a copy of the direct
payment permit to its suppliers when purchasing materials
and supplies to be installed or permanently placed in a
renovation project without paying sales tax.
A direct payment permit holder self-assesses use tax on the
total bill from the general contractor that includes:
• Materials and supplies installed or permanently placed
in a renovation project;
• Labor used in the renovation project.
New Construction Projects
Direct payment permit holders may not issue, and the
general contractor may not accept, the direct payment permit
for new construction projects. General contractors and
subcontractors must pay sales and use taxes on purchases
of materials and supplies installed or permanently placed in
new construction projects and on purchases, leases, or rental
of tools and equipment. CERT-133 and the direct payment
permit cannot be used for new construction contracts.
Construction Projects That Involve Renovation
and New Construction
When the general contractor is performing under a
construction contract that involves both renovation and
new construction, the general contractor must separately
state the costs for the new construction and the renovation
portions of the contract on the bill or invoice to the direct
payment permit holder. This provides the direct payment
permit holder with the actual cost of the renovation portion
of the contract on which the use tax is self-assessed.
The direct payment permit holder must issue a copy of
the direct payment permit to the general contractor for the
renovation portion of the contract. The general contractor
must attach a copy of the taxpayer’s direct payment
permit to CERT-133 and issue CERT-133 to its suppliers
when purchasing materials and supplies to be installed or
20 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
CONTRACTORS PAYING SALES OR USE TAX ON PURCHASES
Contractors are considered to be the consumers of the materials
and supplies used to perform their contracting services. This
means that the contractor must pay sales tax on their purchases
MATERIALS USED IN CONSTRUCTION
CONTRACTS
Contractors are the consumers of materials and supplies
the contractor pays tax on purchases of materials.
The only exceptions are:
be used when purchasing materials unless one of the
following conditions is met. The contractor:
• Has a store that sells building supplies;
• Sells particular building materials (windows, doors,
lumber, sheet metal) to the property owner and
states on the invoice all of the following:
1. Charge for the materials;
2. Exact quantity of materials being sold;
3. Additional price for which the contractor will
install the products being sold.
In both cases, the contractor must charge sales tax on the
materials and taxable labor, if any, unless the transaction
apply
only to contractors that also maintain storefront
businesses, such as plumbing supply stores or lumberyards.
Items taken from the inventory of a storefront business for
use in a construction contract are subject to the use tax on
their cost. The contractor is responsible for self-assessing
the use tax and should not charge its customers tax on items
taken from inventory. Contractors that only sell materials
from their vehicles or do not maintain storefront businesses
may not purchase materials on resale, but must pay tax on
them when they purchase the items, and must not charge
their customers tax on these items.
Contractors must self-assess use tax when they purchase
taxable goods for use in Connecticut from an out-of-state
vendor not registered to collect Connecticut use tax. If the
materials were purchased outside Connecticut for use on a
Connecticut job and the tax paid to the other state is less
and the tax paid to the other state must be reported and
paid to Connecticut. To self-assess use tax, the contractor
should report the gross receipts for any use tax due on the
appropriate line (Lines 4 – 6) on their sales tax return.
B.
Material incorporated into charitable, religious or
governmental property. A contractor that enters into a
construction contract with an exempt entity may purchase,
exempt from tax, the materials that will be installed or
placed and remain in the real property. See Purchasing
Under Contracts With Exempt Entities on Page 23.
Conn. Gen. Stat. § 12-430(5); Conn.
Agencies Regs. § 12-426-18
permanently placed in the renovation portion of the project
without paying sales tax. The general contractor provides
copies of the direct payment permit to all subcontractors
involved in the renovation portion of the project. The
subcontractors for the renovation labor to be resold to the
direct payment permit holder.
The subcontractors must attach a copy of the taxpayer’s
direct payment permit to CERT-133 and issue CERT-133
to its suppliers when purchasing materials and supplies to
be installed or permanently placed in the renovation portion
of the project without paying sales tax.
Recurring Taxable Services Provided to Real
Property Purchased by Direct Payment Permit
Holders
A direct payment permit holder must issue a copy of
the direct payment permit to the service provider when
purchasing any taxable services provided to real property
such as property management, landscaping, janitorial,
or maintenance services. The service provider must
attach a copy of the taxpayer’s direct payment permit to
CERT-133 and issue CERT-133 to its suppliers when purchasing
materials and supplies to be installed or permanently placed
in the real property without paying sales tax.
The service provider supplies copies of the direct payment
from which it is purchasing recurring taxable services for
resale to the direct payment permit holder. The subcontractors
must attach a copy of taxpayer’s direct payment permit to
CERT-133 and issue CERT-133 to its suppliers when purchasing
materials and supplies to be installed or permanently placed
in the real property without paying sales tax.
See , Q & A on the
Connecticut Direct Payment Permit Program, for more
information about direct payment permit holders.
Conn. Gen. Stat. § 12-409a
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 21
TOOLS OF THE TRADE
Contractors must pay tax on the purchase, lease, or rental of
all tools used in their trade. This includes hand tools, power
equipment. Contractors must pay tax on tools even if they
will use them on exempt projects.
Generally, if a used item is traded in on the purchase of a
new item of the same kind, tax is calculated on the selling
price, after allowing for the trade-in credit, provided the
retailer intends to resell the item traded. See
, Sales and Use Taxes on Returned
Goods, Even Exchanges, and Trade-Ins.
Conn. Gen. Stat. § 12-407(a)(8)(B)(v)
and § 12-430a
CONTRACTOR’S PURCHASE OF
SUBCONTRACTOR SERVICES
General contractors often purchase the services of
subcontractors to complete a project. There are two possible
methods of purchasing subcontractor services:
1. General Contractor Issues a Resale
A general contractor can purchase a subcontracting service
for resale as long as both the following conditions are met:
• The subcontracting service is an integral, inseparable
component of the service to be sold to the end customer.
An integral, inseparable component is essential to
sold. If the job is taxable, the contractor charges the
end user tax on the entire service bill.
The general contractor may not use or consume the
service purchased for resale. For example, a general
contractor that hires the services of a temporary help
must pay tax on that service and cannot purchase it on
a resale basis because the service of a secretary is not
an integral and inseparable part of the service to be sold
to the end customer;
to be sold are services listed in Conn. Gen. Stat.
§ 12-407(a)(37) as taxable services. This means the
a. Services performed on new construction (other than
services taxable to all real property, see Page 13);
b. Services performed on owner-occupied residential
real property (other than services taxable to all real
property, see Page 13);
c. Any other taxable services not enumerated in
§ 12-407(a)(37), such as telecommunications
services;
d. Nontaxable services such as engineering and
architecture and design services.
A property management company providing
taxable services to industrial, commercial, or income-
producing real property incurs long-distance telephone
charges on behalf of its client in the course of performing
its management services. The management company may
not purchase telecommunications services on a resale basis
because telecommunications services are not an integral,
inseparable component of the services being sold and are not
enumerated in Conn. Gen. Stat. § 12-407(a)(37).
