Ruling 89-116, Renovation

Example 1: A company overbuilt a building prior to July 1, 1989 and left the overbuilt portion idle to accommodate future growth of the organization. After the building had been occupied by the corporation, further construction was performed within the unused portion of the building to prepare it for the company's use.

In Example 1, the initial fit out work provided to the unused portion of the building is not subject to sales and use tax because it is considered to be new construction pursuant to section 12-407(2)(i)(I) of the Connecticut General Statutes, as amended by Public Act No. 89-251. However, if any use, e.g., storage, is made of the unfinished portion of the building prior to the initial fit out work being performed, then the fit out work would be taxable as a renovation to the building.

Example 2: A new building is constructed for rental purposes. The building will be rented to industrial business and other firms for offices. The building is fitted out or finished out as the space is allocated to the new tenants prior to the original occupancy.

In Example 2, the initial fit out work or finish out work rendered to the building is considered services to new construction and is not taxable pursuant to section 12-407(2)(i)(I) of the Connecticut General Statutes, as amended by Public Act No. 89-251.

Please note that the services referred to in both situations are services that fall under the purview of section 12-407(2)(i)(I) of the Connecticut General Statutes, as amended by Public Act No. 89-251.

LEGAL DIVISION

September 26, 1989