PS 96(7)

Purchases of Meals or Lodging by Exempt Organizations or Qualifying Governmental Agencies

This publication has been superseded in part by SN 98(11), modified by PS 2000(1.1) and amplified by IP 2002(11)and superseded by PS 2003(4)

BACKGROUND: In 1985 the Department of Revenue Services adopted a policy that required preapproval of requests for exemption from sales and use taxes, including room occupancy tax, on the purchase of meals or lodging. Under this policy, which is explained in Bulletin 34, Purchases of Meals/Lodging By Exempt Organizations (Rev. 11/90), exempt organizations and qualifying governmental agencies have been required to submit requests for approval of exemption to the Department of Revenue Services prior to their purchase of meals or lodging. The approval requests have been submitted using Bulletin 34A, Application for Approval of Sales Tax Exemption for Meals and/or Lodging. If approval was granted, the Taxpayer Services Division would provide a letter of exemption to the organization or agency which in turn, would provide it to the retailer of meals or lodging. The letter of exemption would authorize the retailer of meals or lodging to exempt that particular sale of meals or lodging from sales and use taxes.

On June 7, 1995, the General Assembly passed 1995 Conn. Pub. Acts 359, §2 which amends the exemption from sales and use taxes for purchases made by exempt organizations under Conn. Gen. Stat. §12-412(8). The Department then issued AN 95(10), Procedures for Qualified Exempt Organizations Making Purchases Exempt From Sales and Use Taxes, and SN 95(10), Legislative Changes Affecting Exempt Purchases By Exempt Organizations, that set forth new procedures for making purchases, other than purchases of meals or lodging, on or after October 1, 1995.

PURPOSE: This Policy Statement reaffirms the requirement established by the Department for preapproval of requests for exemption from sales and use taxes on qualifying exempt purchases of meals or lodging. It modifies and supersedes Bulletin 34 and Bulletin 34A by changing the procedures for requesting approval of exemption on such purchases. These changes in procedures include changes concerning the application for preapproval or refund and the required form of payment for exempt purchases of meals or lodging. This Policy Statement also requires that new certificates now be used to request preapproval of exemption for purchases of meals or lodging or to request a refund of sales tax paid on qualifying exempt purchases of meals or lodging by exempt organizations or qualifying governmental agencies.

EFFECTIVE DATE: Effective upon issuance for sales and purchases to be made on or after August 1, 1996.

DEFINITIONS:

Qualifying governmental agency means an agency of the United States, the State of Connecticut or a Connecticut municipality. Qualifying governmental agency does not include an agency of another State or of a municipality of another State. Exempt organization means any organization that was either:

1. issued an exemption permit before July 1, 1995 by the Department of Revenue Services under Conn. Agencies Regs. §12-426-15, or
2. an organization that is exempt from federal income tax under section 501(a) of the Internal Revenue Code and that has been determined, by a determination letter issued by the United States Treasury Department, to be an organization described under section 501(c)(3) or (13) of the Internal Revenue Code.

Department means the Department of Revenue Services. Retailer of meals or lodging means any hotel or lodging house, as defined in Conn. Gen. Stat §12-407(16) or (17), respectively, and any "eating establishment," as defined in Conn. Agencies Regs. §12-426-29(c)(2). Qualifying exempt purchase means a purchase of meals or lodging by an exempt organization or qualifying governmental agency (and not by its members, officers or employees), in furtherance of its exempt or governmental purpose, where all of the following conditions are met:

1. the exempt organization or qualifying governmental agency submits a properly completed CERT-112, Certificate for Qualifying Exempt Purchases of Meals or Lodging by An Exempt Organization or Qualifying Governmental Agency, to the Department, receives the CERT-112 back from the Department with the Department's official approval noted thereon, and submits the CERT-112 (with the Department's official approval noted thereon) to the retailer of meals or lodging; AND
   
2. the retailer of meals or lodging directly invoices and charges the exempt organization or qualifying governmental agency for the meals or lodging; AND
3. the exempt organization or qualifying governmental agency directly pays the retailer of meals or lodging for such purchase with a check drawn on its own account or with a credit card issued in the organization's or agency's name (not in the name of one of its members, employees or officers). Cash payments will not satisfy this condition, regardless of the cost of the meal; AND
4. the exempt organization or qualifying governmental agency is not reimbursed, in whole or in part, either by charging those in attendance or by requiring what is purported to be a "donation" from them, for the cost of the meals or lodging.

