Connecticut State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Connecticut, with full citations and the original source on every page.
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Does Connecticut's health care center tax apply to the claim payments and administrative fees a health care center receives for administering a self-insured employer's benefit plan under an administrative-services-only (ASO) contract?
Not taxable. When a health care center administers a self-insured employer's benefit plan under an administrative-services-only (ASO) contract -- processing and paying employee claims solely from fund…
For a company's 'procurement process management services,' which parts are taxable business management services and which qualify for Connecticut's outsourced computer-and-data-processing exemption?
It depends on the service. A company's 'procurement process management services' split two ways for Connecticut sales tax. Its accounts-payable and support functions are computer and data processing s…
Does Connecticut's controlling interest transfer tax apply when a parent merges one wholly-owned subsidiary that owns Connecticut real estate into another wholly-owned subsidiary of the same parent?
No tax. Merging one wholly-owned subsidiary of a parent into another wholly-owned subsidiary of the same parent does not transfer a controlling interest to anyone new -- the parent controls the real-p…
Are a company's services helping nursing homes with the Medicaid resident-admissions process taxable in Connecticut as business management or business management consulting services?
Not taxable. A company's services helping nursing homes handle the Medicaid resident-admissions process are not taxable business management or business management consulting services under Conn. Gen. …
When a financial institution outsources its whole computer and data processing operation, which of those services are exempt as 'outsourced' -- and what about work it used to do for its clients rather than for itself?
Only the 'own use' work is exempt. When a financial institution outsources its entire computer and data processing operation to an unrelated provider, the services the institution formerly performed f…
Does a pathology-testing company that analyzes patient specimens for physicians qualify for Connecticut's biotechnology sales-and-use-tax exemption on its purchases?
No. A company that performs pathology testing on patient specimens to help physicians diagnose, prognose, or monitor disease does not qualify for Connecticut's biotechnology exemption in Conn. Gen. St…
Does a pathology-testing company qualify as a 'biotechnology company' entitled to the 15-year carryforward of Connecticut's research-and-experimental-expenditure corporation business tax credit?
No. A pathology-testing company does not qualify as a 'biotechnology company' under Conn. Gen. Stat. § 12-217j, so it cannot use the special 15-year carryforward of the corporation business tax resear…
When a company places its own computer-skilled staff at a customer's site to run a defined IT project, is it selling taxable personnel services or taxable computer and data processing services?
It's computer and data processing, not personnel services. A company that places its own computer-skilled staff at a customer's site to complete a prearranged, predetermined IT project is providing ta…
Do heavy trailers used only for on-site storage still qualify for Connecticut's commercial-truck sales-and-use-tax exemption if they weigh over 26,000 pounds?
Yes, they qualify. Trailers with a gross vehicle weight rating over 26,000 pounds can be bought or leased exempt under Connecticut's commercial-truck exemption (Conn. Gen. Stat. § 12-412(70)) even whe…
Does a two-step corporate restructuring -- merging one subsidiary into another, then merging the survivor into a newly created holding company -- reduce or eliminate the group's Connecticut corporation business tax operating loss carry-overs?
No -- the loss carry-overs survive. Neither step of the planned restructuring reduces or eliminates the group's Connecticut corporation business tax operating loss carry-overs under Conn. Gen. Stat. §…
When a Connecticut state bank converts to a national bank, does the conversion reduce or eliminate its corporation business tax operating loss carry-overs?
No -- the loss carry-overs survive. When a Connecticut state bank converts to a national bank (a change represented to qualify as a type F tax-free reorganization), its corporation business tax operat…
Which of a health-care management company's many services -- managed care advice, credentialing, quality assurance, claims processing, member services, contract, pre-certification, and utilization review -- are taxable in Connecticut, and under which service category?
It's service-by-service. DRS classified each service a health-care management company sells against Conn. Gen. Stat. § 12-407(2)(i)(J). Because the customers' core business is providing health care, s…
Is a residents' association that was specially chartered by the legislature with municipal powers, and treated by the IRS as a political subdivision, subject to Connecticut's corporation business tax?
No. A residents' association chartered by a 1931 Special Act as a body politic and corporate, exercising municipal-type powers (fire protection, streets, beaches, police, and a real-estate tax) and tr…
When a manufacturer outsources its entire computer division, are the outsourced services and the equipment the provider buys exempt -- and what about equipment the provider buys as the manufacturer's agent?
Mostly exempt, with one taxable piece. When a manufacturer outsources its whole computer division to an unrelated provider, the outsourced computer and data processing services are exempt under Conn. …
Are a company's computer-link services -- routing credit-card authorizations between merchants and card issuers, and connecting PC users to Internet service providers -- taxable Connecticut computer and data processing services?
