Ezel / Tax Rulings / CT
CT Ruling 90-31 Sales and Use Taxes 1990-03-07

Did converting a vacant manufacturing building into residential condominiums count as nontaxable new construction because the renovation cost exceeded the building's price?

Short answer: No under this historical ruling. DRS treated work performed solely inside the existing building as a taxable renovation. The building's vacancy and the high renovation cost relative to its purchase price did not turn the project into new construction. General-contractor and subcontractor services were taxable. DRS says AN 94(4) obsoleted the ruling.

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 reflecting the real-property service rules then in effect for one factory-to-condominium conversion. DRS says Announcement (AN) 94(4) obsoleted it. Its renovation classification should not be assumed current or applied to projects involving different structural work. 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 -- obsolete historical guidance. DRS states that this ruling was obsoleted by Announcement (AN) 94(4).

Plain-English summary

A client planned to convert a vacant manufacturing building into residential condominiums. DRS treated the work as a renovation wholly within an existing building, not as new construction.

Two facts did not change that classification:

  • The building was vacant before work began.
  • Renovation costs were high compared with the building's purchase price.

DRS therefore ruled that the general contractor's and subcontractors' services were taxable under the historical real-property services provision.

What this means for you

Under the historical ruling, vacancy and project economics did not determine whether work was renovation or new construction. DRS focused on the work occurring within the structure of the existing building.

Common questions

Did converting the building from manufacturing to residential use make it new construction? No. DRS still classified the project as renovation.

Did a high renovation cost compared with purchase price matter? No.

Were subcontractor services included? Yes. The ruling treated services of both the general contractor and subcontractors as taxable.

Citations and references

  • Conn. Gen. Stat. § 12-407(2)(i)(I).
  • Announcement (AN) 94(4) -- identified by DRS as obsoleting this ruling.

Source

Original ruling text

Ruling 90-31, Renovations

Ruling 90-31

Renovations

This Ruling has been obsoleted by  AN  94(4)

The Department considers your client to be involved in a renovation project solely within the structure of an existing building.

The fact that the building is vacant prior to the start of the renovation project is immaterial to the application of the sales tax. Likewise, the fact that there is a high construction cost for the renovation work in relation to the purchase price of the building does not permit renovation work to be categorized as new construction. Finally, with respect to the policy considerations set forth in your request, our agency is not the proper forum for the resolution of these issues.

Based on the foregoing, it is ruled that the services rendered by a general contractor and its subcontractors to convert a vacant manufacturing building to residential condominiums constitutes a taxable sale under Connecticut General Statute Sections 12-407(2)(i)(I).

LEGAL DIVISION

March 7, 1990

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