A contractor providing taxable renovation services
to commercial, industrial, or income-producing real property
purchases architectural services. The purchase of architectural
services by the contractor is not a taxable service and may not
be purchased on resale. The architectural services become an
expense of the contractor and are part of the total service charge
and subject to sales tax.
Subcontractors are responsible for paying tax on the
materials used in performing a subcontract. Subcontractors
may only resell the service portion of their bill. A
subcontractor’s bill to a general contractor should be broken
out into two parts when the general contractor issues a
• Materials consumed, including tax paid on the materials;
• Service charges. Service charges include the markup
on materials, overhead expenses, reimbursed expenses,
If the sale is a taxable service, the general contractor should
charge tax to the property owner on the service portion of
the bill only. See Example 1 in the Appendix.
If the subcontractor break out the charge for
materials from the charge for service, the general contractor
is required to charge sales tax to the property owner on the
entire amount of the subcontractor’s bill.
If the service is performed for an exempt entity, a
contractor as long as the above conditions are met.
22 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
A contractor providing taxable renovation services
to a thrift shop owned by a church purchases the services of
a janitorial company to clean up the job site. Because the
janitorial service is an integral, inseparable component of the
services being sold and is enumerated in Conn. Gen. Stat.
to the janitorial company even though the job will ultimately
be exempt because the renovation services are provided to a
religious organization.
A contractor enters into a construction contract with
building. The contractor obtains personnel from a personnel
agency to provide carpentry services to the new addition.
Because new construction is excluded from taxable services
to existing industrial, commercial, or income-producing real
property under Conn. Gen. Stat. § 12-407(a)(37), the personnel
services do not become an integral, inseparable component of
another taxable service under Conn. Gen. Stat. § 12-407(a)(37).
The contractor is not allowed to purchase personnel services
tax on the personnel services.
Conn. Gen. Stat. § 12-410(5)
2. General Contractor Does Not Issue a
to the subcontractor and it is a taxable transaction, the
subcontractor must charge the general contractor tax on the
service portion of the bill.
The subcontractor is the consumer of the materials used
has two options to choose from when billing the general
contractor.
Option One
The subcontractor breaks the bill into three parts:
• Materials consumed, including tax paid on the materials;
• Service charges. Service charges include markup on
materials, overhead expenses, reimbursed expenses,
• Sales tax on the service portion of the bill.
Option Two
The subcontractor does not break the bill down. Only a total
charge is shown on the bill. The bill includes:
• Materials consumed including tax paid on the materials;
• Service charges. Service charges include markup on
materials, overhead expenses, reimbursed expenses,
• The phrase "sales tax included on services".
Sales tax on the service portion of the bill is calculated by
multiplying the entire service charge by .9403. The result
equals gross receipts from services. Subtract the gross
receipts from services from the entire service charge. The
Example 4 in the
Appendix.
Both methods require the subcontractor to charge sales tax
on the service portion of the contract.
Only the service portion of the general contractor’s bill to
the property owner is subject to tax since the subcontractor
has already charged the general contractor tax on the
subcontractor’s service. See Example 2 in the Appendix.
Temporary Personnel Agency Services
Purchases of temporary personnel agency services are
subject to tax. A contractor may purchase temporary
personnel services on a resale basis, if both of these
conditions are met:
1. The temporary help must be an integral, inseparable
component of the contractor’s service. For example,
carpenters and plumbers are an integral, inseparable
component of the contractor’s service, while secretaries
and bookkeepers are not;
2. The contractor must be performing a service
to real property.
As long as both of the above conditions are met, the
contractor may purchase temporary help on a resale basis.
Temporary help cannot be purchased on a resale basis if the
contract is for new construction because new construction
is not a taxable service to real property. If the service is
issued as long as the above conditions are met.
obtains personnel from a temporary personnel agency to
provide electrical services. Because new construction is
excluded from taxable services to industrial, commercial
or income-producing real property under Conn. Gen. Stat.
§ 12-407(a)(37)(I), the contractor must pay tax on its purchase
of the personnel services, which are enumerated under Conn.
Gen. Stat. § 12-407(a)(37)(C).
A general contractor providing taxable renovation
a temporary personnel agency to provide plumbing services.
Because the plumbing service is an integral, inseparable
component of the general contractor's service being sold and
is enumerated in Conn. Gen. Stat. § 12-407(a)(37), the general
personnel services.
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 23
NONRESIDENT CONTRACTOR REQUIREMENTS
Nonresident contractor means a contractor or subcontractor
who does not maintain a regular place of business in
Connecticut.
Resident contractor means a contractor or subcontractor
who maintains a regular place of business in Connecticut.
Regular place of business means:
•
in Connecticut at which a contractor is doing business
in its own name in a regular and systematic manner;
that is
• A place continuously maintained, occupied, and used
by the contractor in carrying on its business through
its employees regularly in attendance to carry on the
contractor's business in the contractor's own name.
A regular place of business :
• A place of business for a statutory agent for service of
at the site of construction;
• Locations used by the contractor only for the duration
of the contract, such as short-term leased offices,
warehouses, storage facilities, or facilities that do not
•
Veried contractor means a nonresident contractor or
subcontractor who:
• Is registered for all applicable taxes with DRS;
PURCHASING UNDER CONTRACTS
WITH EXEMPT ENTITIES
Purchasing Materials
When a construction contract is with an exempt entity,
the contractor may purchase materials and supplies to be
installed or placed in the project exempt from tax. The
materials and supplies must be installed or placed in the
project and remain in the project after its completion.
To purchase materials and supplies exempt from tax,
the contractor issues a , Contractor’s Exempt
Purchase Certicate, to its vendor. Examples of items likely
to be exempt from these contracts are bathroom partitions,
metal lockers, theater seats, and other items nailed, bolted,
or screwed into the real property, as well as appliances and
remain on the property after the contract is completed.
Upon completion of the project, the contractor must report
and pay use tax on any materials still in inventory that
were purchased exempt from tax. If materials or supplies
are installed or placed in a project for an exempt entity
and the contractor has already paid tax on the materials or
supplies, the purchase price of the materials or supplies may
be deducted on the next return as an adjustment.
Contractors are the consumers of all the tools, supplies
contract. Contractors must pay tax on the purchase of these
items because they do not become incorporated or placed
in the exempt job even if they are used up during the job.
Purchasing Services
When a contractor purchases a service while engaged in a
contract with an exempt organization, the contractor must
determine if the service will be consumed or resold. Do not
assume a contract with an exempt entity means all services
can be bought exempt from tax. Only those services resold
by the contractor can be purchased exempt from tax. To
issued to the service provider. Services described in Conn.
Gen. Stat. § 12-407(a)(37) can be resold if they become
an integral and inseparable component of the service also
enumerated in Conn. Gen. Stat. § 12-407(a)(37) being
sold to the exempt entity. Services consumed by the
contractor cannot be purchased for resale. If the contractor is
purchasing and consuming a taxable service, the contractor
must pay tax to the seller of the service.