Yes, both are taxable. A company that uses computers to link merchants' card-authorization devices to card-issuing banks, and to link PC users to an Internet/computer service provider, is providing ta…
Does a manufacturer's multi-building campus qualify for Connecticut's 75% gas-and-electricity exemption when most of the utility-metered energy is used for fabrication and R&D, measured by the utility's meter?
Yes, it qualifies. Gas and electricity are exempt from Connecticut sales and use tax under Conn. Gen. Stat. § 12-412(3)(A)(ii) when, at a metered building, location, or premises, at least 75% of the e…
Is boarding and training other people's horses 'agricultural production,' so that the operator can get a Farmer Tax Exemption Permit even though it sells no animals or produce?
Yes. Boarding and training horses that belong to others is 'agricultural production' under Conn. Gen. Stat. § 12-412(63), because the statute's definition -- raising, feeding, caring for, training, or…
Is running (or removing) telephone/data cabling behind walls and above ceilings a taxable service to real property, or is it excludible installation of tangible personal property?
It's a taxable service to real property. Running (or removing) telephone and data cabling that is concealed behind walls and above ceilings -- not obvious and not readily accessible -- is a service to…
Is a gut renovation that leaves the wall studs and floor/ceiling joists in place treated as nontaxable 'new construction,' or as a taxable service to existing commercial real property?
It's taxable -- not new construction. A renovation that converts a building to a new use but leaves the interior and exterior wall studs and the floor and ceiling joists in place is a taxable service …
Are satellite-based data communications services (monitoring pipelines, messaging trucks, sending distress signals, tracking cargo) taxed in Connecticut as telecommunications services, or as computer and data processing services?
It turns on the label, and it's still taxable either way the company hoped to avoid. Connecticut's satellite-based data communications service is NOT taxable as a telecommunications service under Conn…
When an employer stays fully liable for its own employees' health claims and just pre-funds an account the insurer draws from to pay them, are those claim payments and the insurer's admin fee taxed as insurance 'gross direct premiums' in Connecticut?
No. When the employer remains solely liable for its employees' health benefit claims below a liability limit and simply pre-funds a claims account that the insurer draws on to pay those claims as the …
For a company that sells and rents equipment used on a tribal reservation inside Connecticut's borders, do those receipts count in the Connecticut receipts factor when it apportions its corporation business tax?
Yes — they count. A company that sells or rents construction equipment for use on a federally-recognized tribe's reservation that sits within Connecticut's borders must include those receipts in BOTH …
Is Connecticut sales or use tax owed on construction equipment and materials sold or rented for use on a Connecticut tribe's reservation — when sold to the tribe itself, and when sold to the non-Indian contractors building for the tribe?
It depends on WHO buys and WHERE title or delivery passes. Sales and rentals of construction equipment made DIRECTLY to the Connecticut tribe or its enrolled members are exempt (federal preemption, Co…
Does Connecticut sales tax apply when a store sells a prepaid long-distance phone card, and does it apply when a customer later uses the card to make calls?
Two separate answers. Selling the prepaid long-distance phone card is NOT taxable — a phone card is a 'cash equivalent' (like a gift certificate or voucher), so its sale is the sale of an intangible f…
Are the data processing services a provider performs after taking over a bank's in-house 'item processing' operations exempt from Connecticut sales tax under the outsourcing exemption?
Yes. When a service provider takes over ALL of the data processing functions a customer formerly performed for itself at a specific location of the customer's business premises, those services are exe…
Is a heavy truck chassis a tax-exempt 'commercial truck' in Connecticut when a bucket lift is mounted on it — and when it's still bare?
It depends on whether it hauls freight. A heavy truck chassis (GVWR over 26,000 lbs) with an aerial lift mounted on it is NOT an exempt 'commercial truck' under Conn. Gen. Stat. § 12-412(70), because …
When a business buys copywriting and graphic design for employee newsletters, sales brochures, and community economic-impact statements, is that a taxable service in Connecticut — and can the fee for the design's reproduction/ownership rights be carved out?
Yes, they're taxable — the only question is which category and where. Copywriting and graphic-design services a business buys to influence a group are taxable Connecticut services: work for employee/i…
Are in-room hotel pay-per-view movie charges taxed in Connecticut as sales tax, as room occupancy tax, or both — and who owes what?
Both taxes apply, at two different links in the chain. The pay-per-view movie service a company provides to a hotel is a taxable 'community antenna television service' under Conn. Gen. Stat. § 12-407(…
Does a retailer that imports petroleum products from out of state and sells them in its Connecticut stores owe Connecticut's petroleum products gross earnings tax — and is it measured on its sales or on what it paid?
Yes, and it's measured on the sale, not the purchase. A company that brings petroleum products into Connecticut and sells them here makes the 'first sale within this state,' so it owes the petroleum p…
Is renting a large locked wire-mesh storage cage in a condo basement a taxable 'locker rental,' or a nontaxable rental of space, in Connecticut?
