This TSSN is obsoleted in part by AN 2000(8)

TSSN 90-2

Special Notice - Sales and Use Tax

The following information outlines the 1990 Sales and Use Tax legislation. The new legislation becomes effective July 1, 1990, unless otherwise noted.

Late Payment Penalty - The penalties imposed by Sections 12-415, 12-416, and 12-419 for Sales and Use Tax and Room Occupancy Tax which become due on or after July 1, 1990 will increase from 10% or $50, whichever amount is greater, to 15% or $50, whichever amount is greater.

Interest Rate - The interest rate imposed by Sections 12-414, 12-415, 12-416, and 12-419 for Sales and Use Tax or Room Occupancy Tax which become due on or after July 1, 1990 will increase from 1 1/4% per month to 1 2/3% per month.

Additional Penalty and Interest for Outstanding Balance - An additional penalty in the amount of 5% will be assessed on any outstanding balance of Sales and Use Tax or Room Occupancy Tax at the rate of 1 2/3% per month beginning on or after July 1, 1990. An outstanding balance is any unpaid Sales or Use Tax or Room Occupancy Tax which became subject to penalty and interest prior to July 1, 1990. No adjustment of penalty and interest will be made on cases subject to settlements approved by the Department prior to July 1, 1990.

Consignees' Services - The services of a consignee selling works of art or articles of clothing or footwear are not taxable.

1. "Works of art" include but are not limited to sculpture, painting, drawings, photography, prints, tapestries, weaving, file video tape, folk arts and crafts, graphic design, pottery and architectural sketches.
2. "Articles of clothing or footwear" include clothing or footwear intended to be worn on or about the human body. "Articles of clothing or footwear" do not include special clothing or footwear primarily designed for athletic activity or protective use and jewelry, handbags, luggage, umbrellas, wallets, watches and similar items.

Credit for Bad Debt when Retailer Files Federal Tax Returns on a Cash Basis - Although Sales and Use Tax returns are still required to be files with the Department on an accrual basis method of accounting, retailers on the cash basis method of accounting for federal income tax purposes may receive a credit for sales tax paid to this Department on any sales made on or after July 1, 1989 that are subsequently determined to be worthless. (Refer to Bulletin No. 26 for further information.)

Resale Certificates, Expanded Use by Service Providers - Service providers rendering enumerated services may purchase other enumerated services on a resale certificate that become an integral and inseparable component part of the service to be resold to the final consumer providing:

1. The purchases of the enumerated service for resale issues a bona fide Regulation 1 Resale Certificate to the supplier.
2. The purchaser of the service for resale separately states the cost of this service on the bill or invoice to the final consumer.
3. The services being purchased and resold are any of the services included in Section 12-407 (2) (i) of the Connecticut General Statutes.
4. The service being purchased for resale becomes an integral and inseparable component part of the service to be resold.

(The Department will be publishing a Special Notice concerning purchases of integral and inseparable component parts for resale that will contain further information and examples.)

Business Analysis, Management, Management Consulting and Public Relations Services - Section 12-407 (2) (i) (J) is amended by addition of the word "MANAGEMENT" to modify consulting services. Management consulting services mean services performed in rendering advice concerning the operations and functions of businesses and providing assistance pertaining to the management of a business. Management consulting services do not include services such as marketing, investment, investment banking, engineering, insurance, auditing, and accounting.

Retailers - A "retailer" as defined in Section 12-407 (12) and 12-407 (15) of Connecticut General Statutes now is defined to include an out-of-state company that is owned or controlled either directly or indirectly by a retailer engaged in business in this state in the same or a similar line of business or an out-of-state company that is owned or controlled by the same interests that own or control either directly or indirectly a retailer engaged in business in this state in the same or a similar line of business.

Lodging Facilities Provided by Nonprofit Charitable Organization - Sales tax will not apply to rent charges for room occupancy in any facility operated by nonprofit charitable organizations holding a valid Sales and Use Tax Permit issued by the Department of Revenue Services provided that the income from such lodging accommodations at such facility is not subject to federal income tax.

Exemptions - The following sales of tangible personal property are exempt from the sales and use tax:

• Medical or Surgical Training Films - Materials or equipment which become an ingredient or component part in the production or transmission of finished video/audio programs used for accredited medical or surgical training on or after October 1, 1986.
• Metal Casting Foundries - Molds, dies, patterns and sand handling equipment purchased by metal casting foundries, effective April 1, 1985.
• Pattern Shops - Molds, dies and patterns sold by pattern shops to metal casting foundries or their customers for use in such foundries and the purchase or use of any such items by pattern shops in connection with any such sales, effective April 1, 1985.
• Sales by Eleemosynary Organizations or Elementary and Secondary Schools - The exemption for sales by eleemosynary organizations for purposes of youth activities and elementary or secondary schools is increased from five to twenty dollars per item.

TSSN 90-2 (New 5/90)