LSN-96

LSN - 96

Special Notice Concerning Taxation of Repair or Maintenance Services to Tangible Personal Property

This LSN is cited in Ruling 89-40
Obsoleted in part by AN 2000(8)

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I. GENERAL STATEMENT

The purpose of this notice is to provide general rules and illustrations regarding the application of the sales tax to repair or maintenance services on tangible personal property.

II. DEFINITIONS

A. Tangible Personal Property - personal property which may be seen, weighed, measured, felt or touched or which is in any other manner perceptible to the senses.

B. Services - an activity engaged in for other persons for a consideration other than the sale of real property, tangible property or intangible property.

C. Repair - to mend or bring back as near as possible to its original working order an item of tangible personal property that was broken, damaged, malfunctioning or defective. (Where used in this notice, the word "repair" shall include repair and/or maintenance services.)

D. Maintenance - to keep in good working order by preventing the decline, failure, lapse or deterioration of tangible personal property.

E. Rendered - the realization of the benefit of repair services which were performed on tangible personal property. This realization occurs in the place where the tangible personal property is used after being repaired.

F. Acceptance or Receipt - shall have the same meaning as "rendered" above.

G. Business Situs - the place where a business is concerned to be located; where it engages in its business functions and where its (repaired) property is generally kept, garaged or used.

H. Domicile - a person's true, fixed and permanent home and principal establishment. The place to which, whenever he or she is absent, he or she has an intention of returning. A valid driver's license shall be sufficient evidence of a person's domicile for these purposes only.

I. Vessel - Every description of watercraft, other than a seaplane on water, used or capable of being used as a means of transportation on the water.

III. GENERAL RULES

A. The taxation of the repair of tangible personal property must be divided into two components: the sale of tangible personal property (parts) and the sale of the services (labor).

1. The sale of tangible personal property.

The sale of tangible personal property is taxed at the time the transfer of title to such tangible personal property occurs. Such transfer occurs at the time the repaired property is turned over to the purchaser.

2. The sale of services.

The sales tax on services occurs where the benefit of the repairs is realized, i.e., in the place where the repaired property is used. Absent evidence to the contrary, the use of such repaired property presumed to occur in this state. Therefore, the retailer will be required to collect a sales tax on the amount received for such services at the time the repaired property is turned over to the purchaser.

The presumption that the repaired property will be used in this state can be rebutted with proof by the purchaser that his or her domicile, in the case of an individual purchaser, or business situs, in the case of a business purchaser, is located outside of the state. In such case, it will be presumed that the use or benefit of such services will be realized outside the state, unless the purchaser engages in a significant intervening use in Connecticut. Absent such intervening use in Connecticut, the retailer will not be required to collect a tax on the amount received for such services.

Exception: Repairs to Vessels

The use or benefit of repair services to vessels shall be presumed to occur in this state and therefore be subject to tax. A retailer shall be relieved of having to collect the tax only where all of the following conditions are met:

1. the purchaser shows that his/her domicile, in the case of an individual purchaser, or business situs in the case of a business purchaser, is located outside the state,
2. the vessel is registered outside the state, AND
3. the purchaser's vessel is not currently being moored or berthed in Connecticut waters. 

B. Use of Services in Several States

Absent evidence to the contrary, the use or benefit of repair or maintenance services is presumed to occur within this state. No apportionment of consideration received for such services shall be made even though a Connecticut purchaser may intend to make substantial use of such services outside of the state. In such case, the full amount received for the services shall be subject to tax. Nor shall there be any apportionment made even though a non-Connecticut purchaser may engage in temporary and brief use of such services prior to removal of such repaired property from the state. In such case, no portion of the amount received for the services shall be subject to tax.

IV. ILLUSTRATIONS

A. Connecticut retailer repairs tangible personal property of a Connecticut purchaser.

The sale of the property (parts) occurs at the time of the property is turned over to the purchaser. Therefore, the retailer must collect the sales tax on the consideration received for the property at the time the property is turned over to the purchaser. With respect to the sale of the services (labor), it is presumed that the Connecticut purchaser shall use or benefit from the repair services in the state and therefore the retailer must collect the sales tax on the amount received for the services.

Therefore, the total sales price shall be subject to the sales tax at the time of the sales transaction.

B. Connecticut retailer repairs tangible personal property of a non-Connecticut purchaser.

The taxation of the property (parts) occurs at the time the property is turned over to the purchaser (as above).

With respect to the sale of the services (labor) it is presumed that the use or benefit from such repair services will occur in this state. If, however, the non-Connecticut purchaser shows that his or her domicile or business situs is located outside the state, then it will be presumed that the use or benefit shall occur outside the state. In such case, the Connecticut retailer will not be required to collect a sales tax on the amount received for the service portion of the transaction.

C. A non-Connecticut retailer repairs tangible personal property of a Connecticut purchaser.

The tangible personal property (parts) as well as the use of the services (labor) will be presumed to occur in Connecticut. In such case, the Connecticut purchaser is required to pay a use tax of 8% of the amount paid for the total sale outside the state.

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LSN-96 (NEW 7/89)