A contractor engaged in a contract with an
exempt organization purchases secretarial services to process
are taxable to the contractor because it is a taxable service
and the contractor is consuming them. The services cannot
be purchased on resale because they are not considered an
integral and inseparable component of the building contract
with the exempt entity. However, if a general contractor hires
the plumber because the service is considered to be an integral
and inseparable component of the building contract.
If the contractor is purchasing temporary personnel agency
services, refer to the section on Temporary Personnel
Agency Services on Page 22 to determine if the service can
be purchased on a resale basis.
Conn. Agencies Regs. § 12-408(2);
§ 12-410(5); § 12-411(2)
24 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
CLOSING A BUSINESS
the contractor is out of business and complete the return
to report sales made and taxes due, if any. Enter the last
date of business in the designated space, sign the return,
TSC and
destroy the Sales and Use Tax Permit. If the business is
Sales
and Use Tax Permit and return it in the same envelope with
The business may also have to contact other state agencies,
such as the Secretary of the State, to properly close the
business entity tax or corporation tax accounts. If a business
is not properly closed, future liabilities or obligations may
be assessed.
contractor to hold back a portion of the amount owed
the subcontractor under the contract.
•
surety bond for 5% of the entire project
price with DRS when the contract price for the entire
project is $250,000 or more. A person doing business
a bond with DRS, but is not required to withhold an
amount from payment due to the contractor under the
contract.
• A prime or general contractor must hold back 5% of
subcontractor obtains and furnishes ,
Certicate of Compliance, from DRS. A Form AU-968
authorizes the prime or general contractor to release all
or a portion of the amounts held back from payment to
• Compliance with the provisions of Conn. Gen. Stat.
§ 12-430(7) relieves the person doing business with a
nonresident contractor from liability for the nonresident
contractor’s withholding tax liability or liability for
sales or use tax on materials and consumables. It
does not relieve the person doing business with a
nonresident contractor from liability for sales or use
tax on purchases of services.
Owners or tenants of residential real property are not
required to comply with the nonresident contractor
requirements of Conn. Gen. Stat. § 12-430(7).
See , 2011 Legislative Changes to
the Procedures Governing Nonresident Contractors.
Conn. Gen. Stat. § 12-430(7)
•
• Has no outstanding tax liabilities to DRS;
• Has submitted a , Nonresident Contractor
Request for Veried Contractor Status, and has been
either:
1. Has been registered for all applicable taxes with
DRS for at least three years preceding the contract;
2.
using , Verication Bond.
Unveried contractor means a nonresident contractor or
All contractors, including nonresident contractors, are
required to register with DRS for a Sales and Use Tax
Permit as well as any other required taxes whether they are
, Nonresident Contractor Request for
Veried Contractor Status, and , Verication
Bond.
Bond Requirements of Nonresident
Contractors
Nonresident construction contractors are required to furnish
security for Connecticut taxes arising from jobs performed
in Connecticut.
• There are two classes of nonresident contractors:
veried and unveried. A nonresident prime or general
thus eliminate the requirement for the prime or general
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 25
The DeTails
26 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
AIR CONDITIONING
( Central Air Conditioning Ventilation Systems)
ALARM SYSTEMS AND CLOSED
CIRCUIT TELEVISION SYSTEMS (CCTV)
Permanent Installation
means the wire, keypads, or control
boards and sensor devices are built into the real property.
The contractor pays tax on all purchases of
materials that become part of the alarm system including:
Horn or siren Smoke or re detectors
Keypad Wire
Motion detectors Monitors
The contractor does collect tax when the alarm
system is permanently installed in:
• New construction
• Owner-occupied residential property
The contractor tax when the alarm system is
permanently installed in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Repairs and Maintenance
The contractor tax on:
• The sale or renewal of a repair, maintenance, or
warranty contract on the alarm or CCTV system;
• Repairs or maintenance of the alarm or CCTV system,
except when performed under a repair or maintenance
contract and no additional charge is made for the repair.
The bill to the customer should be broken down into two
components:
• Integral parts
• Labor
The total bill is subject to tax when the service is performed
on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Integral Parts
The contractor performing repair or maintenance services
can purchase integral parts for the alarm or CCTV system
without paying sales tax to the vendor by issuing a resale
Integral parts purchased for use in performing services under
a maintenance, repair, or warranty contract are not subject to
tax unless a charge for the parts is made by the contractor to
Repair
or Maintenance of Tangible Personal Property (Units) on
Page 11. Also see Warranty Contracts on Page 11 for more
information on warranty contracts.
Monitoring Services
Tax on the sale of a monitoring contract.
See Conn. Agencies Regs. §§ 12-407(2)(i)(DD)-1, Repair
or maintenance services to tangible personal property
and contracts of maintenance, repair or warranty and
12-426-27(b)(5), Private investigation, protection, patrol,
watchman and armored car services.
ANTENNAS AND COMMUNICATIONS
TOWERS
Communications towers typically are tall steel structures
mounted on concrete pads on the ground and secured to
the ground with guy wires. There may also be buildings
constructed at the tower sites. Tower owners may grant
wireless communications companies the right to attach
their equipment to the towers and install equipment in the
buildings for a monthly fee. The towers are expected to
removing them and because of considerations involved
in Federal Communications Commission licensing,
contractual arrangements with communications companies,
and zoning approvals.
The towers and buildings are real property, not tangible
personal property. As such, payments for the right to attach
equipment to the towers are not the sale or lease of tangible
personal property and, therefore, are not taxable. Services
performed on the towers themselves or the buildings
around them are services to commercial, industrial, or
income-producing real property. However, services
performed on the equipment attached to the towers or
placed in the buildings are maintenance or repair services
to tangible personal property.
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 27
Installation of and Services to Communications
Towers
The contractor pays tax on all purchases of
materials that become part of the communications tower
including, but not limited to:
girders guy wires concrete
The contractor does collect tax when performing
services to:
• New construction
The contractor tax when performing services
to:
• Existing communications towers
Installation of Equipment on Communications
Towers
The contractor does collect tax on separately
stated installation labor when installing the equipment on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Repair or Maintenance of Equipment Installed
on Communications Towers
The contractor tax on:
• The sale or renewal of a repair, maintenance, or
warranty contract on the equipment;
• Repairs to or maintenance of the equipment, except
when performed under a repair or maintenance contract
and no additional charge is made for the repair.
The bill to the customer should be broken down into two
components:
• Integral parts
• Labor
The total bill is subject to tax when (except when the
service is performed under a warranty contract) the service
is performed on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Integral Parts
The contractor performing repair or maintenance services
can purchase integral parts for the equipment without paying
Integral parts purchased for use in performing services
under a are not
subject to tax unless a charge for the parts is made by the
see Repair or Maintenance of Tangible Personal Property
(Units) on Page 18. Also see Warranty Contracts on Page 18
for more information on warranty contracts.
See Conn. Agencies Regs. § 12-407(2)(i)(DD)-1, Repair
or maintenance services to tangible personal property and
contracts of maintenance, repair or warranty.
