SN 98(10)

The "Buy Connecticut" Provision 1997 Conn. Pub. Acts 243, §48

This Special Notice has been cited in IP 2000(26); and superseded by SN 2001(5) 

PURPOSE: The purpose of this Special Notice is to describe new legislation that allows certain purchasers to obtain refunds of sales and use taxes paid on tangible personal property that is purchased from Connecticut retailers and is eventually shipped out of Connecticut for exclusive use outside Connecticut. This new legislation, known as the "Buy Connecticut" provision, also allows the Commissioner of Revenue Services to issue permits that enable qualified purchasers to purchase such property without payment of the taxes otherwise imposed by the Sales and Use Taxes Act, Conn. Gen. Stat. §12-406 et seq.

EFFECTIVE DATE: Effective for purchases occurring on or after June 24, 1997.

STATUTORY AUTHORITY: 1997 Conn. Pub. Acts 243, §48. (This provision has not yet been codified by the Legislative Commissioner’s Office.)

THE REFUND PORTION OF THE "BUY CONNECTICUT" PROVISION: Section (a)(1) of 1997 Conn. Pub. Acts 243, §48 provides:

Whenever any person carrying on a trade, occupation, business or profession in this state purchases from a retailer tangible personal property for use or consumption in carrying on such trade, occupation, business or profession, (A) for purposes of subsequently transporting such property outside this state by common or contract carrier for use or consumption thereafter solely outside of this state, or (B) for the purpose of being processed, fabricated or manufactured into, attached to or incorporated into, other tangible personal property to be transported outside this state by common or contract carrier, and thereafter used or consumed solely outside the state, such person may claim a refund of the taxes imposed by chapter 219 of the general statutes on the purchase of such property.

Section (a)(1) of 1997 Conn. Pub. Acts 243, §48 allows taxpayers purchasing tangible personal property from Connecticut retailers to obtain refunds of sales and use taxes paid, where the property is eventually shipped out of Connecticut for exclusive use by the purchaser outside Connecticut. Under this provision, tangible personal property purchased from Connecticut retailers may be either stored in Connecticut and subsequently shipped out of Connecticut, or "processed, fabricated or manufactured into, attached to or incorporated into, other tangible personal property" that is subsequently shipped outside Connecticut.

The "Buy Connecticut" provision imposes certain restrictions and requirements that taxpayers must satisfy in order to file claims for refund. An explanation of these restrictions and requirements is set forth below.

TANGIBLE PERSONAL PROPERTY FOR USE IN A TRADE, OCCUPATION BUSINESS OR PROFESSION: 1997 Conn. Pub. Acts 243, §48 applies to "any person carrying on a trade, occupation, business or profession" in Connecticut who "purchases from a retailer tangible personal property for use or consumption in carrying on such trade, occupation, business or profession." From its language, it is clear that 1997 Conn. Pub. Acts 243, §48 is intended to apply only to businesses, and not to individuals other than sole proprietors of businesses or single-member limited liability companies.

TRANSPORTATION OF TANGIBLE PERSONAL PROPERTY BY COMMON OR CONTRACT CARRIER: In order to obtain refunds of use tax paid, a taxpayer must purchase tangible personal property from a Connecticut retailer for "use or consumption" in its "trade, occupation, business or profession" and must eventually ship such property outside of Connecticut by "common or contract carrier." Taxpayers will not be allowed to transport tangible personal property purchased under this provision out of Connecticut in their own vehicles or in vehicles owned by the retailers of the property.

A common carrier is "[a]ny carrier required by law to convey . . . freight without refusal if the approved fare or charge is paid . . . ." Black’s Law Dictionary 275 (6th ed. 1990). A contract carrier is a "transportation company that carries, for pay, the goods of certain customers only as contrasted to a common carrier that carries the goods of the public in general." Black’s Law Dictionary, at 325.

PERMISSIBLE USES OF TANGIBLE PERSONAL PROPERTY IN CONNECTICUT PRIOR TO SHIPMENT OUTSIDE THE STATE: There are two permissible uses of tangible personal property in Connecticut prior to shipment of such property outside Connecticut.

