Were a nonprofit hospital's human-relations and organizational consulting services subject to Connecticut sales and use tax?

Note -- obsolete historical guidance. DRS marks this ruling "not current" and states that it was obsoleted by Announcement (AN) 94(4). It addresses the taxable-services list as it existed in 1991; verify current law before relying on the classification.

Plain-English summary

A nonprofit charitable hospital formed a division to provide human-relations and organizational consulting to public companies, private companies, and nonprofit organizations. The hospital had federal § 501(c)(3) status and a Connecticut sales-and-use-tax exemption permit.

The division's work focused on topics allied with the hospital's mental-health objectives: workplace stress management, corporate wellness, morale, motivation, collaboration, communication, and the human-relations side of an organization's work environment.

DRS ruled that these services were not subject to Connecticut sales and use tax because they did not fall within any of the taxable services enumerated in Conn. Gen. Stat. § 12-407(2)(i). The published text gives that direct classification without tying the result to the hospital's exemption permit.

What this means for you

Connecticut taxed listed services, not every service

The ruling applied the historical enumerated-services structure: if the consulting service did not fit a listed category, it was not taxable.

The service description matters

The division addressed mental-health-related workplace and human-relations issues. A service with different functions could fall into a different category.

Confirm today's classification

DRS has declared this ruling obsolete, and the list and definitions of taxable services can change. Do not assume a modern consulting engagement receives the same result.

Common questions

Did DRS tax the hospital division's consulting fees? No. It held that the described services were not among the taxable services enumerated in § 12-407(2)(i).

What did the division advise on? Workplace stress, wellness, morale, motivation, collaboration, communication, and related human-relations issues tied to mental-health objectives.

Can a consultant rely on this today? No. DRS marks the ruling not current and obsoleted by AN 94(4); current service classifications must be checked.

Citations and references

• Conn. Gen. Stat. § 12-407(2)(i) -- historical enumerated taxable-services provision.
• IRC § 501(c)(3) -- the hospital's federal charitable status stated in the facts.
• Announcement (AN) 94(4) -- identified by DRS as obsoleting this ruling.

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 91-8

Original ruling text

Ruling 91-8, Nonprofit Charitable Hospitals

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

Ruling 91-8

Nonprofit Charitable Hospitals

This Ruling has been obsoleted by   AN 94(4)

FACTS:

X is a nonprofit, charitable hospital. The Internal Revenue Service has determined that X qualifies as a charitable organization under Section 501(c)(3) of the Internal Revenue Code. X also holds a State of Connecticut sales and use tax exemption permit.

X has formed a Division to provide human relations and organizational consulting services to public and private companies as well as non-profit organizations.

The efforts of the Division are all directed to topics allied with X's mental health objectives such as stress management in the work place, corporate "wellness" and, in general, the human relations side of operations that bear upon the quality of a work environment from the mental health perspective, including personal problems involving morale, motivation, collaboration and communication.

ISSUE:

Whether services rendered by Division are subject to sales and use taxes under Section 12-407(2)(i) of the Connecticut General Statutes.

RULING:

The services rendered by the Division do not come within the taxable services enumerated in Section 12-407(2)(i) of the Connecticut General Statutes and, as a result, are not subject to sales and use taxes.

LEGAL DIVISION

April 2, 1991