APPLIANCES
( Kitchens Telephone, Audio-Visual, and Computer
Cable or Wiring)
APPRAISAL, REAL ESTATE
Real estate appraisal services are subject to sales and
use taxes.
ARCHITECTURAL SERVICES
In general, architectural services are not subject to sales
and use taxes. When a contractor purchases architectural
services, the contractor is purchasing a nontaxable service.
However, if the contractor bills the property owner for the
architectural services consumed as a reimbursed expense,
the architectural services become part of the gross receipts
for the contractor’s labor. Therefore, for example, if the
contractor is providing taxable renovation services to
commercial, industrial, or income-producing property,
the total service charge, including the reimbursement for
architectural services, is subject to sales tax. See Example 2
on Page 21.
AUDIO-VISUAL CABLE OR WIRING
( Telephone, Audio-Visual, and Computer Cable or
Wiring)
28 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
AWNINGS
( Standard Units of Equipment)
Installations
A retailer of awnings is selling tangible personal property.
The retailer of awnings can purchase the awnings without
awnings must collect tax on the sale of the awnings.
Separately stated charges for installing the awnings are not
subject to tax when the awnings are placed on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Repair or Maintenance Services to Awnings
Removed From a Building or Structure
Repair or maintenance services, such as removal, repair,
cleaning, and reinstallation, whether or not separately stated,
performed on an awning that has been removed from a
building or structure are considered repair or maintenance
services to tangible personal property. The service provider
must collect tax on the total charge for repair or maintenance
services. However, the removal or reinstallation of awnings
not related to repair or maintenance services of awnings
are not taxable.
Maintenance Services to Awnings Attached to
a Building or Structure
Maintenance services performed on an awning that
remains attached to a building or structure are considered
maintenance services to real property. The service provider
must collect tax when performing maintenance services to:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
The maintenance service provider pays tax on the
purchase of materials and supplies used in performing the
maintenance service. The maintenance service provider is
the consumer of these materials and supplies.
Integral Parts
The contractor performing repair or maintenance services
can purchase integral parts without paying sales tax to the
Integral parts purchased for use in performing services
under a are not
subject to tax unless a charge for the parts is made by the
see Repair or Maintenance of Tangible Personal Property
(Units) on Page 11. Also see Warranty Contracts on Page 11
for more information on warranty contracts.
BATHROOMS
( Standard Units of Equipment)
Installation
The contractor pays tax on all purchases of
materials including, but not limited to:
cabinets* tile
counter tops toilets
exhaust fans tubs
faucets tub or shower enclosures
mirrors vanities
shower heads whirlpool tubs
sinks
* Contractors installing cabinets should review
, Fabrication and Installation of Stock
and Custom Cabinets, to determine the proper tax
treatment.
The contractor does collect tax when installing
the items above in:
• New construction
• Owner-occupied residential property
The contractor tax when installing the above
items in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 29
BRICKWORK/STONEWORK
1. Related to the Structure Installation
The contractor pays tax on all purchases of
materials for the construction of chimneys, interior, and
but not limited to:
bricks stone cement
stone dust mortar
The contractor does collect tax when installing
the items above in:
• New construction
• Owner-occupied residential property
The contractor tax when installing the items
above in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Taxation of the services of waterproofing, repairing,
rules for installation.
Brick washing is a maintenance service to real property.
See Maintenance Services to Real Property.
2. Related to landscaping, such as the
installation of walkways, walls, and patios
(other than asphalt, tar, macadam, or poured
concrete)
The contractor purchases all the materials
including, but not limited to brick, stone, mortar, and stone
dust that will be physically incorporated into the project
the vendor.
The contractor tax on the labor and
materials to install when the service is performed on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
See also Landscaping and Horticulture Services,
Maintenance Services to Real Property, and Painting,
Staining, Varnishing, and Waterproong.
BUILDING ENGINEERING, BUILDING
PLANNING OR DESIGN SERVICES
In general, building engineering and building planning or
design services are not subject to sales and use taxes. When
a contractor purchases any of these services, the contractor is
purchasing a nontaxable service. However, if the contractor
bills the property owner for the building engineering
and building planning or design services consumed as a
reimbursed expense, those services become part of the gross
receipts for the contractor’s labor. Therefore, for example,
if the contractor is providing taxable renovation services
to commercial, industrial, or income-producing property,
the total service charge, including the reimbursement
for building engineering and building planning or design
services, is subject to sales tax. See Example 2 on Page 21.
CABINETS
( Bathrooms, Kitchens, Standard Units of
Equipment)
CARPENTRY
The contractor pays sales or use tax on all
purchases of materials including, but not limited to lumber
and building supplies.
The contractor does collect tax when performing
carpentry services to:
• New construction
• Owner-occupied residential property
The contractor tax when performing carpentry
services to:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
CARPET CLEANING
( Janitorial Services)
CARPETING
( Floor Coverings)
30 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
CENTRAL AIR CONDITIONING
Installation
The contractor pays tax on all purchases of
materials that become part of the central air conditioning
system including, but not limited to:
blowers central air conditioning units
duct work control devices
The contractor does collect tax when installing
the central air conditioning system in:
• New construction
• Owner-occupied residential property
The contractor tax when installing the central
air conditioning system in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Repairs and Maintenance (excluding duct
work)
The contractor tax on:
• The sale or renewal of a repair, maintenance, or
warranty contract on the air conditioning unit;
• Repairs to or maintenance of the air conditioning unit
except when performed under a service contract and no
additional charge is made for the repair.
The bill to the customer should be broken down into two
components:
• Integral parts
• Labor
The total bill is subject to tax when the service is performed
on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Integral Parts
The contractor performing repair or maintenance services
can purchase integral parts for the air conditioning system
without paying sales tax to the vendor by issuing a resale
These parts include, but are not limited to:
blowers excess moisture drains
coils fans
compressors lters
condenser coils refrigerant
control devices refrigerant tubes
Integral parts purchased for use in performing services
under a are not
subject to tax unless a charge for the parts is made by the
see Repair or Maintenance of Tangible Personal Property
(Units) on Page 11. Also see Warranty Contracts on Page 11
for more information on warranty contracts.
See the Interior Sheet Metal section of this guide for tax
treatment of the cleaning and maintenance of interior duct
work.
See Conn. Agencies Regs. § 12-407(2)(i)(DD)-1, Repair
or maintenance services to tangible personal property
and contracts of maintenance, repair or warranty, and
Conn. Agencies Regs. § 12-407(2)(i)(Q)-1, Electrical and
electronic repair services.
CENTRAL VACUUM SYSTEMS
Installation
The contractor pays tax on all purchases of
materials that become part of the central vacuum system
including, but not limited to:
vacuum units wall outlets
pipe control devices
tubing
The contractor does collect tax when installing
the central vacuum system in:
• New construction
• Owner-occupied residential property
The contractor tax when installing the central
vacuum system in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 31
Repairs and Maintenance
The contractor tax on:
• The sale or renewal of a repair, maintenance, or
warranty contract on the central vacuum unit;
• Repairs to or maintenance of the central vacuum unit
except when performed under a service contract and no
additional charge is made for the repair.
