Ezel / Tax Rulings / CT
CT Ruling 90-16 Sales and Use Taxes 1990-02-05

What did a supplier have to do when drop-shipping merchandise to a Connecticut customer for an out-of-state retailer?

Short answer: ABC Corporation complied by charging Connecticut tax to the out-of-state retailer when ABC delivered the merchandise to that retailer's Connecticut customer. Instead, ABC could accept through the retailer a bona fide Connecticut resale certificate or a valid governmental or charitable exemption certificate issued by the Connecticut customer.

Apply this to your situation

This page answers the general question as of 1990. Ezel answers yours, under current Connecticut tax law, with citations.

Currency note: this ruling is from 1990
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 1990 Connecticut Department of Revenue Services Ruling applying the drop-shipment and certificate rules then in effect to ABC Corporation's Connecticut deliveries for an out-of-state retailer. Later statutory, nexus, documentation, or certificate changes can alter the result, and another supplier should not assume this ruling applies to its transaction. 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)

Plain-English summary

ABC Corporation sold merchandise to XYZ Corporation, a retailer outside Connecticut, and delivered the goods to XYZ's customer in Connecticut.

The historical statute treated delivery in Connecticut to a consumer for a sale by an out-of-state retailer as a Connecticut retail sale by the person making the delivery. That delivery person had to include the retail selling price in gross receipts.

DRS said ABC complied in either of two ways:

  • charge Connecticut sales tax to XYZ when ABC delivered the merchandise to XYZ's Connecticut customer; or
  • obtain through XYZ a copy of a bona fide Connecticut resale certificate issued by the Connecticut customer.

ABC could likewise accept through XYZ a valid governmental-organization or charitable-organization exemption certificate issued by the Connecticut customer.

What this means for you

Under the historical drop-shipment rule, the in-state delivering supplier bore the Connecticut tax obligation unless it held documentation supporting resale or the customer's exempt status.

Common questions

Who was outside Connecticut? XYZ, the retailer buying from ABC.

Who received the merchandise in Connecticut? XYZ's customer, the third party in the transaction.

What documents could replace charging tax? The ruling lists Connecticut resale, governmental-organization exemption, and charitable-organization exemption certificates issued by the Connecticut customer.

Citations and references

  • Conn. Gen. Stat. § 12-407(3).

Source

Original ruling text

Ruling 90-16, Drop Shipments

Ruling 90-16

Drop Shipments

I. Drop-Shipments

Section 12-407(3) of the Connecticut General Statutes states:

(3) "Retail sale" or "sale at retail" means and includes a sale for any purpose other than resale in the regular course of business of tangible personal property or a transfer for a consideration of the occupancy of any room or rooms in a hotel or lodging house for a period of thirty consecutive calendar days or less, or the rendering of any service described in any of the subdivisions of subsection (2) of this section. The delivery in this state of tangible personal property by an owner or former owner thereof or by a factor, if the delivery is to a consumer pursuant to a retail sale made by a retailer not engaged in business in the state, is a retail sale in this state by the person making the delivery. He shall include the retail selling price of the property in gross receipts.

Therefore, ABC Corporation is complying with the Connecticut Sales & Use Tax Statutes by either charging Connecticut sales tax to XYZ Corporation outside the State of Connecticut when the merchandise ABC Corporation is selling is being delivered to the XYZ Corporation customer located in Connecticut or, by ABC Corporation obtaining a copy of a bonafide Connecticut Resale Certificate from the XYZ Corporation issued by XYZ Corporations customer who is the third party receiving the merchandise in Connecticut.

ABC Corporation may also accept a valid Governmental Organization Exemption Certificate or Charitable Organization Exemption Certificate from XYZ Corporation issued by XYZ Corporations customer who is the third party receiving the merchandise in Connecticut.

LEGAL DIVISION

February 5, 1990

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