Does a homeowner owe Connecticut sales tax on propane bought to fuel a standby generator at home?

Plain-English summary

A homeowner planned to buy a standby generator for the home and fuel it with propane from a tank installed on the property that would supply only the generator. The question was whether the propane bought for that generator is subject to Connecticut sales and use tax.

DRS ruled the propane is exempt. Connecticut generally taxes sales of tangible personal property, including propane gas (Conn. Gen. Stat. § 12-407). But a separate exemption in Conn. Gen. Stat. § 12-412(3)(A) covers gas — expressly including "bottled gas," which the statute defines as L.P. (propane) gas — "when delivered to consumers through mains, lines, pipes or bottles for use ... in any residential dwelling."

Crucially, DRS noted that, unlike the heating-fuel exemption in § 12-412(16), the residential-gas exemption in § 12-412(3)(A) does not require the gas to be used for any particular purpose. So propane delivered for use at a residential dwelling is exempt regardless of what it powers — here, a backup generator rather than a furnace.

What this means for you

Homeowners

Propane you buy for use at your home is generally exempt from Connecticut sales and use tax, and this ruling confirms the exemption is not limited to heating. Because § 12-412(3)(A) exempts residential gas without tying it to a specific use, propane that runs a backup generator, a stove, a fireplace, or other residential equipment qualifies the same way.

Propane dealers and generator installers

When you sell propane for delivery and use at a customer's residential dwelling, that gas is exempt residential gas under § 12-412(3)(A) — the exemption follows the residential use, not the appliance. Note the statutory hook is gas "delivered to consumers ... for use ... in any residential dwelling"; the ruling's facts involved an on-site tank dedicated to the home's generator.

Accountants and tax professionals

The ruling turns on contrasting two exemptions: the general residential gas/electricity exemption in § 12-412(3)(A), which is not use-restricted, and the heating-fuel exemption in § 12-412(16), which is. Because the propane qualified under the broader residential-gas provision, its end use (a generator, not heating) didn't matter. DRS also pointed to Policy Statement 94(3.2) on gas and electricity purchased for residential use.

Common questions

Q: Is propane taxable in Connecticut?
A: Propane is tangible personal property and is generally taxable (§ 12-407), but propane delivered for use in a residential dwelling is exempt under § 12-412(3)(A). The statute treats "bottled gas" — defined as L.P. (propane) gas — as exempt residential gas.

Q: Does the exemption only apply to propane used for heating?
A: No. DRS specifically noted that § 12-412(3)(A) — unlike the heating-fuel exemption in § 12-412(16) — does not require the gas to be used for a particular purpose. Propane for a residential dwelling is exempt regardless of what it is used for.

Q: What about propane used at a business or other non-residential building?
A: This ruling addressed propane for use at a residential dwelling. Gas that isn't delivered for residential use falls outside § 12-412(3)(A), and other rules (or the general tax) may apply. The related heating-fuel exemption in § 12-412(16) has its own, narrower terms.

Q: Does this ruling apply to my situation?
A: Not automatically. A Connecticut Ruling binds DRS only for the taxpayer and facts it addressed. It shows how DRS reads the residential-gas exemption, but different facts could be analyzed differently.

Citations and references

Statutes:

• Conn. Gen. Stat. § 12-407 (Connecticut sales and use taxes generally apply to sales of tangible personal property, including propane gas)
• Conn. Gen. Stat. § 12-412(3)(A) (exemption for gas — including bottled, i.e. L.P./propane, gas — delivered for use in any residential dwelling)
• Conn. Gen. Stat. § 12-412(16) (separate exemption for fuel used for heating purposes; cited by contrast)

Guidance:

• Policy Statement 94(3.2), Gas and Electricity Purchased for Residential Use or for Use in Agricultural Production, in the Fabrication of Finished Products to Be Sold, or in an Industrial Manufacturing Plant

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 2014-1

Original ruling text

RULING NO. 2014-1
SALES AND USE TAXES
UTILITY EXEMPTION (GENERAL)
PROPANE USED IN HOME GENERATORS
FACTS:

A homeowner is purchasing a standby generator for his home, which he plans to fuel with
propane from a tank to be installed on his property that will only supply the generator.
ISSUES:

Whether the sale of propane gas to be used to operate a standby generator at a residential
dwelling is subject to sales and use taxes.
RULINGS:

The sale of propane gas to be used to operate a generator at a residential dwelling is exempt from
sales and use taxes.
DISCUSSION:

Sales of tangible personal property, including sales of propane gas, are generally subject to
Connecticut Sales and Use Taxes. See Conn. Gen. Stat. §12-407. However, sales of propane gas for use
in any residential dwelling are exempted by the provisions of Conn. Gen. Stat. § 12-412(3)(A), which
states in relevant part as follows:
The sale, furnishing or service of gas, including bottled gas, and electricity when delivered to
consumers through mains, lines, pipes or bottles for use (i) in any residential dwelling . . . .
Bottled gas as used in this subsection means L.P. (propane) gas.
See also Policy Statement 94(3.2), Gas and Electricity Purchased for Residential Use or for Use in
Agricultural Production, in the Fabrication of Finished Products to Be Sold, or in an Industrial
Manufacturing Plant.
Unlike the exemption for fuel used for heating purposes, which is set forth in Conn. Gen. Stat. §
12-412(16), the exemption for gas in Conn. Gen. Stat. § 12-412(3)(A) does not specify that the gas must
be used for a specific purpose at a residential dwelling in order to be eligible for exemption. Thus, gas
sold for use at a residential dwelling may be purchased exempt from sales and use tax, regardless of its
use.
OFFICE OF COUNSEL
December 18, 2014