Ruling 90-43

Services of an Agent

This Ruling has been cited by Ruling 93-3; obsoleted by AN 2000(8)

ISSUE PRESENTED:

Whether the various fees charged by X Company are subject to Connecticut sales and use tax as "services of the agent of any person in relation to the sale of any item of tangible personal property for such person" pursuant to section 12-407(2)(i)(U) of the Connecticut General Statutes, as amended by Public Act No. 89-251.

FACTS:

X Company is a corporation engaged in the business of storing and auctioning motor vehicles. It is a licensed Connecticut motor vehicle dealer and also has a Connecticut motor vehicle dealer's auction permit which allows X Company to operate "dealer to dealer" motor vehicle auctions. All of the vehicles auctioned by X Company are purchased by licensed motor vehicle dealers for resale.

In the course of its business operations, X Company charges certain fees to the sellers or purchasers of the vehicles in the following manner:

1. Dealer registration fee: This is a one-time initial sign-up fee to all motor vehicle dealers who use the auction to sell or purchase vehicles. It is in the nature of an admission charge and is paid regardless of whether the registrant sells or purchases any vehicles at the auction.
2. Entry fee: This is a flat fee charged to the owners (sellers) of motor vehicles for each vehicle going through the auction. This fee entitles the owner to have X Company's employees drive the car through the auction lanes.
3. Selling commission: This is a sales fee charged to the vehicle's owner for selling it at wholesale and is based upon the auction price of the vehicle.
4. Title attached fee: This is a flat fee charged to the vehicle owner for performing title work at a later time if the title is not presented at the time of sale.
5. Buying commission: This is a fee charged to the purchaser of the vehicle based on the auction sales price of the vehicle.
6. Storage fee: This is a fee charged to certain fleet sellers and automobile manufacturers for storage of their vehicles at X Company's facilities.

RULING:

A. The Department rules that the following fees are subject to the sales and use tax pursuant to section 12-407(2)(i)(U).

1. Selling commission: The selling commission is the fee charged by X Company to the owner of the vehicle for its services rendered in selling the vehicle at auction. The fee is based on the auction price of the vehicle. As such, X Company's services fall directly within the scope of section 12-407(2)(i)(U).

In imposing the sales and use tax on "services of the agent of any person in relation to the sale of any item of tangible personal property," the General Assembly purposely used all inclusive language and made no exception for wholesale auctions.

X Company is a corporation engaged in the business of storing and auctioning motor vehicles at wholesale. As such, its services cannot be characterized as the services of a manufacturers' representative.

X Company's services are rendered in Connecticut and the benefit of X Company's services are received by sellers at the time the motor vehicle is sold at auction. The fact that some of the sellers at X Company's auctions may be from outside of Connecticut is immaterial to the imposition of section 12-407(2)(i)(U).

2. Entry fee: The entry fee is subject to sales and use tax under section 12-407(2)(i)(U) because it represents a fee charged by the seller's agent for sale to drive the vehicle through the auction. This fee also establishes an appraised value for the vehicle. The Department considers these activities to be among the services rendered by the agent for sale within the scope of the statute.

3. Title attached fee: This is a flat fee which X Company charges to a motor vehicle owner when it has to perform work on the vehicle's title when the title was not presented at the time of auction. As the title to the motor vehicle is a key element in the transfer from seller to buyer, the Department considers these services performed by X Company to be among its services as an agent for the sale of tangible personal property and thus subject to sales and use tax pursuant to section 12-407(2)(i)(U).

B. The Department rules that the following fees are not subject to sales and use tax pursuant to section 12-407(2)(i)(U):

1. Dealer registration fee: This initial sign-up fee is charged to all motor vehicle dealers to be present at the auction and is not contingent on whether the registrant sells or purchases any vehicles at the auction. Accordingly, this fee does not come within the services enumerated in section 12-407(2)(i)(U).

2. Buying commission: This fee is not subject to sales and use tax. The buyer's fee is a separate charge to the purchaser, in addition to the auction price of the vehicle, and does not fall within the taxable service enumerated by section 12-407(2)(i)(U).

3. Storage fee: This fee is charged to fleet sellers and automobile manufacturers for the storage of their vehicles at X Company's facilities. Storage is not an enumerated service and, therefore, storage fees are not subject to the sales and use tax. These fees must be related to the actual storage for the vehicles.

James F. Meehan
Commissioner

April 25, 1990