The bill to the customer should be broken down into two
components:
• Integral parts
• Labor
The total bill is subject to tax when the service is performed
on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Integral Parts
The contractor performing repair or maintenance services
can purchase integral parts for the central vacuum system
without paying sales tax to the vendor by issuing a resale
Integral parts purchased for use in performing services
under a may be
purchased on resale and are not subject to tax unless a charge
for the parts is made by the contractor to the customer. For
Repair or Maintenance
of Tangible Personal Property (Units) on Page 11. Also see
Warranty Contracts on Page 11 for more information on
warranty contracts.
The repair, cleaning, and maintenance of the interior piping
of the system follows the taxation rules for installation of
a system.
See Conn. Agencies Regs. § 12-407(2)(i)(DD)-1, Repair
or maintenance services to tangible personal property
and contracts of maintenance, repair or warranty, and
Conn. Agencies Regs. § 12-407(2)(i)(Q)-1, Electrical and
electronic repair services.
CHIMNEYS
Installation and Repairs
The contractor pays tax on all purchases of
materials including, but not limited to:
bricks ues
caps pots
cement rain and draft deectors
ashing stone
The contractor does collect tax when installing
items in:
• New construction
• Owner-occupied residential property
The contractor tax when installing or repairing
the above items in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
See the Exterior Sheet Metal Work section of this guide for
CHIMNEY CLEANING
Chimney cleaning is a maintenance service. The contractor
pays tax on the purchase of all cleaning supplies. The
contractor tax on the total charge for chimney
cleaning when the service is performed on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
CLEAN ROOMS/HVAC SYSTEMS
( Heating Systems Ventilation Systems)
This section covers the construction of clean rooms
(enclosed, environmentally controlled areas) and the
installation of systems used to regulate the temperature,
humidity, and contamination of the rooms by heating,
ventilation, and air conditioning (HVAC) contractors.
32 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
For transactions where a contractor is purchasing
exempt property for use by an exempt user, refer to
, Purchases of Tangible Personal
Property by Contractors for Construction Contracts with
Qualied Entities.
The taxability of the construction of clean
rooms is controlled by Conn. Agencies Regs. § 12-426-18.
Consequently, contractors pay the tax as a consumer on the
purchase or lease of all materials, supplies, or equipment
Contractors may make purchases of component parts for
assembly of machinery exempt from sales and use taxes
under Conn. Gen. Stat. § 12-412(73) when the clean room is
part of a manufacturing process. Clean room machinery may
systems. Clean room machinery does not include the walls,
The contractor does collect tax on the
construction of clean rooms that are part of:
• New construction
The contractor tax when constructing clean
rooms that are in:
• Existing commercial real property
• Existing industrial real property
• Existing income-producing real property
Repair or Maintenance
A contractor repairing or maintaining HVAC units is
performing taxable maintenance and repair services on
tangible personal property. Sales of items of tangible
personal property to contractors performing the service are
of integral part, see Repair or Maintenance of Tangible
Personal Property (Units) on Page 11.
A contractor that both installs and repairs or maintains
HVAC systems used in clean rooms may purchase items of
that can be used in both installation and repair,
such as wiring or piping, on a resale basis. If the item is
used for installation, the contractor must self assess use
tax on the purchase price of the item. If the item is used
for repair purposes, the contractor must collect tax from its
purchase items that can only be used in an installation, such
as ventilation units, etc.
See Conn. Agencies Regs. § 12-407(2)(i)(DD)-1, Repair
or maintenance services to tangible personal property
and contracts of maintenance, repair or warranty, and
Conn. Agencies Regs. § 12-407(2)(i)(Q)-1, Electrical and
electronic repair services.
COMPUTER CABLE OR WIRING
( Telephone, Audio-Visual, and Computer Cable or
Wiring)
DECKS
The contractor pays tax on all purchases of
materials including, but not limited to lumber and building
supplies.
The contractor does collect tax when performing
carpentry services to:
• New construction
• Owner-occupied residential property
The contractor tax when performing carpentry
services to:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Site improvements that put the property to a new use are
new construction (see Page 14). For example, the owner of
an existing apartment complex contracts with a carpenter
to build a wooden deck on the back of each unit. Prior to
this contract there were never any decks attached to this
building. This contract is a new construction contract.
For the repair of decks at a condominium complex, see
Condominiums on Page 16.
DEMOLITION
The contractor pays tax on all materials
consumed, such as explosives and blasting supplies, in
providing demolition services.
The contractor does collect tax when demolition
services are performed on:
• New construction
• Owner-occupied residential property
The contractor tax when demolition services
are performed on:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
As long as the demolition is part of the contract for a new
construction project, the demolition service is not subject
to tax.
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 33
DREDGING
Dredging services are performed to create or maintain
a certain depth in bodies of water. Dredging includes
excavation of earth to reach the water line and removal of
excavated or dredged material. Dredging does not include
services provided to piers or docks.
Dredging of Publicly Owned Navigable Waters
Dredging in, adjacent to, or to create access to publicly
owned navigable waterways, such as Long Island Sound,
lakes, rivers, streams, or wetlands, is not taxable. This
includes dredging to create or maintain areas such as
harbors, channels, marinas, and ports that are in, adjacent
to, or that lead to navigable bodies of water, whether or not
dredged areas are privately owned, and regardless of the
purpose of the dredging. Publicly owned means owned by
the federal government, a state, or a political subdivision
of a state.
Dredging of Privately Owned Ponds, Lakes,
Streams, or Inland Wetlands
Dredging to reconstruct, remodel, or repair privately owned
ponds and dredging of existing privately owned ponds,
lakes, streams, or inland wetlands are taxable services,
except when performed adjacent to, or to create access to
publicly owned navigable waterways as described above.
Dredging performed to construct, remodel, or repair
privately owned ponds is taxable as a landscaping service.
Dredging of existing privately owned ponds, lakes, streams,
or inland wetlands are taxable maintenance services even
if the body of water is navigable. These dredging services
are taxable when performed on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
See Conn. Agencies Regs. § 12-407(2)(i)(X)-1, Maintenance
services, and § 12-407(2)(i)(V)-1, Landscaping and
horticulture services, for related information.
DRIVEWAYS, PARKING LOTS, AND
WALKWAYS
(
Paving)
(
Landscaping and Horticulture Services)
DUCT WORK
( Interior Sheet Metal Ventilation Systems)
ELECTRICAL
(Complete wiring or rewiring of structures or the
upgrading of the electrical service of a structure)
The contractor pays tax on all purchases of
materials including, but not limited to:
circuit breakers main power boxes
outlets receptacles
switches wall boxes
wall xtures wiring
door bells, buzzers, and chimes
The contractor does collect tax when installing
the above items in:
• New construction
• Owner-occupied residential property
The contractor tax when installing the above
items in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
ELECTRICAL DEVICES
Repairs and Maintenance
Repairing electrical or electronic devices and repair or
maintenance services to any item of tangible personal
property including, but not limited to central air conditioning
units, central vacuum units, refrigeration units, modular
lighting units, pumps, and alarm systems.
