SN 95(10)

1995 Legislative Changes Affecting
Exempt Purchases by Exempt Organizations

This publication has been cited in AN 95(10); modified and superseded in part by SN 98(11)

BACKGROUND: 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 (generally, charitable and religious organizations) under Conn. Gen. Stat. §12-412(8). For sales occurring before July 1, 1995, exempt organizations that were issued a Connecticut Sales and Use Tax Exemption Permit by the Department of Revenue Services under Conn. Agencies Regs. §12-426-15 could purchase tangible personal property and taxable services exempt from sales and use taxes if the exempt organization made the purchase exclusively for its own use and paid for the purchase by a check drawn on its own account. When making exempt retail purchases, exempt organizations were required to give their retailers a Charitable and Religious Organizations Exemption Certificate, as described in Conn. Agencies Regs. §12-426-15(g).

PURPOSE: This Special Notice describes the effect of 1995 Conn. Pub. Acts 359, §2 on the exemption from sales and use taxes for purchases by exempt organizations under Conn. Gen. Stat. §12-412(8) and the new procedures that exempt organizations must follow when making purchases, other than purchases of meals and lodging, on or after October 1, 1995.

EFFECTIVE DATE: Effective upon issuance and applicable to all sales occurring on or after October 1, 1995.

STATUTORY AUTHORITY: Conn. Gen. Stat. §12-412(8), as amended by 1995 Conn. Pub. Acts 359, §2.

DEFINITIONS:

• Department means the Department of Revenue Services
• Determination letter means a written statement issued by a District Director of the Internal Revenue Service in response to a written inquiry by a taxpayer that applies principles and precedents previously announced by the National Office of the Internal Revenue Service to a specific set of facts. 26 C.F.R. §601.201(a)(3)
• Exempt organization means any organization that was either:
• issued an exemption permit before July 1, 1995 by the Department, which permit has not been canceled or revoked by the Department, or
• is exempt from federal income tax under section 501(a) of the Internal Revenue Code and has been determined, by a determination letter issued by the United States Treasury Department, to be an organization described in section 501(c)(3) or (13) of the Internal Revenue Code, which determination letter has not been revoked by the Internal Revenue Service.

EXEMPT ORGANIZATIONS ISSUED AN EXEMPTION PERMIT BEFORE JULY 1, 1995: Any exempt organization that was issued an exemption permit before July 1, 1995 by the Department under Conn. Agencies Regs. §12-426-15 can continue to make purchases exempt from sales and use taxes after July 1, 1995, even if the organization would not qualify under Conn. Gen. Stat. §12-412(8), as amended (because, e.g., the organization is not one described in section 501(c)(3) or (13) of the Internal Revenue Code). When making an exempt purchase on or after July 1, 1995 but before October 1, 1995, the exempt organization must issue to retailers at the time of each purchase a completed Charitable and Religious Organizations Exemption Certificate, the form of which is prescribed in Conn. Agencies Regs. §12-426-15(g), to which a copy of the organization’s exemption permit must be attached. When making an exempt purchase on or after October 1, 1995 the exempt organization must issue to retailers at the time of each purchase a completed CERT-119, Certificate for Purchase of Tangible Personal Property and Services by Exempt Organizations to which a copy of the organization’s exemption permit must be attached. Charitable and Religious Organizations Exemption Certificates are not to be used when making exempt purchases on or after October 1, 1995.

EXEMPT ORGANIZATIONS THAT WERE NOT ISSUED AN EXEMPTION PERMIT BEFORE JULY 1, 1995: Effective for purchases made on or after July 1, 1995, Conn. Gen. Stat. §12-412(8), as amended, provides an exemption from sales and use taxes for purchases made by any organization that is exempt from federal income tax under section 501(a) of the Internal Revenue Code and that the United States Treasury Department has expressly determined, by a determination letter, to be an organization described in section 501(c)(3) or (13) of the Internal Revenue Code.

An exempt organization that was not issued an exemption permit before July 1, 1995 by the Department pursuant to Conn. Agencies Regs. §12-426-15 may make exempt purchases on or after (1) the date of the determination letter issued by the Internal Revenue Service to the organization or the date on or after which a group exemption letter covers the exempt organization or (2) July 1, 1995, whichever is later.