CREDIT CARD PURCHASES: If a credit card is used to pay the retailer of meals or lodging, the card must be used exclusively to make purchases for the use of the exempt organization or qualifying governmental agency (not for the convenience of its officers, employees or members), and the credit card charges must be paid by check drawn on the organization's or agency's own checking account

REIMBURSEMENT IN WHOLE OR IN PART: If the exempt organization or qualifying governmental agency is not reimbursed, in whole or in part, for certain meals or lodging at an event, but is reimbursed for other meals or lodging at the same event, the purchase of the meals or lodging for which the organization or agency is not reimbursed, in whole or in part, may, if all other conditions are met, be a qualifying exempt purchase (while the purchase of the meals or lodging for which the organization or agency is reimbursed, in whole or in part, will not be a qualifying exempt purchase). However, if the exempt organization or qualifying governmental agency is reimbursed in whole or in part for all meals or lodging at the same event, the purchase of the meals or lodging will not be a qualifying exempt purchase.

NOTE: If the purchase is at least in part a qualifying exempt purchase because the exempt organization or qualifying governmental agency is not reimbursed, in whole or in part, for some (but not all) of the meals or lodging at the same event, the exempt organization or qualifying governmental agency must pay tax on all of the meals or lodging purchased and seek a refund of the tax paid on the qualifying exempt purchase. See Application for Refund of Taxes Paid in this publication.

EXAMPLE 1: An exempt organization sells tickets for $50 each to a dinner that it is sponsoring to honor one of its members, but the honoree and her spouse will be nonpaying guests of the organization. The restaurant directly invoices and charges the exempt organization $50 per meal, and the exempt organization, with a check drawn on its own checking account, directly pays the restaurant for all the meals. Because the exempt organization was not reimbursed at all for the meals for the honoree and her spouse, only the purchase of the meals for the honoree and her spouse will be a qualifying exempt purchase. The purchase of all the other meals will be a nonqualifying purchase, because the organization was reimbursed, in whole or in part, for those meals. The organization must pay tax to the retailer on all the meals purchased, including those meals (for the honoree and her spouse) for which it received no reimbursement. However, it may seek a refund from the Department for the taxes paid on the meals for which no reimbursement, full or partial, was received. See Application for Refund of Taxes Paid in this publication.

EXAMPLE 2: An exempt organization sells tickets for $10 each to a dinner that it is sponsoring to honor its volunteers. The restaurant directly invoices and charges the exempt organization $25 each per meal, and the exempt organization, with a credit card issued in the organization's name, directly pays the restaurant for all the meals. The purchase of the meals is a nonqualifying purchase, even though the organization was only reimbursed in part for the meals.

Nonqualifying purchase means a purchase of meals or lodging by an exempt organization or qualifying governmental agency not meeting all four conditions that are set out above. Some examples of purchases that are nonqualifying purchases include a fund raiser for an exempt organization, where those in attendance are charged or are required to make what is purported to be a "donation" for the cost of the meals or lodging; or a seminar or conference that is sponsored by an exempt organization where meals or lodging are provided at no additional expense to those paying the registration fee to the seminar or conference. (Events such as high school or college reunion dinners, class picnics, proms, holiday parties, or any other event where an exempt organization or qualifying governmental agency collects reimbursement, full or partial, for the cost of meals or lodging from attendees and pays the retailer with its own check, are taxable events because they do not involve purchase of meals by exempt organizations or by qualifying governmental agencies.)

NEW PROCEDURES FOR EXEMPTION REQUESTS: A retailer of meals or lodging must charge tax on the sales of meals or lodging unless the retailer is presented with a CERT-112, Certificate for Qualifying Exempt Purchases of Meals or Lodging by An Exempt Organization or Qualifying Governmental Agency, that (1) has been completed by an exempt organization or qualifying governmental agency for a particular purchase of meals or lodging, (2) has been submitted by the exempt organization or qualifying governmental agency for approval to the Department and (3) has been approved by the Department (with the Department's official approval noted thereon).

The Department will not approve a CERT-112 unless it has been properly completed by the exempt organization or qualifying governmental agency and has been submitted by an exempt organization or qualifying governmental agency at least three weeks prior to the date of the event at which qualifying exempt purchases of meals or lodging are to be made. Also, the Department will not approve a CERT-112 if an exempt organization or qualifying governmental agency is reimbursed, in whole or in part, for certain meals or lodging at a single event although it is not reimbursed, in whole or in part, for other meals or lodging; in such circumstances, the organization or agency will be required to pay tax on all the meals and lodging and may apply for a refund of tax on the particular meals or lodging for which the organization or agency was not reimbursed in whole or in part. Likewise, CERT-112 will not be approved if the exempt organization or qualifying governmental agency is reimbursed in whole or in part for all meals or lodging at the same event.

