Was the 40% commission retained by a nonprofit arts school's store for selling artists' consigned goods subject to Connecticut sales tax?

Note -- obsolete historical guidance. DRS marks this information "not current" and states that Announcement (AN) 2000(8) obsoleted the ruling.

Plain-English summary

Company X was a nonprofit school teaching arts and crafts. Artists and craftspeople sent goods to its store for sale; the school did not initially purchase or take legal title to the goods, and unsold articles could be returned. When an item sold, the school paid 60% of the sales price for it and retained 40% for its programs.

DRS treated the retained 40% as a taxable fee or commission for acting as the seller's agent in the sale of tangible personal property.

What this means for you

Under the historical ruling, nonprofit status did not prevent the school's consignment commission from being taxed as a sales-agent service. AN 2000(8) later obsoleted the guidance.

Common questions

Was the retained 40% taxable? Yes, as a fee or commission.

Why did DRS treat the school as an agent? It sold goods for others without initially buying or taking legal title to them.

Citations and references

• Conn. Gen. Stat. § 12-407(2)(i)(V), as cited in the ruling.
• Public Act No. 89-251, as cited in the ruling.
• Announcement (AN) 2000(8) -- identified by DRS as obsoleting this ruling.

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 89-229

Original ruling text

Ruling 89-229, Agent For Sale

This information is not current and is being provided for reference purposes only

Ruling 89-229

Agent for Sale

This Ruling has been obsoleted by   AN 2000(8)

According to your letter, Company X is a non-profit organization that provides courses teaching various arts and crafts to its students. Some of the goods made by the students are sold in a store located at and run by the Company X Additionally, artists and craftsmen from throughout the country will send articles that they have made to the school for sale. The school does not purchase the articles initially nor does it take legal title to them. The articles can be returned to the artist. For those articles that are sold, the school will purchase them at 60% of the gross sales price and will retain 40% for use in conducting its own programs.

Effective July 1, 1989, the sales tax on services applies to the "services of the agent of any person in relation to the sale of any item of tangible personal property for such person; section 12-407(2)(i)(V) of the Connecticut General Statutes, as amended by Public Act No. 89-251.

Please be advised that 40% of the selling price of an item retained by Company X is a taxable fee or commission that is subject to sales tax.

LEGAL DIVISION

November 21, 1989