CT sales tax rules put construction firms at risk

Invoice Slattery
FML

Invoice Claffey
FML

Constructing and enchancment contractors have A multitude of complicated factors to Deal with When it Includes gross sales and use taxes in Connecticut. The Division of Income Providers went So far as to problem a 104-Website guide To assist the enterprise Deal with The numerous complicatedities.

In apply, the guide created extra questions than it answered, notably Inside The world of whether or not or not sure services are taxable Contained in the state. With out understanding it, contractors typically expose themselves to hazard Of An monumental gross sales tax audit adjustment And regularly Discover your self paying taxes they don’t Want to.

Knowing when To collect gross sales tax: In figuring out if a contractor is required To collect gross sales tax on a given sale, the state considers three parts — The Sort of service being carried out, The Sort of property receiving the service, and whether or not or not the purchaser is exempt from gross sales tax.

Sales of tangible private property are topic to tax till A particular exemption Referring to the purchaser applies. One event of exempt sale Can be an inclined stairway chairlift To be used by somebody with a incapacity.

Providers to enterprise, industrial or revenue-producing property are topic to gross sales tax till an exemption applies to the purchaser as properly, Similar to nonprofit organizations. Sales of sure services Similar to restore and upkeep are topic to tax For every Sort of exact property.

Set up vs. upkeep

The DRS guide provides An inventory of services that particulars the variations between installation versus restore or upkeep of property. Usually, installation services Aren’t taxable when carried out to proprietor-occupied residential property and new enchancment.

Repair and upkeep services in widespread are taxed to The client on each labor and parts. This definition has triggered most contractors to pay the gross sales tax upon buying for parts After which cost the gross sales tax as quickly as extra to The client. Rather than effectively paying the tax twice, contractors ought to use a resale certificates when buying for “integral parts” for the job.

Although Connecticut gross sales tax guidelines for enchancment corporations are terribly complicated and non-intuitive, it’s important to take the time to get it proper. Sales tax audits Aren’t unwidespread for enchancment corporations, and On this aggressive, low-margin enterprise, a sudden tax bill you weren’t anticipating Might be devastating.

Invoice Slattery and Invoice Claffey are companions at FML, Glastonbury, Conn.