Ezel / Tax Rulings / CT
CT Ruling 89-180 Sales and Use Taxes 1989-10-30

How were product-marketing strategy, packaging design, subcontracted design, and out-of-state design services taxed under Connecticut Ruling 89-180?

Short answer: Product-marketing strategy and new-product design were exempt, while packaging and delivery-system design were taxable. Subcontracted design required tax unless resale applied; out-of-state use could be exempt. DRS says Ruling 93-13 partly superseded and AN 94(4) obsoleted it.

Apply this to your situation

This page answers the general question as of 1989. Ezel answers yours, under current Connecticut tax law, with citations.

Currency note: this ruling is from 1989
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official 1989 Connecticut Department of Revenue Services Ruling reflecting the marketing and design-service rules then in effect. DRS expressly marks the information 'not current,' says Ruling 93-13 superseded it in part, and says Announcement (AN) 94(4) obsoleted it. Its outcomes depended on service type, resale without alteration, and sole benefit and use outside Connecticut. Connecticut imposes sales and use tax solely at the state level: there are no local or municipal sales taxes. This summary is informational only and is not legal or tax advice. Consult a licensed Connecticut tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Note -- changed historical guidance. DRS marks this information "not current," states that Ruling 93-13 superseded it in part, and states that Announcement (AN) 94(4) obsoleted it.

Plain-English summary

Strategy ideas and design for new products were treated as product marketing, and gross receipts from that marketing were exempt. Packaging and delivery-system design were taxable as business analysis and management services.

Design services from a small design company to a large design company were taxable unless a valid resale certificate applied. Services for a large design company outside Connecticut were not taxable when sole benefit and use occurred outside the state. A resale certificate could be used when the large company resold the designs without alteration or modification.

What this means for you

The historical ruling separated product marketing from packaging design and conditioned resale and out-of-state treatment on specific facts. Later DRS guidance changed it.

Common questions

Were new-product strategy and design taxable? No under the ruling.

Were packaging and delivery-system designs taxable? Yes.

Could subcontracted design be bought for resale? Yes, when resold without alteration or modification.

Could design for an out-of-state company be nontaxable? Yes, when sole benefit and use occurred outside Connecticut.

Citations and references

  • Conn. Gen. Stat. § 12-407(2)(i)(J), as cited in the ruling.
  • Public Act No. 89-251, as cited in the ruling.
  • Ruling 93-13 -- identified by DRS as partly superseding this ruling.
  • Announcement (AN) 94(4) -- identified by DRS as obsoleting this ruling.

Source

Original ruling text

Ruling 89-180, Marketing

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

Ruling 89-180

Marketing

This Ruling has been superseded in part by   Ruling 93-13,   obsoleted  by   AN 94(4)

The services that involve providing strategy ideas and design for new products are related to the marketing of products. The gross receipts for the marketing of products are exempt from sales and use tax.

The total sales price for packaging and delivery system designs are subject to sales and use tax as business analysis and management services pursuant to section 12-407(2)(i)(J) of the Connecticut General Statutes, as amended by Public Act No. 89-251.

The services rendered to a large design company a the small design company are subject to sales and use tax unless a valid resale certificate applies. The charge for the design services rendered by the small design company to the large design company located outside Connecticut is not subject to sales and use tax provided the sole benefit and use of the service inure outside Connecticut. A resale certificate may be issued if the large design company resells the designs without altering or modifying them.

LEGAL DIVISION

October 30, 1989

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