BUILDING CONTRACTORS’ - Connecticut

1 IP 2006 (35)S T A T E O F C O N N E C T I C U TDEPARTMENT OF REVENUE SERVICESI ssued: March 2007 BUILDINGCONTRACTORS GUIDE TOSALES AND USETAXES2IP 2006(35), BUILDING Contractors' Guide to Sales and Use TaxesThis document is not intended to be used as a legalruling, but as a general guide for the proper treatmentof sales and use taxes as they relate to the every potential tax situation is covered in this you have questions about the taxability of goods orservices you provide, contact the Department ofRevenue Services (DRS) Taxpayer Services Division(see inside back cover).TO ORDER INFORMATIONAL PUBLICATION 2006(35), BUILDING CONTRACTORS GUIDE TO SALES AND USE TAXES,SEND A 9" X 12" SELF-ADDRESSED ENVELOPE WITH $ POSTAGE AFFIXED TO:DEPARTMENT OF REVENUE SERVICESMAIL UNIT, BUILDING CONTRACTORS GUIDE25 SIGOURNEY STREETHARTFORD CT 06106-5032 VISIT THE DRS WEBSITE AT TO PREVIEW ANDDOWNLOAD FORMS AND 2006(35), BUILDING Contractors' Guide to Sales and Use Taxes3 TABLE OF CONTENTSThe BasicsNONTAXABLE Materials.

2 14 Purchasing 15 TYPES OF NONTAXABLE With Exempt Organizations .. 15 Contracts With Governmental Agencies .. 16 Federally Recognized Indian Tribes .. 16 Connecticut Development Authority (CDA) .. 16 Low and Moderate Income Housing .. 16 Waste Treatment Facilities .. 17 Air Pollution Control 17 Out-of-State 18 EXCLUSION FOR SERVICES RELATED TOHAZARDOUS WASTE AND OTHER PERSONAL Sheds, Buildings, and Trailers .. 18 INSTALLATION VERSUS REPAIR OR MAINTENANCEOF TANGIBLE PERSONAL of Systems .. 19 Repair or Maintenance of TangiblePersonal Property (Units).. 19 Warranty 19 EQUIPMENT RENTAL OR SERVICE 20 Equipment CONTRACTS WITHDIRECT PAYMENT PERMIT Construction Projects .. 21 New Construction 21 Construction Projects That InvolveRenovation and New Construction .. 21 Recurring Taxable Services Providedto Real Property Purchased byDirect Payment Permit Holders .. 22 BOND REQUIREMENTS OFNONRESIDENT 8 OBTAINING A SALES AND USE TAX 8 ACCOUNTING 8 BAD 8 TYPES OF CONSTRUCTION 8 Lump-Sum or Fixed Fee Contract.

3 8 Cost-Plus 9 Time and Material Contract With an Upset orGuaranteed Price That May Not Be 9 REAL 9 Types of Real Property .. 9 New ConstructionOwner-Occupied Residential PropertyCommercial PropertyIndustrial PropertyIncome-Producing PropertyPublic Right-of-WayServices Taxable to Certain Real Property .. 10 Services Taxable to All Real Property .. 10 Site Improvements .. 10 SERVICE 10 Reimbursed 11 contractor s Labor Subject to Tax .. 11 contractor s Labor Not Subject to Tax .. 11 contractor s Purchase of Subcontractor 11 General contractor Issues aResale Certificate to a SubcontractorGeneral contractor Does Not Issue aResale Certificate to a SubcontractorTemporary Employment Agency Services .. 13 MATERIALS USED INCONSTRUCTION OF THE S BILL TO THE FINAL Held in Trust .. 144IP 2006(35), BUILDING Contractors' Guide to Sales and Use TaxesAir Conditioning (See Central Air Conditioning and Ventilation Systems)Alarm 24 Antennas and Communications 24 Appliances (See Kitchens and Telephone,Audio-Visual, and Computer Cable or Wiring)Architectural 25 Audio-Visual Cable or Wiring(See Telephone, Audio-Visual, and ComputerCable or Wiring)Awnings (See also Standard Units of Equipment).