It's a nontaxable rental of space, not a taxable locker rental. Connecticut taxes 'locker rental' (except cold storage) as a miscellaneous personal service under Conn. Gen. Stat. § 12-407(2)(i)(FF). B…
If a 'sale and leaseback' is really a secured loan — the customer keeps title and possession and the lender just holds a security interest — are the 'lease' payments subject to Connecticut sales tax?
No. When a 'sale and leaseback' is really a disguised financing — the customer's 'Bill of Sale' expressly grants only a security interest, the customer keeps legal title and possession, and the 'lease…
When a company sells online access to the Connecticut DMV computer plus the software to use it, which parts are taxable — the online access, the software fee, the support, and the revenue-share payments?
It splits four ways. (1) The online service giving customers direct access to the DMV computer — to file registrations and make inquiries — IS taxable computer and data processing service under Conn. …
Is a phone-based auto-parts locating service — where employees use a computerized directory but do the finding by telephone — a taxable computer and data processing service in Connecticut?
No. A telephone auto-parts locating service is NOT a taxable computer and data processing service under Conn. Gen. Stat. § 12-407(2)(i)(A). Applying the 'true object' test, DRS found the computer here…
Is a 'phone flea market' — where sellers pay to be listed and buyers call in for the listings — a taxable sales-agent service or a taxable advertising service in Connecticut?
Neither — but this ruling is dated and only partly good law. As DRS decided it in 1994, a 'phone flea market' (sellers pay a flat fee to be listed; buyers call in for the listings and deal directly wi…
Is a chemist's paid consulting on the chemical properties of a manufacturer's products a taxable business-management service in Connecticut?
No. A chemist with advanced degrees who consults on the chemical properties of a manufacturer's hair care and hair color products is NOT providing taxable 'business analysis, management, management co…
Is a landowner who digs up and hauls away contaminated soil that is a hazardous waste a 'generator' owing Connecticut's hazardous waste assessment, even if the pollution predates their ownership?
Yes. A landowner who excavates and removes contaminated soil that is itself a hazardous waste from a site IS a 'generator of hazardous waste' under Conn. Gen. Stat. § 22a-132 — and owes the hazardous …
Are subscription sales of scientific/technical trade magazines exempt from Connecticut sales tax under the magazine-by-subscription exemption?
Yes. Subscription sales of the publisher's scientific and technological periodicals are exempt from Connecticut sales tax under Conn. Gen. Stat. § 12-412(6) as 'sales of magazines by subscription.' Be…
When a temporary worker's staffing contract is renewed until the worker becomes a 'leased employee,' can the agency stop charging Connecticut sales tax on the worker's wages and benefits?
Only going forward, once the worker actually qualifies as a 'leased employee.' A staffing agency's charges for separately stated compensation, fringe benefits, workers' compensation, and payroll taxes…
Are 'outplacement services' — counseling laid-off executives to find new jobs, paid for by their former employer — taxable in Connecticut as business management consulting or as employment-agency services?
No — outplacement services are not taxable in Connecticut, under either category considered. Counseling an employer's terminated executives/managers to help them find NEW jobs is NOT taxable 'personne…
When a distributor's propane is a mix of natural-gas propane and petroleum-gas propane, how much of its Connecticut gross earnings is subject to the petroleum products gross earnings tax?
Only the petroleum-gas propane portion is taxable. Petroleum-gas propane is a 'petroleum product' (SIC Major Group 29, Industry 2911) subject to the petroleum products gross earnings tax under Conn. G…
Is document scanning and indexing a taxable computer and data processing service in Connecticut, and is supervising a customer's own scanning staff taxable business management?
Document imaging is taxable; supervising the customer's staff is not. Scanning paper documents into electronic images and indexing them IS a taxable computer and data processing service under Conn. Ge…
When one partner transfers its minority partnership interest to the only other partner — ending the partnership that owns Connecticut real estate — does the conveyance tax or the controlling interest transfer tax apply?
Neither tax applies. When a parent transfers its MINORITY partnership interest to the only other partner (its subsidiary, which already holds the controlling interest), ending the partnership so the C…
If a car-lease company refunds a lessee an end-of-lease adjustment because the returned vehicle sold for more than its book value, does that reduce taxable receipts and require refunding the sales tax?
Yes. When a motor-vehicle leasing company's end-of-lease 'rental charge adjustment' runs in the LESSEE's favor — because the company sold the returned vehicle for MORE than its book value and pays the…
Are a licensed pharmacist's consultation services to nursing homes — including in-service training of staff — taxable business-management services in Connecticut?
No. A licensed pharmacist's 'pharmacy consultation services' to skilled and intermediate care nursing facilities — monthly review of drug appropriateness, reviewing dosages, assessing drug regimens, m…
Is a company's transfer of an entire manufacturing division's assets into new subsidiaries exempt from Connecticut sales and use tax as a casual sale?