The contractor tax for:
• The sale or renewal of a repair, maintenance, or
warranty contract on any item of tangible personal
property or electrical or electronic devices;
• Repairs to or maintenance of tangible personal
property or electrical or electronic devices except when
performed under a service contract and no additional
charge is made for the repair.
34 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
The bill to the customer should be broken down into two
components:
• Integral parts
• Labor
The total bill is subject to tax when the service is performed
on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Integral Parts
The contractor performing repair or maintenance services
can purchase integral parts for electrical devices without
Integral parts purchased for use in performing services
under a are not
subject to tax unless a charge for the parts is made by the
see Repair or Maintenance of Tangible Personal Property
(Units) on Page 11. Also see Warranty Contracts on Page 11
for more information on warranty contracts.
See Conn. Agencies Regs. § 12-407(2)(i)(DD)-1, Repair
or maintenance services to tangible personal property
and contracts of maintenance, repair or warranty, and
Conn. Agencies Regs. § 12-407(2)(i)(Q)-1, Electrical and
electronic repair services.
ELEVATORS AND ESCALATORS
( Inclined Stairway Chairlifts)
Installation
The contractor pays tax on all purchases of
materials including, but not limited to:
motors staircases
cables elevator cars
control panels
The contractor does collect tax when installing
an elevator or escalator in:
• New construction
• Owner-occupied residential property
The contractor tax when installing an elevator
or escalator in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Repairs and Maintenance
The contractor tax on:
• The sale or renewal of a repair, maintenance, or warranty
contract on the elevator or escalator motor;
• Repairs to or maintenance of the elevator or escalator
motor except when performed under a service contract
and no additional charge is made for the repair.
The bill to the customer should be broken down into two
components:
• Integral parts
• Labor
The total bill is subject to tax when the service is performed on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Integral Parts
The contractor performing repair or maintenance services
can purchase integral parts for elevators or escalators
without paying sales tax to the vendor by issuing a resale
Integral parts purchased for use in performing services
under a are not
subject to tax unless a charge for the parts is made by the
see Repair or Maintenance of Tangible Personal Property
(Units) on Page 11. Also see Warranty Contracts on Page 11
for more information on warranty contracts.
Taxation of the repairs to or maintenance of the elevator
shaft or box, or the escalator stairs follows the tax rules for
the installation of elevators and escalators.
See Conn. Agencies Regs. § 12-407(2)(i)(DD)-1, Repair
or maintenance services to tangible personal property
and contracts of maintenance, repair or warranty, and
Conn. Agencies Regs. § 12-407(2)(i)(Q)-1, Electrical and
electronic repair services.
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 35
ENERGY AUDITS
Energy audits, usually performed for utility companies
to foster energy conservation and reduce energy costs to
customers, are services to real property.
The energy audit contractor must pay tax on
all purchases of materials consumed in performing energy
audits. However, if the energy audit contractor separately
states charges to the utility company or utility company
customers for materials such as shower heads, weather
stripping, and insulation, it may purchase the items on resale
and must collect tax on the items.
The energy audit contractor does collect tax
when the audit is conducted on:
• New construction
• Owner-occupied residential property
The energy audit contractor tax to the utility
company or utility company customer when the audit is
conducted on:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
ENERGY EFFICIENT HEATING,
COOLING, AND GENERATING SYSTEMS
There is an exemption from Connecticut sales and use taxes
for sales of solar energy electricity generating systems,
passive or active solar water or space heating systems,
and geothermal resource systems. The exemption includes
equipment related to the systems mentioned above and
sales of services relating to the installation of the systems.
There is also an exemption for sales of ice storage systems
used for cooling by a utility ratepayer who is billed by
the utility company on a time-of-service metering basis.
Additionally, this exemption includes equipment related
to ice storage systems and sales of services related to the
installation of the systems.
See , 2007 Legislation Granting a
Connecticut Sales and Use Tax Exemption for Sales of Solar
Heating Systems, Solar Electricity Generating Systems, and
Ice Storage Cooling Systems.
ENVIRONMENTAL SERVICES
Services performed in the voluntary or involuntary
evaluation, prevention, treatment, containment or removal of
hazardous waste or other contaminants of air, water or soil
are included as taxable services to industrial, commercial or
income-producing real property. Such services are nontaxable
when performed on residential real property. See
, Certain Environmental Services Excluded
from Sales and Use Taxes
of hazardous waste and other contaminants that remain
applicable.
The environmental services contractor does
collect tax when the service is performed on:
• New construction
• Owner-occupied residential property
The environmental services contractor tax to
the customer when the services are performed on:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Environmental consulting services are not taxable, as long
as the charge for such services is separately stated from
taxable charges.
EXCAVATING, GRADING, AND LAND
CLEARING
1. Not Related to Landscaping
The contractor does collect tax when performing these
services on:
• New construction
• Owner-occupied residential property
The contractor tax when performing these
services on:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
36 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
2. Related to Landscaping
These services are subject to tax when performed on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
See Landscaping and Horticulture Services and Landscape
Architectural Services, for related information.
EXTERIOR SHEET METAL WORK
( Gutters)
Installation and Repair
The contractor pays tax on the purchase of
materials including, but not limited to:
ashing metal downspouts metal gutters
The contractor does collect tax when installing
or repairing exterior sheet metal work in:
• New construction
• Owner-occupied residential property
The contractor tax when installing or repairing
exterior sheet metal work in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
See Conn. Agencies Regs. § 12-407(2)(i)(I)-1, Services to
industrial, commercial or income-producing real property,
for related information.
EXTERMINATING
Exterminating services mean services to kill or expel pests.
The exterminator pay tax on all purchases
of equipment and supplies including, but not limited to
poisons and traps.
The exterminator tax on the customer’s
total bill when the service is performed on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
The service of live trapping a pest and releasing it is a
taxable service.
See Conn. Agencies Regs. § 12-407(2)(i)(Z)-1,
Exterminating Services, for related information.
FENCING
( Landscaping and Horticulture Services, Silt
Fencing Underground Pet Barrier Systems)
The contractor pays tax on all purchases of
materials that become part of the fence.
Except as discussed below, the contractor
tax when installing the fence on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
The installation of any chainlink fencing and the installation
of any fencing used to contain livestock on a farm are not
considered landscaping services. The installation of any
chainlink fencing and any fencing used to contain livestock
on a farm is taxable as a service to real property under Conn.
Gen. Stat. § 12-407(a)(37)(I) when performed on existing
industrial, commercial, or income-producing real property.