Storage: Section (a)(1)(A) of 1997 Conn. Pub. Acts 243, §48 provides that any business that purchases tangible personal property from a Connecticut retailer for "use or consumption" in carrying on such business and that "subsequently" ships such property out of Connecticut by common or contract may be eligible to file a claim for refund. This section allows for the temporary storage in Connecticut of tangible personal property purchased from Connecticut retailers prior to its shipment out of Connecticut. The business must own the property at the time it is shipped outside Connecticut, and must use the property exclusively outside Connecticut after shipment, for as long as it owns the property. Section (a)(1)(A) does not specify how long such property may be stored in Connecticut before being shipped out of Connecticut. The Department has determined that such property may be stored in Connecticut for up to three years from the date of its purchase.

Processing, Fabrication, Manufacturing, or Incorporation into Other Tangible Personal Property: Under section (a)(1)(B) of 1997 Conn. Pub. Acts 243, §48, any business that purchases tangible personal property from a Connecticut retailer "for the purpose of being processed, fabricated or manufactured into, attached to or incorporated into, other tangible personal property to be transported outside this state by common or contract carrier" may be eligible to file a claim for refund.

Upon completion of the processing, fabrication, manufacturing or incorporation of tangible personal property as allowed by section (a)(1)(B), such property must be shipped out of Connecticut. The business must own the property at the time it is shipped outside Connecticut, and must use the property exclusively outside Connecticut after shipment, for as long as it owns the property. The Department has determined that such property must be shipped out of Connecticut within three years from the date of its purchase.

Any use of tangible personal property in Connecticut for which a sales and use tax refund has been issued prior to its shipment out of Connecticut, other than storage, or use in the course of being processed, fabricated, manufactured, or incorporated into other tangible personal property, will subject the property to use tax on its purchase price as of the date of such use. Likewise, any use of tangible personal property by the purchaser in Connecticut after its initial shipment out of Connecticut will subject the property to use tax as of the date of such use.

Furthermore, if the Department discovers that tangible personal property purchased under the "Buy Connecticut" provision remains in Connecticut beyond three years from the date of its purchase and a refund has been issued, the business that purchased the property will become liable for use tax on the purchase price of the property as of three years after the date of purchase.

REFUND PROCEDURES: Section (a)(1) of 1997 Conn. Pub Acts 243, §48 provides:

A claim for refund of the taxes imposed by said chapter 219 on all such purchases of property during the calendar year may be filed, along with substantiating documentation, annually with the Commissioner of Revenue Services on a form prepared for such purposes by the commissioner not later than the first day of the fourth month next succeeding the end of the calendar year for which such claim is filed.

Under this provision, all claims for refund of taxes paid on tangible personal property purchased under the "Buy Connecticut" provision during a calendar year must be filed by April 1 of the next calendar year. (Note: If April 1 is a Saturday, Sunday or legal holiday, the refund claim must be filed by the next succeeding day that is not a Saturday, Sunday or legal holiday.)

Under Conn. Gen. Stat. §12-425, the general sales and use tax refund provision, taxpayers have three years after the due date of sales or use taxes in which to file a claim for refund of such taxes. However, Conn. Gen. Stat. §12-425 does not apply to the "Buy Connecticut" provision. Therefore, it is important to note that the period in which to file a claim for refund under 1997 Conn. Pub. Acts 243, §48 is significantly shorter than the period allowed under Conn. Gen. Stat. §12-425.

All refund claims must be filed on Form AU-526, Sales and Use Tax Refund Application for Purchases Made Under the "Buy Connecticut" Provision, and must be accompanied by "substantiating documentation." If the tangible personal property for which a refund is being sought was shipped out of Connecticut prior to the filing of the refund claim, a taxpayer must provide the Department with copies of the shipping documents along with Form AU-526. If the tangible personal property has not yet been shipped out of Connecticut when the refund claim is filed, the taxpayer must complete the portion of Form AU-526, attesting that such property will be shipped out of Connecticut within three years from the date of its purchase. The Department requires that taxpayers retain records substantiating refund claims, including but not limited to proof that tax was paid and shipping documents, for six years from the date on which such claims were filed.

When a completed Form AU-526 with all required documentation is submitted to the Department, the Commissioner will make a determination as to the validity of the refund claim within 90 days of its receipt. If the Commissioner determines that a claim is not valid, either in whole or in part, the Commissioner will send the taxpayer a notice of proposed disallowance.

