Connecticut Sales and Use Tax for Construction Contractors
Connecticut Sales and Use Tax for
Construction Contractors
Presented by: Michael D'Addio, J.D. Barry A. Fischman, CPA
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CT Sales Tax Structure of Sales Tax Law
Tax is imposed on the "retail sale" of: Tangible personal property; and Enumerated services
? This means that only certain services specifically referenced by statute are taxable.
Leases of tangible personal property are considered sales for sales tax purposes. Conn Gen Stat 12-407(a)(2)(J)
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CT Sales Tax Structure of Sales Tax Law
Nontaxable & Exempt sales Resales: To avoid double taxation, a sale made for resale is not subject to sales tax.
? Seller should obtain a CT resale certificate; ? The DRS imposes a "good faith" requirement on this type of certificate.
Exempt Purchaser:
? Certain sales are specifically exempted from sales tax; ? Sales of normally taxable property or services can be exempt based on
identity of the purchaser.
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CT Sales Tax Accrual versus Cash Basis
In general, every retailer of a taxable item, either property or service, must charge and collect sales tax on taxable sales.
The sales tax is payable to the DRS by the seller on an accrual basis. This means that the seller may have to pay the tax even before it is actually collected from the buyer.
? Worthless Account Receivable: DRS permits an accrual reporting taxpayer to make a claim for credit for account receivable (on which sales tax was previously paid). However, receivable must actually have been written off for federal tax purposes.
Cash Basis Taxpayer: There is a limited exception which permits reporting on a cash basis (as collected) if:
? Retailer sells only services; and ? Reports on cash basis for federal income tax purposes.
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CT Sales Tax Basic Sales Tax Rules
The sales tax applies to taxable sales in Connecticut. Sales made out of state are normally not subject to Connecticut tax.
Two different rules exist to determine the location of the sale: Tangible Property: The location where the property is delivered determines where the sale occurs. Where property is sold for use out-of-state or to a buyer physically located out-of-state, if the property is picked up in Connecticut, this is a Connecticut sale subject to Connecticut sales tax. Services: The place of sale when a service is involved is based on where the service is to be used. Under this rule it normally does not matter where the work is actually performed, the important item is where the benefit of the service will be enjoyed. Example: If there is a New York project and certain work is done in Connecticut in connection with that job, the service will not be subject to Connecticut sales tax since the ultimate benefit of the services will be in New York.
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