The construction, remodeling, or repair of fences is
presumed to be a taxable landscaping service until the
contrary is established. This presumption may be rebutted
if it is clearly established that the services performed are not
intended to be landscaping services, such as when an action
is mandated by statute. For example, a contractor installing
a fence that encloses a swimming pool and that is installed
to comply with a law requiring that swimming pools be
enclosed may establish that the services performed are not
intended to be landscaping services. When the services are
not considered to be landscaping services, they are treated
as services to real property.
The following information applies to the construction,
remodeling and repair of fences when they are services
to real property and not considered landscaping services.
The contractor pays tax on all purchases of
materials that become part of the fence.
The contractor does collect tax when installing
a fence on:
• New construction
• Owner occupied residential property
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 37
The contractor tax when installing the fence
on:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
FIRE, WATER, AND WIND DAMAGE
(Cleaning, deodorizing, and removal of water or debris)
The contractor tax on the total bill when this
service is performed on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
For rehabilitation of the structure, see Carpentry, Roong,
Painting, etc. For tree trimming or removal, see Landscaping
and Horticulture Services.
See Conn. Agencies Regs. § 12-407(2)(i)(Y)-1, Janitorial
Services, for related information.
FIREPLACES
Installation or Repair
The contractor pays tax on all purchases of
materials including, but not limited to:
bricks lintels dampers
mantels reboxes stone
ues
The contractor does collect tax when installing,
• New construction
• Owner-occupied residential property
The contractor tax when installing, repairing,
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Chimneys.
FLOOR COVERINGS
1. Carpet
Permanent Installation
tiles)
Wall-to-wall and other carpet installations are generally
services to real property. If the carpet is glued or cemented
structure and is a service to real property.
The contractor must pay tax on the purchase of
collect tax when
permanently installing carpeting in:
• New construction
• Owner-occupied residential property
The contractor tax when permanently installing
the carpet in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Nonpermanent Installation
(Tacked or nailed to the oor)
installation of carpet and is not a service to real property.
The installer is considered a retailer of carpet
and purchases the carpet without payment of tax by issuing
on the sale to the end customer.
The contractor does collect tax on separately
stated nonpermanent installation labor in:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
2. Floating Floors
Nonpermanent Installation
The installation of floating floors is nonpermanent
38 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
The installer is considered a retailer of the
collects tax on the sale to the end customer.
The contractor does collect tax on separately
stated nonpermanent installation labor in:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
3. Floor Coverings Other Than Carpet and
Floating Floors
These services are a service to real property and also include
all necessary surface and other preparations prior to the
actual installation.
The contractor pays tax on all purchases of
materials including, but not limited to:
ceramic tile marble vinyl
concrete terrazzo wood
linoleum
The contractor does collect tax when installing
• New construction
• Owner-occupied residential property
The contractor tax when installing these types
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Other Separately Stated Labor Charges
Other types of separately stated labor charges that may
appear on the customer's invoice in connection with the
include labor to move furniture, labor to rip up the old carpet,
and disposal of the old carpet. When separately stated, the
charges for labor to move furniture are not subject to sales
and use taxes. However, the separately stated charges for
labor to rip up and discard the old carpet are treated as
charges for refuse removal. Refuse removal services are
not subject to tax when performed on new construction
or owner-occupied residential property. Refuse removal
services performed on existing commercial, industrial, or
income-producing real property are subject to tax.
Cutting and binding services performed on carpet remnants
that will be sold as tangible personal property are taxable as
fabrication labor. See Conn. Gen. Stat. § 12-407(a)(2)(G).
FLOOR REFINISHING
Floor renishing usually involves the following services
The contractor pays tax on purchases of all
The contractor does
• Owner-occupied residential property
The contractor
• Existing commercial property
• Existing industrial property
• Existing income-producing property
FURNACES
( Heating Systems)
GARAGE DOORS
Installation and Repairs
The contractor pays tax on all materials
purchased for installing, replacing, or repairing the garage
door including, but not limited to:
garage doors rollers tracks
trim springs sensors
The contractor does collect tax when installing,
replacing, or repairing a garage door in:
• New construction
• Owner-occupied residential property
The contractor tax when installing, replacing,
or repairing a garage door in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 39
GARAGE DOOR OPENERS
Installation
The contractor must pay tax on the purchase of
the electric garage door opener and controls (as a consumer).
If the contractor is a retailer of electric garage door openers,
the contractor may purchase the opener and controls exempt
on the sale to the end customer.
The contractor does collect tax on separately
stated labor for installing the electric garage door opener in:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Repairs and Maintenance
The contractor tax on:
• The sale or renewal of a repair, maintenance or warranty
contract on an electric garage door opener;
• Repairs to or maintenance of electric garage door
openers except when performed under a service contract
and no additional charge is made for the repair.
The bill to the customer should be broken down into two
components:
• Integral parts
• Labor
The total bill is subject to tax when the service is performed on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Integral Parts
The contractor performing repair or maintenance services
can purchase integral parts for the electric garage door
openers without paying sales tax to the vendor by issuing
Integral parts purchased for use in performing services
under a are not
subject to tax unless a charge for the parts is made by the
see Repair or Maintenance of Tangible Personal Property
(Units) on Page 11. Also see Warranty Contracts on Page 11
for more information on warranty contracts.
See Conn. Agencies Regs. § 12-407(2)(i)(DD)-1, Repair
or maintenance services to tangible personal property
and contracts of maintenance, repair or warranty, and
Conn. Agencies Regs. § 12-407(2)(i)(Q)-1, Electrical and
electronic repair services.
GARBAGE DISPOSALS
Installation
The contractor pays tax on purchases of all
materials incorporated into the garbage disposal system.
The contractor does collect tax when installing
the garbage disposal in:
• New construction
• Owner-occupied residential property
The contractor tax when installing the garbage
disposal in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Repairs and Maintenance
The contractor tax on:
• The sale or renewal of a repair, maintenance, or warranty
contract on a garbage disposal unit;
• Repair or maintenance of the garbage disposal, except
when performed under a service contract and no
additional charge is made for the repair.
The bill to the customer should be broken down into two
components:
• Integral parts
• Labor
The total bill is subject to tax when the repair is performed on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
40 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
Integral Parts
The contractor performing repair or maintenance services
can purchase integral parts for the garbage disposal without
Integral parts purchased for use in performing services
under a are not
subject to tax unless a charge for the parts is made by the
see Repair or Maintenance of Tangible Personal Property
(Units) on Page 11. Also see Warranty Contracts on Page 11
for more information on warranty contracts.
See Conn. Agencies Regs. § 12-407(2)(i)(DD)-1, Repair
or maintenance services to tangible personal property
and contracts of maintenance, repair or warranty, and
Conn. Agencies Regs. § 12-407(2)(i)(Q)-1, Electrical and
electronic repair services.
GAZEBOS
( Sheds and Gazebos)
GUTTERS
( Exterior Sheet Metal Work Maintenance
Services to Real Property)
The contractor pays tax on purchases of all
materials.
The contractor does collect tax when installing
the gutters in:
• New construction
• Owner-occupied residential property
The contractor tax when installing the gutters
in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
The cleaning of gutters and downspouts is taxable as a
maintenance service to real property.