If the taxpayer does not agree with a proposed disallowance, it may file a written protest with the Commissioner setting forth the grounds on which the protest is based. The taxpayer must file a protest with the Commissioner within 60 days of the mailing of the proposed disallowance. If no protest is filed within 60 days, a notice of proposed disallowance will constitute a final disallowance. If a protest is timely filed, the Commissioner will reconsider the proposed disallowance and, if the taxpayer has so requested, may grant or deny said taxpayer an oral hearing.

After reconsidering a refund claim, the Commissioner will send the taxpayer a notice of determination. If the taxpayer disagrees with the Commissioner’s determination, pursuant to Conn. Gen. Stat. §12-422, it has one month from the date on which such determination was mailed in which to appeal the determination to the Superior Court. If the taxpayer fails to appeal the Commissioner’s determination within one month, such determination will be final.

Note: The provisions for protest and appeal set forth in 1997 Conn. Pub. Acts 243, §48 are the same as those contained in Chapter 219 of the Connecticut General Statutes.

THE EXEMPTION PERMIT PORTION OF THE "BUY CONNECTICUT" PROVISION: Section (b)(2) of 1997 Conn. Pub. Acts 243, §48 allows the Commissioner, in his discretion, to issue permits to taxpayers that enable such taxpayers to purchase tangible personal property from Connecticut retailers exempt from sales and use taxes, where the property is eventually shipped out of Connecticut for exclusive use by the purchaser outside Connecticut. Section (b)(2) of 1997 Conn. Pub. Acts 243, §48 provides:

The Commissioner of Revenue Services may . . . issue a permit to any person carrying on a trade, occupation, business or profession in this state who purchases from a retailer tangible personal property for use or consumption in carrying on such trade, occupation, business or profession, (A) for the purpose of subsequently transporting it outside this state for use or consumption thereafter solely outside of this state or (B) for the purpose of being processed, fabricated or manufactured into, attached to or incorporated into, other tangible personal property to be transported outside this state and thereafter used or consumed solely outside the state, if the commissioner determines that the person is carrying on a trade, occupation, business or profession in this state and is filing the returns required to be filed by such person under section 12-414 of the general statutes and that the enforcement of the provisions of chapter 219 of the general statutes shall not be adversely affected.

As with the refund portion of the "Buy Connecticut" provision, the Department has determined that tangible personal property purchased with an exemption permit may be stored in Connecticut for up to three years from the date of its purchase. Likewise, upon completion of the processing, fabrication, manufacturing or incorporation of the tangible personal property allowed by section (b)(2), such property must be transported out of Connecticut within three years from the date of its purchase. The business must own the property at the time it is transported outside Connecticut, and must use the property exclusively outside of Connecticut after it is transported, for as long as it owns the property.

Note: The exemption permit portion of the "Buy Connecticut" provision does not require that tangible personal property be transported outside Connecticut by common or contract carrier. Purchasers may use their own vehicles or retailers of the property may use their vehicles.

Any use in Connecticut of tangible personal property purchased with an exemption permit, other than storage, or use in the course of being processed, fabricated, manufactured or incorporated into other tangible personal property, will subject the purchase price of the property to use tax as of the date of such use.

Furthermore, if the Department discovers that tangible personal property purchased with an exemption permit under the "Buy Connecticut" provision remains in Connecticut beyond three years from the date of its purchase, the business that purchased the property will become liable for use tax on the purchase price of the property as of three years after the date of its purchase.

PERMIT APPLICATION PROCESS: Any taxpayer registered to pay Connecticut sales and use taxes that wishes to obtain a permit must make application to the Commissioner of Revenue Services. All applications must be in writing and must contain the following information:

• the name of the business entity,
• its location,
• a description of the trade, occupation, business or profession the business entity is carrying on in Connecticut, and
• the business entity’s Connecticut Tax Registration Number.

All information submitted with an application should be accompanied by a notarized statement attesting to the accuracy of the information, and that the applicant is filing sales and use tax returns as required by Conn. Gen. Stat. §12-414. The notarized statement should also contain a statement that the applicant, if approved for a permit, agrees to comply with the provisions of 1997 Conn. Pub. Acts 243, §48.

Note: Taxpayers should send their permit applications to:

CRITERIA FOR ISSUING A PERMIT: In deciding whether to issue a permit, the Commissioner may take into consideration an applicant’s history of compliance with sales and use tax and other taxing statutes, including its payment and audit histories, and the nature of the taxpayer’s business. If, upon reviewing all pertinent information, the Commissioner determines that "the provisions of Chapter 219 of the general statutes will not be adversely affected," the Commissioner may issue the taxpayer an exemption permit. The Commissioner will make a determination on an application for an exemption permit within 90 days of its receipt.

