Ruling 89-21

Renovations

You have requested a ruling from our office on the application of the sales and use tax to commercial renovations taking place on or after July 1, 1989 as well as how the new law pertains to your company's existing floor covering contracts containing no escalation provision.

The new sales tax on services rendered in the renovation of commercial, industrial or income producing real property is effective July 1, 1989 and applies to all renovations performed on or after the effective date at the rate of 8%.

You are incorrect in your understanding that the law provides for a ninety day delay in the payment of the tax. Section 12-408(1) of the Connecticut General Statutes permits existing retail sales contracts prior to July 1 to be taxed at the rate of 7.5% so long as delivery of the product is made within ninety days of the rate change. The Connecticut General Assembly has imposed a new sales tax on renovations to commercial, industrial or income-producing real property. The new tax at the rate of 8% applies to all renovation services, including those performed under existing contracts, which are rendered on or after July 1, 1989.

With respect to the installation of carpets, the entire charge is subject to the sales tax under section 12-426-26 of the Regulations of Connecticut State Agencies when the carpet is permanently affixed, to the real estate by such methods as cementing. If the carpet is installed by the "stick and pad method" and is not permanently affixed to the real estate, the carpet retains its characteristics as tangible personal property, and there is no tax on the installation labor so long as it is separately stated on the bill to the customer.

LEGAL DIVISION

July 7, 1989