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Ruling 89-274

Exemption - Governmental

You request clarification of the application of the sales tax on services provided to the State of Connecticut. The Department of Public Works enters into contracts with architects in order to design State projects. The architect is responsible for providing a complete design for new facilities. The architect will, in turn, enter into contracts with engineers, surveyors, boring contractors and other subcontractors to do part of the design for the State project.

Sales of property and services directly to the State of Connecticut are exempt from sales and use tax pursuant to Conn. Gen. Stat. § 12-412(1). In addition, Conn. Agencies Regs. § 12-426-26(h) provides that:

services in connection with work done for . . . the State of Connecticut . . . are exempted from the tax.

Accordingly, subcontractors of architects for State projects whose services are directly connected with the project are exempt from the tax on those services. Those services would normally include engineering, land surveying and landscaping services.

Services purchased by a state contractor that are incidental to the services being performed for the State are deemed to be used by the contractor and are not exempt from tax. An example of these services would be guard services or personnel services purchased by a state contractor during the construction phase of a contract. (See White Oak Corporation v. Department of Revenue Services, 198 Conn. 413.) These latter types of services are not regarded as directly connected with the projects but are instead used by the contractor in fulfilling its contract.

Accordingly, where services rendered in connection with a State project are an integral, inseparable component of the ultimate service rendered to the State, those services are not subject to sales tax. However, where services are incidental to performing the contract for the project, those services will be deemed to be subject to sales tax.


December 12, 1989