When making an exempt purchase on or after July 1, 1995 but before October 1, 1995, the organization must issue to retailers at the time of each purchase a completed Charitable and Religious Organizations Exemption Certificate, the form of which is prescribed in Conn. Agencies Regs. §12-426-15(g), to which a copy of the organization’s determination letter or group exemption letter must be attached. When making an exempt purchase on or after October 1, 1995, the organization must issue to retailers at the time of each purchase a completed CERT-119 to which a copy of the organization’s determination letter or group exemption letter must be attached.

However, for exempt purchases made on or after January 1, 1996, an exempt organization that is covered by a group exemption letter, and that was not issued an exemption permit before July 1, 1995 by the Department pursuant to Conn. Agencies Regs. §12-426-15, must attach to a completed CERT-119 (i) a copy of its group exemption letter, (ii) a copy of the exempt organization’s written consent to its central organization to being covered by the group exemption letter and (iii) a copy of the central organization’s written notification to the Internal Revenue Service that the exempt organization consents to being covered by the group exemption letter.

EXEMPTION PERMITS WILL NO LONGER BE ISSUED AFTER JUNE 30, 1995: The Department will no longer issue exemption permits to exempt organizations after June 30, 1995.

USE TAX LIABILITY OF EXEMPT ORGANIZATIONS: An exempt organization is liable for use tax on any purchase of tangible personal property or services that are not used or consumed exclusively for the exempt purposes for which the organization was established or that are resold.

FORM OF PAYMENT FOR EXEMPT PURCHASES: An exempt organization must pay for its exempt purchases by a check drawn on its own checking account. An organization may make purchases using a credit card provided the credit card is issued in the organization's name (not the name of one of its members or officers), is used exclusively to make purchases for the use of the organization (not for the convenience of its officers or members), and the charges are paid for by check drawn on the organizations's own checking account. An exempt organization, however, may make an exempt purchase of goods or services for $10.00 or less using cash, provided the purchases are for its own use and are made with its own funds. However, a blanket CERT-119 may not be used for cash purchases, and a properly completed CERT-119, to which the appropriate documents are attached, must be presented to the retailer at the time of each cash purchase.

BLANKET CERTIFICATES: An exempt organization may issue, on an annual basis, a completed CERT-119, with the appropriate documents attached, as a blanket certificate. When issued to a retailer as a blanket certificate, the CERT-119 will cover retail purchases, other than purchases of meals and lodging, from the retailer that are made within one year after the date of issuance of the certificate, provided the circumstances surrounding the issuance of the certificate do not change. A blanket CERT-119 issued before January 1, 1996 by an exempt organization that is covered by a group exemption letter and that was not issued an exemption permit prior to July 1, 1995 by the Department expires no later than December 31, 1995, unless the documents that will be required to be attached to a CERT-119 that is issued on or after January 1, 1996 by an exempt organization covered by a group exemption letter were attached to the CERT-119 when issued.

PURCHASES OF MEALS AND LODGING BY EXEMPT ORGANIZATIONS: The procedures in Bulletin 34 and Bulletin 34A for purchases of meals and lodging by an exempt organization are not being changed at this time.

EFFECT OF THIS DOCUMENT: A Special Notice is a document that announces a new policy or practice in response to changes in State or federal laws or regulations or to judicial decisions. A Special Notice indicates the Department’s informal interpretation of Connecticut tax law and may be referred to for general guidance by taxpayers or tax practitioners.

EFFECT ON OTHER DOCUMENTS: LSN 91(1) and PS 91(2) are obsoleted and may not be relied upon after the date of issuance of this Special Notice. TSSN-42 is obsoleted in part and that part may not be relied upon after the date of issuance of this Special Notice.

FOR FURTHER INFORMATION: To order forms, certificates or publications, call the Department of Revenue Services at 203-566-7033 or 1-800-382-9463 (in-state). Telecommunications Device for the Deaf (TDD/TT) users only call 203-297-4911.

SN 95(10)
Sales and use taxes
Issued: 7/24/95