When did a sale to a federal agency qualify for Connecticut's governmental sales and use tax exemption?

Plain-English summary

Sales to the United States, Connecticut, their agencies, and Connecticut political subdivisions or their agencies were exempt under the cited statute. DRS confirmed that X was a federal agency.

DRS did not issue exemption permits to the listed governmental entities, so the ruling letter could be used instead. For a sale to qualify, the retailer had to:

• bill the governmental entity directly;
• receive payment directly from that entity; and
• obtain a completed exemption certificate for each sale.

If the retailer billed an employee and the employee paid, the exemption did not apply even when the entity later reimbursed that employee.

What this means for you

The historical ruling focused on who was billed and who paid, not simply who ultimately bore the cost. Reimbursement did not turn an employee purchase into a direct agency purchase.

Common questions

Was X a qualifying governmental entity? Yes. The ruling identifies X as a federal agency.

Could the agency use this letter instead of an exemption permit? Yes.

Did employee reimbursement preserve the exemption? No.

Was one exemption certificate enough for all transactions? No. The ruling required a completed certificate for each sale.

Citations and references

• Conn. Gen. Stat. § 12-412(1), as cited in the ruling.

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 89-254

Original ruling text

Ruling 89-254, Exemptions - Governmental

Sales to the United States or any agency thereof, the State of Connecticut or any agency thereof or a Connecticut political subdivision or any agency thereof are exempt from the sales and use tax under section 12-412(1) of the Connecticut General Statutes.

X is a federal agency.

It is the policy of this agency not to issue an exemption permit to any entity described in the first paragraph of this letter. This letter may be used in lieu of an exemption permit.

The exemption from sales and use taxes applies only if the retailer bills the entity directly, and the bill is paid directly by such entity. The exemption does not apply when the retailer bills an employee of the entity and the bill is paid by such employee, even if such employee is subsequently reimbursed by the entity.

Please note that a completed exemption certificate (copy enclosed) must be furnished to each retailer on each sale.

LEGAL DIVISION

December 6, 1989