4 25 Bathrooms (See also Standard Units of Equipment) .. 26 26 Cabinets (See Bathrooms, Kitchens, and StandardUnits of Equipment) 27 Carpet Cleaning (See Janitorial Services)Carpeting (See Floor Coverings)Central Air 27 Central Vacuum 28 Chimney 29 Clean Rooms/HVAC Systems(See also Heating Systems and Ventilation Systems) .. 29 Computer Cable or Wiring(See Telephone, Audio-Visual, and ComputerCable or Wiring) 30 Driveways, Parking Lots and Walkways(For asphalt, tar, macadam, andpoured concrete areas, see Paving)(For brick, stone areas, or concrete pavers,see Landscaping and Horticulture Services)Duct Work(See Interior Sheet Metal and Ventilation Systems) 30(Complete wiring or rewiring of structures or theupgrading of the electrical service of a structure)Electrical 31 Elevators and Escalators(See also Inclined Stairway Chairlifts) .. 31 Energy 32 Excavating, Grading, and Land 32 Exterior Sheet Metal Work (See also Gutters).

5 33 Fencing (See also Landscaping and HorticultureServices and Silt Fencing) .. 33 Fire, Water, and Wind Damage(Cleaning, deodorizing, and removalof water or debris) .. 33 Floor 34 Floor 34 Furnaces (See Heating Systems)Garage 35 Garage Door 35 Garbage 36 Gazebos (See Sheds and Gazebos)Gutters (See also Exterior Sheet Metal Workand Maintenance Services to Real Property) .. 36 Hatchways (See Standard Units of Equipment)Heating Systems(See also Clean Rooms/HVAC Systems) .. 36 Home Entertainment/Home Theater 37 Hot Tubs, Spas, and 38 House Washing (See Maintenance Services to RealProperty and Painting, Staining, Varnishing, andWaterproofing)Inclined Stairway 39 Inspections (See Structural Inspections)Interior 40 Interior Sheet Metal (Duct work).. 40 Janitorial Services(See also Maintenance Services to Real Property) .. 40 Landscape Architectural 41 Landscaping and Horticulture 42 Locksmith 42 The DetailsIP 2006(35), BUILDING Contractors' Guide to Sales and Use 43 Maintenance Services to Real 44 Masonry (See Brickwork/Stonework)Moving a 44 Painting, Staining, Varnishing,and 44 Patio (See Landscaping and Horticulture Services)Paving(See also Maintenance Services to Real Property).

6 45 Pest Control (See Exterminating) 45 Power Washing(See Maintenance Services to Real Property)Precast Concrete or Cement Steps(See Standard Units of Equipment)Protection, Patrol Work, and Watchman 46 Refuse 46 Retaining Walls(See Landscaping and Horticulture Services) 47 Saunas(See Hot Tubs, Spas, and Sauna)Septic Systems(See also Standard Units of Equipment) .. 47 Septic System 48 Sheds and 48 Sheet Metal(See Interior Sheet Metal or Exterior Sheet Metal Work) 49 Sign Painting and Lettering 49 Silt 49 Snow Plowing/Removal(See Maintenance Services to Real Property)Spas (See Hot Tubs, Spas, and Sauna)Sprinkler Systems (Interior)(See also Landscaping and Horticulture Services forexterior sprinkler systems).. 49 Staining (See Painting, Staining, Varnishing,and Waterproofing)Standard Units of 50 Stock Cabinets (See Standard Units of Equipment)Stonework (See Brickwork/Stonework)Structural 51 Sump 51 Swimming Pools(See also Hot Tubs, Spas, and Sauna).