HATCHWAYS
( Standard Units of Equipment)
HAZARDOUS WASTE AND OTHER
CONTAMINANTS OF AIR, WATER OR
SOIL
( Environmental Services)
HEATING SYSTEMS
( Clean Rooms/HVAC Systems)
Installation
Heating systems include but are not limited to:
gas heating systems heat pump units
hot water heating systems oil heating systems
radiant heating systems solar heating systems
steam heating systems warm air duct systems
coal burning heating systems
electric heating systems (permanently installed)
humidiers (permanently installed)
wood burning furnaces (permanently installed)
The contractor pays tax on all purchases of
materials that become part of the heating system including,
but not limited to:
furnace fuel lines
duct work above ground oil tanks
blowers thermostats
control devices hot water heaters
humidiers (permanently installed)
The heating contractor does collect tax when
installing the heating system in:
• New construction
• Owner-occupied residential property
The heating contractor tax when installing the
heating system in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Repairs and Maintenance (Excluding duct
work)
The contractor tax on:
• The sale or renewal of a repair, maintenance, or
warranty contract on the heating system;
• Repairs to or maintenance of furnaces, oil burners
and blowers, except when performed under a service
contract and there is no additional charge for the repair.
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 41
The bill to the customer should be broken down into two
components:
• Integral parts
• Labor
The total bill for cleaning, maintenance, and repairs to
the heating system is subject to tax when the service is
performed on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
A service charge to diagnose a problem with a heating
system is a taxable maintenance and repair service to
tangible personal property.
Integral Parts
The contractor performing repair or maintenance services
can purchase integral parts for the furnace, oil burner, and
blower without paying sales tax to the vendor by issuing a
Integral parts purchased for use in performing services
under a are not
subject to tax unless a charge for the parts is made by the
see Repair or Maintenance of Tangible Personal Property
(Units) on Page 11. Also see Warranty Contracts on Page 11
for more information on warranty contracts.
For the tax treatment of the cleaning and maintenance of
the interior duct work, see the Interior Sheet Metal section
of this guide.
See also Energy Ecient Heating, Cooling and Generating
Systems for information about an exemption from sales and
use taxes for solar energy electricity generating systems,
passive or active solar water or space heating systems,
geothermal resource systems, and ice storage systems used
for cooling.
See Conn. Agencies Regs. § 12-407(2)(i)(DD)-1, Repair
or maintenance services to tangible personal property
and contracts of maintenance, repair or warranty, and
Conn. Agencies Regs. § 12-407(2)(i)(Q)-1, Electrical and
electronic repair services.
HOME ENTERTAINMENT/HOME
THEATER SYSTEMS
For services provided by a contractor, see Telephone,
Audio-Visual, Electrical, and Computer Cable or Wiring.
Components and Materials
Installation provided as part of the sale
When a retailer of televisions, audio equipment, and home
entertainment/theater systems sells the components and
also agrees to install those components into the customer’s
home or business, the retailer must collect sales tax on the
sale price of the components, including any delivery fees.
Installation Labor
The separately stated charges for the nonpermanent
installation labor and charges for connecting the individual
components are not subject to tax. However, charges for
any television calibration services are taxable whether
performed as part of the original setup and installation or
performed by a third party vendor.
Permanent Installation
If any of the wiring for the components or the sound system
will be permanently installed into the property where the
wire will be run behind walls, above the ceiling, or below
to real property.
The retailer does collect tax when performing permanent
installation services to:
• New construction
• Owner-occupied residential property
The retailer tax when performing permanent
installation services to:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
HOT TUBS, SPAS, AND SAUNAS
Installation of Stand-Alone Hot Tubs and Spas
Stand-alone hot tubs and spas include, but are not limited
to portable hot tubs and spas, move and plug-in hot tubs
and spas, and hot tubs and spas not permanently installed
into real property. The installation of a stand-alone hot tub
and spa is not a service to real property because the hot tub
and spa is considered to be tangible personal property and
follows the rules for installation labor for tangible personal
property. The installer is considered a retailer of hot tubs
42 IP 2018(2), Building Contractors' Guide to Sales and Use Taxes
and spas and purchases all materials exempt by issuing a
collects tax on the sale to the end customer.
The contractor does collect tax on separately
stated installation labor when installing the hot tub and
spa on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
There are stand-alone hot tubs and spas that require the
installation of a concrete pad, an electrical circuit, and a
gas line if the heater is to be fueled by gas. The installation
of these three items is a service to real property.
The contractor does collect tax on separately
stated installation labor when installing the concrete pad,
electrical circuit, and gas line in:
• New construction
• Owner-occupied residential property
The contractor tax when installing the concrete
pad, electrical circuit, and gas line in:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Repairs to Stand-Alone Hot Tubs and Spas
Repairs include, but are not limited to replacing a cover
or repairing the vinyl or wood frame of the hot tub or spa.
The hot tub and spa contractor performing repair or
maintenance services can purchase integral parts for the
stand-alone hot tub and spa without paying sales tax to the
The bill to the customer should be broken down into two
components:
• Integral parts
• Labor
The total bill is subject to tax when the stand-alone hot tub
and spa repair is performed on:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Installation of Built-in Hot Tubs and Spas
The contractor pays tax on all purchases of
materials incorporated into the built-in hot tub and spa
including, but not limited to:
built-in lights lumber
cement pipes
lters pumps
heaters hot tub and spa kits
gravel tile
liners valves
The contractor does collect tax when
constructing the original built-in hot tub and spa in:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
The installation of a built-in hot tub and spa is considered a
use. Therefore, the original construction of a built-in hot
tub and spa, where a built-in hot tub and spa never existed
before, is considered a new construction contract.
Repairs to and Replacement of Built-In Hot
Tubs and Spas
The replacement of an existing built-in hot tub and spa is
not considered a site improvement and, therefore, follows
the rules for repairing a built-in hot tub and spa.
Repairs to built-in hot tubs and spas include, but are not
tiles, replacing or patching cracked linings, and replacing
The contractor pays tax on all purchases of
materials used in repairing the built-in hot tub and spa
including, but not limited to:
cement tile vinyl lining
The contractor does collect tax when repairing
or renovating a built-in hot tub and spa built on:
• Owner-occupied residential property
The contractor tax when repairing or
renovating a built-in hot tub and spa built on:
• Existing commercial property
• Existing industrial property
• Existing income-producing property
IP 2018(2), Building Contractors' Guide to Sales and Use Taxes 43
Cleaning and Maintenance to Both Stand-
Alone and Built-In Hot Tubs and Spas
The hot tub and spa cleaning and maintenance
contractor pays tax on all purchases of materials used in
cleaning or maintaining hot tubs and spas.
The contractor tax when performing
hot tub and spa cleaning and maintenance services to:
• New construction
• Owner-occupied residential property
• Existing commercial property
• Existing industrial property
• Existing income-producing property
Repairs to Hot Tub and Spa Filters, Heaters
and Pumps
The contractor tax on: