Walk-in services at all DRS branch office locations remain suspended. Email DRS at drs@po.state.ct.us. Email the Priority One Taxpayer Assistance Program: DRSPriorityOne_CollectionsAssist@po.state.ct.us. Please check our Frequently Asked Questions page.

This information is not current and is being provided for reference purposes only

IP 2000(10)

Q & A on the Connecticut Direct Payment Permit Program

This publication has been superseded byIP 2001(7)


PURPOSE: This Informational Publication explains the Connecticut Direct Payment Permit program for sales and use taxes.


EFFECTIVE DATE: Effective upon issuance.


STATUTORY AUTHORITY: 1999 Conn. Pub. Acts 173, §63 and Conn. Gen. Stat. §12-430(7), as amended by 2000 Conn. Pub. Acts 174, §17.


What is a Direct Payment Permit?

Form AU-621, Direct Payment Permit, allows a business to purchase taxable goods and services without paying Connecticut sales tax and to remit the use tax due directly to the Department of Revenue Services (DRS). This process allows businesses to accurately determine their use tax liability on purchases. DRS began issuing a limited number of Direct Payment Permits to qualifying taxpayers after October 1, 1999.

Who qualifies for a Direct Payment Permit?

To qualify for a Direct Payment Permit, taxpayers must meet all of the following criteria:

  • A Direct Payment Permit will not jeopardize the collection of sales and use taxes;
  • The business’ accounting system must clearly indicate the amount of sales and use taxes owed;
  • The business is regularly audited by DRS;
  • The business will remit sales and use taxes using EFT (Electronic Funds Transfer) technology; and
  • The business agrees that its name may be published as a Direct Payment Permit holder on the DRS Web site and in any other related publications, and may be disclosed as a Direct Payment Permit holder in any other manner for tax administration purposes.

How does a taxpayer apply for a Direct Payment Permit?

If all of the criteria are met, the taxpayer must complete Form AU-620, Direct Payment Permit Application, and remit the $20 permit fee to DRS. If the application is approved, DRS will deposit the $20 permit fee; if the application is denied, DRS will return the permit fee.

When will DRS give notice of acceptance or denial of an application?

DRS has 120 days from the date the completed Form AU-620 is received to review the information provided. At the end of the review process, a letter of approval or denial will be sent to the taxpayer. The Commissioner retains sole discretion in the approval or denial of all Direct Payment Permits. Direct Payment Permits are issued with an effective date and are not retroactive to prior periods.

What purchases are not allowed with the Direct Payment Permit?

The following items may not be purchased with the Direct Payment Permit:

  • Tangible personal property incorporated into new construction to real property;
  • Meals or lodging;
  • Motor vehicles, vessels, aircraft, and snowmobiles;
  • Telecommunications services;
  • Utilities (gas, electricity, and heating fuel).

Must a Direct Payment Permit holder purchase all items without paying sales tax?

Yes. A Direct Payment Permit holder must purchase all goods and services, except those items listed above, without paying Connecticut sales tax. The permit holder must issue a copy of its Direct Payment Permit to each of its vendors and does not have the option to pay sales tax.

Is the Direct Payment Permit holder responsible for remitting all Connecticut sales and use taxes due?

Yes, except for tax already paid to vendors on those goods and services the permit holder cannot purchase with a Direct Payment Permit.

Can the Direct Payment Permit be transferred or assigned?

No. The Direct Payment Permit cannot be transferred or assigned.

Does the Direct Payment Permit need to be renewed?

No. The Direct Payment Permit is valid until it is surrendered by the taxpayer or revoked by DRS. In that case, the taxpayer must immediately notify all vendors that it is no longer a Direct Payment Permit holder and begin paying sales tax at the time of purchase.

Can the Direct Payment Permit holder request a refund for purchases of goods and services covered under the Direct Payment Permit?

Yes. The Direct Payment Permit holder can request a refund through the established DRS refund procedures.

Can a Direct Payment Permit holder issue a "blanket" copy of its Direct Payment Permit for items purchased on a recurring basis?

Yes, but only for those purchases that are similar in type and are of a recurring nature. Blanket permits are valid indefinitely or until the permit is suspended or revoked.

How long must a Direct Payment Permit holder keep records to substantiate direct payment permit purchases?

A Direct Payment Permit holder must keep a copy of the permit, the bills or invoices for at least six years from the date that the items or services are purchased.

How long must the vendor keep records to substantiate Direct Payment Permit sales?

A vendor must keep a copy of the permit, any certificates, and bills or invoices to the purchaser for at least six years from the date that the items or services are purchased. These documents must be appropriately marked to indicate that untaxed purchases were made. The words "purchased with D.P.P." satisfy this requirement.

Where can vendors find the list of Direct Payment Permit holders?

Vendors may verify that a taxpayer holds a valid Direct Payment Permit by accessing the DRS Web site or by calling DRS during business hours. (See the DRS Web site address and telephone numbers.)


Contractor Information

What if a contractor performs a job for a Direct Payment Permit holder?

General contractors that enter into renovation construction contracts with Direct Payment Permit holders must purchase materials and supplies to be installed or permanently placed in the projects without payment of tax. Subcontractors working on renovation projects also must purchase materials and supplies to be installed or permanently placed in the projects without payment of tax.

The general contractor must get a copy of the taxpayer’s Form AU-621, Direct Payment Permit, and attach it to CERT-133, Contractor’s Exempt Purchase Certificate for a Renovation Contract with a Direct Payment Permit Holder, to purchase materials and supplies for a renovation project without paying sales tax. The general contractor provides copies of the Direct Payment Permit to all subcontractors involved in the renovation project. Form AU-621 and CERT-133 cannot be used for new construction contracts.

Subcontractors should continue to sell taxable renovation labor on resale to the contractors to which they are subcontracted using the Sales & Use Tax Resale Certificate.

The Direct Payment Permit holder must self assess use tax on all materials and supplies installed or permanently placed in the renovation construction project, and on the renovation labor for the project.


When does a contractor issue CERT-133?

The contractor must be engaged in a renovation contract with a Direct Payment Permit holder and must have been issued a copy of the Direct Payment Permit. The contractor then issues CERT-133 to the vendors and subcontractors on a job-specific basis. The contractor can issue CERT-133 to subcontractors as a "blanket" certificate for services that are recurring in nature, such as plumbing, building maintenance, and landscaping.


Can all tangible personal property purchased for a Direct Payment Permit holder’s construction contract be purchased without payment of sales tax?

New construction: No. The contractor must pay sales tax to the vendor at the time of purchase.

Renovation: Yes. The contractor must issue CERT-133, with a copy of Form AU-621 attached, to the vendor and purchase materials for renovation contracts without paying sales tax.

Repair or maintenance of tangible personal property: Yes. Follow the rules related to integral parts purchased using a resale certificate as outlined in Informational Publication 99(19), Building Contractors’ Guide to Sales and Use Taxes.


Can a contractor purchase, rent or lease tools and equipment to perform construction contracts for a Direct Payment Permit holder without the payment of sales and use taxes?

No. They are not materials or supplies to be installed or permanently placed in the construction project.


How should a contractor handle a construction contract that involves both renovation and new construction?

The costs for new construction and renovation portions of the contract must be separately stated. This provides the Direct Payment Permit holder with the actual costs related to the renovation on which use tax is due.

The contractor must pay sales tax on materials and supplies that will remain in new construction projects after their completion.

The contractor must issue CERT-133 to the vendor and purchase materials for the renovation portion of the contract without paying sales tax.


Is a nonresident contractor still required to post a nonresident contractor’s bond with DRS for a Direct Payment Permit holder’s contracts?

Yes. Under Conn. Gen. Stat. §12-430(7), as amended, a nonresident contractor entering into a contract with a Direct Payment Permit holder on or after October 1, 2000, where the use of a Direct Payment Permit is allowed, must post cash or a bond at the start of the contract for 2% of the total amount to be paid under the contract. In all other cases, nonresident contractors are expected to post cash or bond of 5% of the contract amount.


EFFECT OF THIS DOCUMENT: An Informational Publication is a document that addresses frequently asked questions about a current DRS position, policy or practice, usually in a less technical question and answer format.


FOR FURTHER INFORMATION: Please call the Department of Revenue Services during business hours, Monday through Friday:

  • 1-800-382-9463 (toll-free within Connecticut), or
  • 860-297-5962 (from anywhere).

TTY, TDD, and Text Telephone users only may transmit inquiries 24 hours a day by calling 860-297-4911.


FORMS AND PUBLICATIONS: Forms and publications are available all day, seven days a week:

  • Internet: Preview and download forms and publications from the DRS Web site
  • Telephone: call 860-297-4753 (from anywhere), or 1-800-382-9463 (toll-free within Connecticut) and select Option 2 from a touch-tone phone

IP 2000(10)
Sales and Use Taxes
Direct Payment Permit
Issued 09/14/00