Ruling 89-17

Containers

This Ruling has been modified by PS 94(1)

As the result of discussions between the Department of Revenue Services and your Association, this letter embodies our agreement on the rules applicable to the past and future sales and use tax treatment of cartons and packing materials.

The adoption of these standards is made in the interest of administrative simplicity for the Department and to dispel any uncertainty on the part of the moving industry. The effective date of this agreement will be April 1, 1989.

Future Tax Treatment

1. Moving companies are regarded as the consumers of cartons acquired for use in connection with a move, without drawing fine distinctions among situations in which the company states an itemized charge for cartons used in the move, situations in which the customer retains the cartons after the move and those in which the moving company removes them.
2. The only exception to the general rule treating moving companies as the consumers of cartons would apply in those isolated situations in which a particular moving company also engages in over-the-counter sales of such material to purchasers not in the context of a move. In those cases, sales tax should be collected and remitted by the moving company on the over-the-counter sale. The moving company would take a credit for the amount of sales or use tax previously paid on its purchase of the cartons that are ultimately sold over-the-counter.
3. Purchases of cartons and other packing material by Connecticut moving companies are taxable under the sales and use tax without regard to whether the purchases occur within or without Connecticut, as long as cartons purchased out of state are physically brought into Connecticut by the moving company for storage or other use. In the future, no distinction will be drawn between the portion of a moving company's carton inventory to be used on intrastate moves and the portion to be used in interstate moves. In order to be nontaxable, cartons both purchased and stored out of state must be specifically identifiable and stored at a permanent and legitimate out-of-state location and must never be used subsequently in Connecticut other than in totally interstate moves which both originate and terminate out of the State of Connecticut and continue uninterrupted in the flow of interstate commerce.

Prior Period Tax Treatment

1. No sales tax liability will be assessed against moving companies for their sale of cartons to customers, except in the case of over-the-counter sales.
2. As to over-the-counter sales, the moving companies will be given a credit in audits for prior periods reflecting any sales and use taxes previously paid on the acquisition of cartons that are sold over-the-counter.
3. Sales tax will be paid on all carton purchases made from Connecticut vendors. In a case where the vendor failed to collect the tax, the use tax would be due and owing.
4. The use tax will apply to all carton purchases from out-of-state vendors to the extent that they are used totally in intrastate moves within Connecticut.
5. For the period April 1, 1988 to March 30, 1989, the purchase of cartons from out-of-state vendors, which were used in interstate moves, will be subject to Connecticut use tax only to the extent that they are used in interstate moves originating in Connecticut. Prior to April 1, 1988, out-of-state purchases of cartons used for interstate moves either originating in Connecticut or elsewhere will not be subject to use tax. To the extent that a moving company can demonstrate, by use of statistic sampling or other reasonable method of proof, that a percentage of its cartons purchased out of state were not used in such moves, that percentage of its carton purchases will be deemed nontaxable for these prior audit periods.

TIMOTHY F. BANNON
COMMISSIONER

June 23, 1989