PS 90(2)

Modular Home Units

This policy statement is a restatement of the Department's existing policy and is issued in response to major changes in the prevalent business practices by out-of-state manufacturers in the modular home industry and sets forth the Department's Sales and Use Tax treatment of various methods of doing business within the industry.

The prior business practice has been for the manufacturers to sell directly to the purchaser and to deliver, install and affix the modular units to the foundation either by its own employees or by a subcontractor under its direct supervision and control before the transfer of title took place. Under these circumstances, the Department has and will continue to treat the sale of the modular units as a construction contract for an improvement to real property. A Use Tax is due on the actual cost of the materials. In order for the manufacturer to be treated as a contractor, the actual placement of the modular home must be accomplished solely by employees of the manufacturer or a subcontractor under the direct supervision and control of the manufacturer. The manufacturer must complete delivery and installation by affixing the modulars to the foundation, by aligning them and bolting them together, installing support columns, and making the building weather-tight. The manufacturer cannot transfer title to the builder-dealer until delivery and installation are complete and the structure is affixed to the realty and in weather-tight condition. When the transfer of title cannot be readily ascertained, it will be presumed to be at the point of delivery before the actual placement onto the foundation and, therefore, considered to be a retail sale of tangible personal property.

Current business practices reflect a change whereby the manufacturer only delivers the modular unit to the building site and performs no connection or finishing services although in some cases the unit may be off-loaded onto the foundation. Under these circumstances, the Department considers the manufacturers of modular home units to be making retail sales of tangible personal property when the manufacturers passes title to any buyer before the unit becomes affixed to the permanent foundation, and, accordingly, the full amount of the sales prices is subject Sales and Use Tax. The Department requires the Sales and Use Tax to be collected on the full amount of such retail sales. See Zo-John, Inc v. Heffernan, Tax Commissioner, No. 139837 (Conn. Super. Ct. Sept. 2, 1980).

Transportation charges for delivery which occur prior to the passage of title are subject to the Sales and Use Tax. Transportation charges for delivery which occur after the transfer of title are not subject to Sales and Use Tax as long as the delivery charges are separately stated. 

Issued: 5-90