Transcript Sales and Use Taxes for the Construction Industry

Connecticut Sales and Use Taxes
for Construction Contractors
presented by
Felicia Hoeniger and
Scott Sebastian
Robinson & Cole LLP
Paul Greenfield
Department of Revenue Services
CBIA Connecticut Business Tax Conference – June 1, 2012
Structure of Connecticut
Sales and Use Taxes
• The Sales Tax
– Imposed on sales of tangible personal property and enumerated
services – Retailer liable
• The Use Tax
– Imposed on use in CT of purchased tangible personal property or
enumerated services – Purchaser liable
• Nontaxable and exempt sales – Certificates
• Removal from Inventory – nonexempt use
• Credit for taxes paid
Structure of Connecticut
Sales and Use Taxes
• All gross receipts presumed taxable
• Services taxable only if enumerated
• Accrual method of accounting
– Exceptions
• Situs of Taxation
– Property Transactions
– Temporary Storage Exception – Buy Connecticut Refund
– Enumerated services
– Environmental Exclusion
Contractor as Purchaser of
Tangible Personal Property
• Contractor is Consumer of Materials and Supplies,
not a Retailer
• Who is a contractor? – Types of contract
• Contractor’s Exempt Purchases
– Governments and Exempt Organizations
– Manufacturing Machinery and Equipment
– Other Exemptions
– Use of Certificates
Contractor as Purchaser of
Tangible Personal Property
• Contractor’s Use of Tools and Equipment
– Contractor as Independent Contractor
– Contractor as Agent
• Trade-ins
• Safety Apparel
• Particular Types of Equipment
Contractor as Retailer
• Contractor may Qualify as Retailer
• Purchases for Resale
– Manufacturing and Fabricating – Machinery Purchases
• Installation Services
• Repair or Maintenance Services
• Warranty Contracts
• Equipment Rental or Service Contract?
• Out-of-state Contracts
• Nonresident Contractors
Contractor as Service Provider
• Taxable Service Categories
• New Construction
– Renovation vs. new construction
– Site improvements
– When does Construction Begin and End?
• Other Exceptions
– Low and Moderate Income Housing
– Residential Exception
Contractor as Service Provider
• Construction Managers
• Accounting for Purchases of Services from Subcontractors
• Exemptions and Exempt Persons
• Specific Services
Billing
• Tax Base
‾ Materials
‾ Services
• General Contractor Purchases Services of Contractor
– General contractor issues a resale certificate to subcontractor
– General contractor does not issue a resale certificate
• Tax held in trust
• “Pay When Paid” method for materialmen
Audit Considerations
• If under audit, documentation may be required
to support amount of tax paid by subcontractors
(i.e., invoices)
• May still incur additional tax due on materials if
subcontractor is located out of state
• Results in extra
– Time spent
– Money in wages and taxes
Record Keeping
• A taxpayer shall maintain all records that are
necessary to a determination of correct tax liability
under the affected tax law provisions.
• Each exemption certificate, whether resale or
otherwise, should indicate the time period the
acceptor must keep such certificate in his or her
records.
• A safe practice is to retain all certificates and
records until the taxpayer is next audited by the
State.
• IP 2009(15) states that resale certificates should be
kept at leat 6 years.