Bulletin #43

Taxpayer Services Division
New 11/90
Sales Agent Services

This Bulletin is obsoleted by AN 2000(8)

Introduction

This bulletin provides definitions of brokers, auctioneers, consignees and manufacturer's representatives for the purpose of interpreting sales agent services. The services of the agent of any person in relation to the sale of any item of tangible personal property for such person is a "sales agent service." Sales agent services are subject to Sales and Use Tax pursuant to Section 12-407 (2) (i) (U) of the Connecticut General Statutes.

BROKER

Service - A broker is an agent who, for a commission or brokerage fee, bargains or carries on negotiation of contracts on behalf of his principal as an intermediary between the latter and third persons relative to the sale of personal property. Accordingly, a broker is a middleman who is hired by the seller to negotiate contracts for the sale of tangible personal property between the buyer and seller. A broker's duties require him to deal merely with the contracting parties rather than with the property to which the contract relates. A broker is not entrusted with possession and title of the goods bought and sold and has no special property interest. A broker may or may not disclose to the buyer the name of the seller he represents. The broker generally deals with a particular or identifiable item or property which has been previously purchased at retail by the seller. A broker's service is considered to be a sales agent service.

Property - A broker of tangible personal property is not considered to be a retailer or seller of tangible personal property.

Registration - A broker of tangible personal property must register for collection of Sales and Use Tax. The broker must check "SERVICE" under Line 5 of the Application for Tax Registration Number, Reg-1.

Taxation

1. A broker of tangible personal property must apply Sales and Use Tax to the total brokerage fee or commission that he charges the seller.

2. If a broker of tangible personal property charges a commission to the buyer, the commission is not taxable. However, the total amount of the commission paid by the buyer is subject to tax as part of the gross receipts for sale of the goods.

3. A broker of tangible personal property does not charge Sales and Use Tax for the retail sale of the goods for which he negotiates or arranges the contract of sale.

4. If the seller represented by the broker is engaged in selling the property in the regular course of business, the seller is liable for collection of the Sales and Use Tax from the buyer. If the seller is making a "casual sale" pursuant to Section 12-426-17 of the Regulations of Connecticut State Agencies, the Sales and Use Tax does not apply to the sale.

AUCTIONEER

Service - An auction is a public sale by competitive bidding to the highest bidder. An auctioneer is usually selling the property of another and is entrusted with possession of the property for the purpose of sale. The auctioneer does not take title to the goods that he is selling at auction. The auctioneer's authority to conduct the sale is derived from the person whose property he undertakes to sell. The auctioneer is primarily the agent of the person whose property he is selling at auction and acts in the interest of this person. An auctioneer's service is considered to be a sales agent service.

Property - An auctioneer is considered to be a retailer of tangible personal property.

Registration - An auctioneer of tangible personal property must register for collection of Sales and Use Tax. The auctioneer must check off "RETAIL" and "SERVICE" under Line 5 on the Application for Tax Registration Number, Reg-1.

Taxation

1. An auctioneer of tangible personal property must apply Sales Tax to the total fee or commission that he charges the person for whom he acts as agent.

2. If an auctioneer of tangible personal property charges a commission to the buyer, the commission is not taxable. However, the total amount of the commission paid by the buyer is subject to tax as part of the gross receipts for the sale of the goods.

3. An auctioneer of tangible personal property must apply Sales Tax to the total gross receipts that he charges the purchaser for the sale of the property sold at auction.

CONSIGNEE

Service - A consignee receives and sells goods on consignment in the regular course of business. A consignee is entrusted with possession of the goods for the purpose of sale; however, title to the goods remains with the consignor until such time that the sale of the goods is completed. The consignee has the power to sell these goods and may sell the goods in his own name without disclosing that he is conducting business as a consignee and without disclosing the name of the consignor. A consignee initiates the contract of sale or purchase and carries it through to performance on behalf of the consignor. A consignee has a special property interest in the property of his consignor. A consignee's service is considered to be a sales agent service.

Property - A consignee is considered to be a retailer of tangible personal property.

Registration - A consignee of tangible personal property must register for collection of Sales Tax. The consignee must check "RETAIL" and "SERVICE" under Line 5 on the Application for Tax Registration Number, Reg-1.

Taxation

1. The commission that a consignee charges to the consignor for the sale of tangible personal property is subject to Sales and Use Tax unless the consignee is selling articles of clothing or works of art.

2. If a consignee of tangible personal property charges a commission to the buyer, the commission is not taxable. However, the total amount of the commission paid by the buyer is subject to Sales and Use Tax as part of the gross receipts for the sale of the goods.

3. A consignee of tangible personal property must apply Sales and Use Tax to the total sales price that he charges the purchaser for the sale of the property sold on consignment.

MANUFACTURER'S REPRESENTATIVES

Service - A manufacturer's representative sells a line of new products on an ongoing or repetitive basis. A manufacturer's representative may represent one or more manufacturers to his client. A manufacturer's representative usually does not take possession or title to the property that he sells on a recurring basis. A manufacturer's representative takes an order and deposit (if any) from his client and forwards it to the manufacturer for acceptance or approval of the sale. A manufacturer's representative receives a commission from the manufacturer when the sale of the property is completed. A manufacturer's representative service is not considered to be a sales agent service because the manufacturer's representative is not hired to sell an item of tangible personal property, but, instead, is hired to sell lines of products on an ongoing basis.

Property - A manufacturer's representative and/or the manufacturer are considered to be retailers of tangible personal property.

Registration - A manufacturer's representative must register for collection of Sales Tax if any of the manufacturers that he represents is not registered for collection of Connecticut Sales or Use Tax. In this situation the manufacturer's representative must check "RETAIL" under Line 5 on the Application for Tax Registration Number, Reg-1.

Taxation

1. The commission received by the manufacturer's representative from the manufacturer for selling a line of goods is not subject to Sales and Use Tax.

2. A manufacturer's representative or the manufacturer is required to charge the Sales and Use Tax to the purchaser for the sale of a line of goods. If the manufacturer is not registered for collection of Connecticut Sales and Use Tax, the manufacturer's representative must be registered and must collect and remit the tax on any taxable sale for which he received a commission. The manufacturer and the manufacturer's representative may be held jointly and severally liable for collection and payment of the Sales and Use Tax.