Did Company X have to collect sales tax on management services provided to partnerships owning Connecticut housing projects?

Note -- obsolete historical guidance. DRS marks this information "not current" and states that Announcement (AN) 94(4) obsoleted the ruling.

Plain-English summary

Company X provided management services to partnerships that owned Connecticut housing projects. DRS treated those services as taxable services to income-producing property and required Company X to collect and remit tax.

The low-income nonprofit housing exemption did not apply because it covered tangible personal property purchased for operating a low-income housing facility, while the partnerships bought services. The partnerships also had not shown nonprofit and § 501(c)(3) status or supplied evidence satisfying the cited regulatory exceptions; the services were provided to the owner partnerships, not to Connecticut.

What this means for you

The historical ruling required proof for every claimed exemption or exception and distinguished services from tangible-property purchases. AN 94(4) later obsoleted the guidance.

Common questions

Were the management services taxable? Yes under the ruling.

Did the nonprofit housing exemption apply? No. It addressed tangible personal property, not the services Company X sold.

Had the partnerships shown qualifying nonprofit status? No evidence of nonprofit and § 501(c)(3) status was presented.

Were the services treated as services to Connecticut? No; DRS said they were provided to the owner partnerships.

Citations and references

• Conn. Gen. Stat. § 12-407(2)(i)(I) and § 12-412(29), as cited in the ruling.
• Conn. Agencies Regs. § 12-426-26(f) and (h), as cited in the ruling.
• Announcement (AN) 94(4) -- identified by DRS as obsoleting this ruling.

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 89-209

Original ruling text

Ruling 89-209, Management

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

Ruling 89-209

Management

This Ruling has been obsoleted by   AN 94(4)

Company X provides management services to partnerships that own housing projects in Connecticut. Such services are taxable pursuant to section 12-407(2(i)(I) of the Connecticut General Statutes. It is your position that Company X should be relieved of having to collect the sales tax on its services to the owners-partnerships pursuant to section 12-412(29) of the Connecticut General Statutes and section 12-426-26(f) and (h) of the Regulations of Connecticut State Agencies. These provisions, however, do not exempt the partnerships from having to pay the tax nor Company X from having to collect and remit such tax.

Section 12-412(29) of the Connecticut General Statutes does not apply in determining whether Company X's services are exempted from the sales tax. That exemption relates specifically to tangible personal property purchased for use in the operation of a low-income housing facility by a nonprofit housing organization. The partnerships are purchasing services rather than tangible personal property from Company X. Additionally, the partnerships, absent evidence of their nonprofit and section 501(c)(3) status, do not qualify as a nonprofit housing organization.

Regulations describing exceptions to the tax on services to income producing property does not provide relief to Company X. Evidence that the partnerships meet the requirements in section 12-426-26(f)(1) and (2) of the Regulations of Connecticut State Agencies has not been presented and with respect to section 12-426-26(h) of the Regulations of Connecticut State Agencies, the services provided by Company X are to the owners-partnerships, not the State of Connecticut.

For the aforementioned reasons, Company X will not be relieved of collecting and remitting the tax on its management services.

LEGAL DIVISION

November 14, 1989