Yes (with two carve-outs). When a large manufacturer converts a division into new subsidiaries by contributing all of the division's assets and liabilities — inventory, materials, tools, fuel, machine…
Is a licensed casualty adjuster's insurance investigation and claims-adjusting work a taxable business-management or private-investigation service in Connecticut?
No, on both counts. A company licensed as a 'casualty adjuster' that investigates and adjusts insurance claims for insurers — accident reconstruction, surveillance, interviews, polygraphs, document an…
Are marketing consulting and consumer test-market workshops taxable 'business public relations services' in Connecticut?
No. A company that assesses a client's product marketing, advises on better marketing strategies, and runs 'workshops' using members of the public to test those strategies is NOT providing taxable 'bu…
Which of a scrap-metal recycler's machines, materials, fuel, and power qualify for Connecticut's manufacturing and fabrication tax exemptions?
It splits by machine. A scrap-metal recycler's SHREDDER (with its shaker table and magnetic separators) — which pulverizes whole cars and appliances into separated 'frag' and other outputs — IS exempt…
Is a service that finds a judgment debtor's attachable assets for a creditor a taxable credit-reporting or private-investigation service in Connecticut?
No, on both counts. A company that searches by phone and computer to locate a judgment debtor's attachable assets for a judgment creditor — and just delivers a written asset report — is NOT providing …
Does the electricity used in a newspaper's prepress-operations building qualify for Connecticut's manufacturing/fabrication utility exemption?
No. The electricity used in the building that houses a newspaper's PREPRESS operations (advertising, composing, art, camera, editorial, darkroom, classifieds) does NOT qualify for the utility exemptio…
Is testing underground storage tanks for leaks to comply with environmental law a taxable service to real property or a taxable tank repair in Connecticut?
No, on both counts. Testing underground storage tanks at service stations (and the related monitoring wells and test pits) to comply with state and federal environmental laws is a service rendered for…
When worn grinding wheels are stripped and re-coated, is that exempt manufacturing, an exempt material purchase, or taxable repair in Connecticut?
It splits into three parts. Replating a worn grinding wheel is NOT the 'manufacture of a tool' under Conn. Gen. Stat. §§ 12-412(18) and (34) — a grinding wheel goes in and a grinding wheel comes out (…
Is the software a manufacturer uses to run its computerized milling machines exempt from Connecticut sales tax as manufacturing machinery?
It depends on how the software is bought. A manufacturer's CAD/CAM software that drives its computerized milling machines can qualify for a manufacturing exemption, but with a key catch: (1) if the so…
Is selling subscribers online access to a company's land-records database a taxable computer and data processing service in Connecticut?
Yes. A company that manually collects real-property transfer data from town records, loads it into its own daily-updated database, and sells subscribers 24-hour searchable access is rendering taxable …
Is a teleconferencing service provided by a company that isn't a telephone carrier a taxable telecommunications service in Connecticut?
No. A company that provides teleconferencing by bridging multiple phone calls through a computerized 'audio bridge' — while its own coordinators introduce, monitor, and manage the calls — is NOT rende…
Can a corporation deduct dividends from a mutual fund under Connecticut's dividends-received deduction when the fund's payouts are exempt-interest or capital-gain dividends?
It depends on the type of distribution. Under Connecticut's dividends-received deduction, Conn. Gen. Stat. § 12-217(a)(D), a corporation may deduct 'dividends as defined in the federal income tax law.…
Do a surviving corporation's pre-merger Connecticut net operating loss carryovers survive an ownership-change merger, free of the federal Section 382 limit?
Yes. Where a corporation is the SURVIVING corporation in a merger (here a reverse triangular merger in which the purchaser's new subsidiary merged into the holding company, and the holding company sur…
Can a contractor that improves a government facility under an informal but binding agreement buy the incorporated materials free of Connecticut sales tax?
Yes. A limited partnership that operates a Connecticut political subdivision's facility and makes agency-funded improvements to it may purchase, free of sales and use tax, the materials and supplies t…
Is a company that supplies law-library staff and looseleaf filing to law firms providing taxable personnel services in Connecticut?
It splits. When the company supplies temporary LIBRARY PERSONNEL (librarians, paraprofessionals, clerks) to law firms, that IS a taxable personnel service under Conn. Gen. Stat. § 12-407(2)(i)(C): the…
Does air-control machinery in a manufacturer's clean room qualify for Connecticut's manufacturing-machinery sales and use tax exemption?
Yes. A company that makes hypodermic needles was building a 'clean room' — an enclosed, environmentally controlled space — and installing machinery to regulate the air's temperature, pressure, humidit…
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These are official tax letter rulings and advisory opinions issued by Connecticut's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.