7 51 Telephone, Audio-Visual, and Computer Cableor Wiring(See also Home Entertainment/Home Theater Systems) .. 53 Testing for 53 Underground 53 Underground Storage 53 Varnishing(See Painting, Staining, Varnishing, and Waterproofing)Ventilation Systems(See also Clean Rooms/HVAC Systems) .. 54 Walls(For exterior walls, see alsoLandscaping and Horticulture Services) .. 55 Water 55 Waterproofing(See Painting, Staining, Varnishing, and Waterproofing)Weatherization Products (See also Energy Audits,Heating Systems, Water Heaters, and Windows) .. 56 Wells and 57 Window 57 Window 57 Wiring (See Telephone, Audio-Visual,and Computer Cable or Wiring) 59 Connecticut TAX FORMS, PUBLICATIONS,CERTIFICATES, AND SALES TAX 80 WHERE TO GET 856IP 2006(35), BUILDING Contractors' Guide to Sales and Use TaxesnotesIP 2006(35), BUILDING Contractors' Guide to Sales and Use Taxes7 THE BASICS8IP 2006(35), BUILDING Contractors' Guide to Sales and Use TaxesINTRODUCTIONS ales tax is imposed on certain contractor servicesperformed in Connecticut .

8 Generally, services to existingcommercial, industrial, and income-producing property aretaxable. Some services to residential property are alsotaxable. This guide presents information on the sale andpurchase of services and materials for are unique in that they are both the consumerof materials and retailers of their services. Therefore, BUILDING contractors must:1. Pay sales and use tax on materials, supplies, andequipment used in their construction contracts; and2. Charge and remit sales tax on their services must register with the Department of Revenue Services(DRS) if you are conducting business in Connecticut . Taxesfor which you may be liable include sales and use taxes,withholding tax, corporation business tax, and business entitytax. See Informational Publication 2006(11), GettingStarted in Business, for more A SALES AND USE TAX PERMITAll contractors, including subcontractors, must obtain aConnecticut Sales and Use Tax Permit from and subcontractors must register for salesand use taxes prior to providing any services even if theservices provided are not addition to obtaining a sales and use tax permit, anonresident contractor is required to post a bond.

9 SeePage 22 for more information on nonresident contractorbond you are purchasing an existing business, you may notuse the Sales and Use Tax Permit issued to the previousowner. You must obtain a new Sales and Use Tax Informational Publication 2002(16), SuccessorLiability for Sales and Use Taxes and Admissions andDues Tax, for more register a business, use Form REG-1, Business TaxesRegistration may register by mail, apply in person at the DRS mainoffice in Hartford or at any of the regional offices, oronline. Visit the DRS website at and clickon Taxpayer Service Center (TSC). If you register online,you must make direct payment of the registration fee onlinefrom your savings or checking METHODSMost retailers must report the sales tax on the accrual basisof accounting, under which a retailer reports all sales duringthe filing period in which the sales are made, not when thecustomer provides payment.

10 However, there is a limitedexception to this rule that allows a retailer to report salestax on the cash basis method, under which the retailer reportsits sales during the filing period in which the customerprovides payment regardless of when the services wererendered. To qualify to report on the cash basis, the retailermust sell only services taxable under Conn. Gen. Stat. 12-407(a)(37) and report sales on the cash basis ofaccounting for federal income tax purposes. A retailer thatsells tangible personal property cannot qualify to report salestax on the cash Authority: Conn. Gen. Stat. 12-408(1)BAD DEBTSA worthless accounts receivable is an account receivabledetermined to be worthless and actually written off asuncollectible for federal income tax purposes. DRS onlyaccepts claims for credit filed by retailers that havedetermined a sale is worthless for federal income taxpurposes and have remitted the tax for the sale to does not include retailers reporting sales on the cashbasis for Connecticut sales and use tax reporting Policy Statement 2001(1), Procedure for RetailersClaiming Credit for Sales Tax Previously Paid onWorthless Account Receivable, for more Authority: Conn.