If a taxpayer’s application is approved, the Commissioner will issue the taxpayer a numbered permit that will entitle the taxpayer to make exempt purchases using CERT-132, Sales and Use Tax Exemption for Purchases Under the "Buy Connecticut" Provision. Such a permit is valid from the date of its issuance through the end of the calendar year in which it was issued.

If a taxpayer’s application is not approved, the Commissioner will notify the taxpayer of the disapproval in writing. A taxpayer that is not issued a permit may utilize the refund procedures outlined above.

PROCEDURES FOR PURCHASING TANGIBLE PERSONAL PROPERTY WITH AN EXEMPTION PERMIT: If approved, the Department will issue a taxpayer a permit allowing the taxpayer to purchase tangible personal property from a Connecticut retailer exempt from tax under the "Buy Connecticut" provision. The taxpayer must either provide a copy of its exemption permit and a completed CERT-132 to a retailer each time it makes a purchase under 1997 Conn. Pub. Acts 243, §48 or issue the retailer a "blanket certificate" for a continuing line of exempt purchases. A "blanket certificate" will remain in effect from the date of the first purchase in a calendar year until the end of the calendar year, unless a written revocation is made by the taxpayer before the expiration of the period.

CERT-132 will contain information about the permit holder and will inform the retailer of its record keeping obligations. Acceptance in good faith of a properly completed and signed CERT-132, along with a copy of a taxpayer’s exemption permit, will relieve a retailer from the burden of proving that the sale, and the storage, use or other consumption, of the tangible personal property is not subject to sales and use taxes. Retailers are not to accept CERT-132 without a copy of the taxpayer’s permit.

Note: Any misuse of a permit by a taxpayer will result in immediate revocation of the permit and will subject the taxpayer to other penalties as provided in the Connecticut General Statutes.

REPORTING REQUIREMENTS: Section (3)(B) of 1997 Conn. Pub. Acts 243, §48 requires that a taxpayer who has been issued an exemption permit must submit a report with each sales tax return (Form OS-114, Sales and Use Tax Return) that the taxpayer is required to file (either monthly, quarterly or annually) under Conn. Gen. Stat. §12-414. Taxpayers who have made exempt purchases during the reporting period must complete and submit Schedule OS-114A.

Schedule OS-114A requires the taxpayer to list:

• the purchases made under the "Buy Connecticut" provision,
• the dates on which such purchases were made, and
• the retailers from which such purchases were made.

PERMIT RENEWAL PROCESS: An exemption permit issued by the Commissioner to a taxpayer under 1997 Conn. Pub. Acts 243, §48 is valid from the date of its issuance through the end of the calendar year in which it was issued. By no later than December 1, a taxpayer must apply to the Commissioner for a new permit in accordance with the procedures set forth in "Permit Application Process," above.

APPLICATION OF THE "BUY CONNECTICUT" PROVISION TO "INDIAN COUNTRY": "Indian country," as that term is defined in 18 U.S.C. §1151, is considered to be outside of Connecticut for purposes of both the refund and exemption permit portions of the "Buy Connecticut" provision.

SECTIONS NOT AFFECTED BY THE "BUY CONNECTICUT" PROVISION: Section (a)(1)(B) of 1997 Conn. Pub. Acts 243, §48 does not apply to tangible personal property that becomes an ingredient or component part of tangible personal property intended to be sold as a finished product by the purchaser. Such property may be purchased exempt under Conn. Gen. Stat. §12-412(18).

The "Buy Connecticut" provision also does not apply to printed material that has been manufactured in Connecticut to the special order of a purchaser and which, within thirty days following delivery to such purchaser, is to be delivered for use outside Connecticut. Such material may be purchased exempt under Conn. Gen. Stat. §12-412(31).

EFFECT ON OTHER DOCUMENTS: None affected.

EFFECT OF THIS DOCUMENT: A Special Notice is a document that announces a new policy or practice in response to changes in State or federal laws or regulations or to judicial decisions. A Special Notice indicates the Department’s informal interpretation of Connecticut tax law and may be referred to for general guidance by taxpayers or tax practitioners.

SN 98(10)
Sales and use taxes
Issued: 9/11/98