BLANKET CERTIFICATE: The Department may, at its discretion, choose to allow certain exempt organizations and qualifying governmental agencies that make frequent qualifying exempt purchases of meals or lodging to submit an application for a blanket certificate for all qualifying exempt purchases of meals or lodging occurring during a particular calendar year and to submit such application to the Department. If the application is approved, the Department will issue CERT-123, Blanket Certificate for Qualifying Exempt Purchases of Meals or Lodging by An Exempt Organization or Qualifying Governmental Agency, to the exempt organization or qualifying governmental agency, a copy of which may be issued to and accepted by retailers of meals or lodging for qualifying exempt purchases made by the exempt organization or qualifying governmental agency during the prescribed period of time.

APPLICATION FOR REFUND OF TAXES PAID: If the exempt organization or qualifying governmental agency does not receive prior approval of exemption from the Department, either because it is reimbursed, in whole or in part, for certain meals or lodging (although not reimbursed, directly or indirectly, for other meals or lodging) or because it does not submit a properly completed CERT-112 at least three weeks prior to the event, the exempt organization or qualifying governmental agency must pay the tax on all the meals or lodging to the retailer at the time of the purchase and may request a refund of sales tax paid on the particular meals or lodging for which it was not reimbursed, in whole or in part, by submitting a properly completed CERT-122, Certificate for Refund of Sales Tax Paid on Exempt Qualifying Purchases of Meals or Lodging by an Exempt Organization or Qualifying Governmental Agency, to the Department.

The following items must be included with the CERT-122:

1. a copy of an itemized bill directly invoicing and charging the exempt organization or qualifying governmental agency for the meals or lodging. The bill must separately state the amount of sales tax charged on the meals and on the lodging; AND
   
2. a copy of the canceled check(s) (front and back), including the initial deposit, drawn on the exempt organization's or qualifying governmental agency's checking account, directly paying for the meals or lodging.

USE OF U.S. GOVERNMENT "I.M.P.A.C." CREDIT CARDS UNAFFECTED: Subject to the conditions set out in PS 95(2), Retailer's Acceptance of U.S. Government "I.M.P.A.C." Credit Card for Purchases Exempt under Conn. Gen. Stat. §12-412(1), a qualifying exempt purchase of meals or lodging may be made by an employee of an agency of the United States Government using the I.M.P.A.C. credit card that is issued in the name of such employee. However, a qualifying exempt purchase may not be made by an employee of an agency of the United States Government using an American Express or any other credit card issued in the name of such employee.

DIPLOMATS UNAFFECTED: Purchases of meals or lodging by diplomatic personnel are unaffected by this Policy Statement. For further information about the procedures to be followed by diplomats seeking exemption from tax on the purchase of meals or lodging, see PS 93(2), Sales and Use Tax Exemptions for Diplomatic Personnel.

EFFECT ON OTHER DOCUMENTS: Bulletin 34 and Bulletin 34A are modified and superseded by this Policy Statement and may not be relied upon on or after the date of issuance of this Policy Statement.

EFFECT OF THIS DOCUMENT: A Policy Statement is a document that explains in depth a current Department policy or practice affecting the liability of taxpayers. Unlike a Special Notice, it does not announce a new policy or practice in response to changes in state or federal laws or regulations or to judicial decisions.

RELATED FORMS AND PUBLICATIONS:

CERT-112 Certificate for Qualifying Exempt Purchases of Meals or Lodging by an Exempt Organization or Qualifying Governmental Agency
CERT-122 Certificate for Refund of Sales Tax Paid on Exempt Qualifying Purchases of Meals or Lodging by an Exempt Organization or Qualifying Governmental Agency
CERT-123 Blanket Certificate for Qualifying Exempt Purchases of Meals or Lodging by an Exempt Organization or Qualifying Governmental Agency
AN 95(10) Procedures for Qualified Exempt Organizations Making Purchases Exempt from Sales and Use Taxes
SN 95(10) Legislative Changes Affecting Exempt Purchases by Exempt Organizations

FOR FURTHER INFORMATION: For further information concerning exempt purchases of meals or lodging, contact the Exempt Organization Coordinator at 860-297-5962.  

PS 96(7)
Sales and Use Taxes
Issued: 7/19/96