DRS: SN 2002(9), Sales and Use Taxes on the Furnishing of Space for Storage

 

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

450 Columbus Blvd
Hartford CT 06103
 
 
 
 
 
 

 
 

NOTE:  Bill No. 700 passed by the General Assembly on August 13, 2002,
changed the effective date of the tax on storage space from
July 1, 2002 to October 1, 2002.
* Effective: Services rendered on or after October 1, 2002

This Special Notice has been modified and superseded by SN 2002(9.1)

SN 2002(9)

Sales and Use Taxes on the Furnishing of Space for Storage


Purpose: This Special Notice provides information about 2002 legislation imposing sales and use taxes on the furnishing of space for storage of personal property by persons engaged in the business of furnishing such space.


Effective Date: Effective July 1, 2002. *


Statutory Authority: Conn. Gen. Stat. §12-407(2), as amended by 2002 Conn. Pub. Acts 1, §§66 and 68 (May 9 Spec. Sess.).  This service will be codified as Conn. Gen. Stat. §12-407(a)(2)(P).


Imposition of Sales and Use Taxes on Furnishing of Space for Storage: Effective July 1, 2002, sales and use taxes are imposed at the rate of 6% on the following service: “The furnishing by any person, for a consideration, of space for storage of personal property when such person is engaged in the business of furnishing space . . . [excluding] the furnishing of space which is used by a person for residential purposes.”  2002 Conn. Pub. Acts 1, §§66 and 68 (May 9 Spec. Sess.).  To be taxable, the furnishing of space for storage must take place in Connecticut and meet all elements of the statute, as defined below.


Definitions:  These definitions apply for purposes of the new service described in this Special Notice:

Space for storage means secure areas, such as rooms, units, compartments, or containers, whether accessible from outside or from within a building, that are designated for the use of a customer, where the customer can store and retrieve property.  Space for storage includes self-storage units, mini-storage units, and areas by any other name to which the customer has either unlimited free access or free access within reasonable business hours or upon reasonable notice to the service provider to add or remove property.  It does not include the rental of an entire building, such as a warehouse.

Furnishing space for storage does not include general warehousing and storage, where the warehouse typically handles, stores, and retrieves a customer’s property using the warehouse’s staff and equipment and does not allow the customer free access to the storage space (usually termed “warehouse storage”).  Furnishing of space for storage also does not include accepting specific items of property for storage, such as clothing at a dry cleaning establishment or golf bags at a golf club.

Consideration means any amount charged, valued in money, whether received in money or otherwise, for the furnishing of space for storage.  Consideration is usually periodic charges, such as for monthly storage, but may be for shorter or longer periods of time.  Consideration is usually also based on the size of the space for storage.  Charges for transportation of property to or from a space for storage, or for loading or unloading the property, are not subject to sales and use taxes, if separately stated. 

Personal property means tangible personal property of any kind including but not limited to: furniture, household goods, documents, office equipment and supplies, merchandise, or manufacturing machinery, if the property is stored in a space for storage, as defined above, regardless of the identity of the customer.

A person engaged in the business of furnishing space means any person that furnishes space for storage of personal property, as those terms are defined above, on a recurring basis and as a regular part of its business, even if furnishing space for storage is not its primary business.

For example, a truck rental company that offers self-storage of property is engaged in the business of furnishing space for storage, even if that portion of its business does not produce the majority of its income.  On the other hand, a business such as an apartment complex that furnishes space for storage of furniture and other goods of its tenants, incidental to its business of renting apartments, is not engaged in the business of furnishing space for storage.

Space which is used by a person for residential purposes, the furnishing of which is excluded from sales and use taxes, means space that is intended to be lived in by individuals.


Storage Not Subject to Sales and Use Taxes:  Charges for the following types of storage are not subject to tax under the new service described in this Special Notice:

  • Safe deposit boxes;
  • Storage of property in hotel safes;
  • Cold storage of furs or storage of dry-cleaned or laundered clothing;
  • Storage of property in meat lockers, refrigerators, or freezers;
  • Storage of property for tenants in storage areas at apartment or condominium complexes;
  • Storage of motor vehicles, vessels, or any other property by repairers pending payment for repairs;
  • Storage of motor vehicles by towing companies pending payment for towing;
  • Storage of motor vehicles, recreational vehicles, vessels, trailers, aircraft, etc. in parking spaces, garages, or hangars, rather than in storage units intended for general storage of tangible personal property (Some motor vehicle parking is taxable under Conn. Gen. Stat. §12-407(2)(i)(N) before January 1, 2003, and under Conn. Gen. Stat. §12-407(a)(37)(N) thereafter.);
  • Locker rental (Locker rental is taxable under Conn. Gen. Stat. §12-407(2)(i)(CC) before January 1, 2003, and under Conn. Gen. Stat. §12-407(a)(37)(BB) thereafter.);
  • Boat mooring and storage (Some boat mooring and storage is taxable under Conn. Gen. Stat. §12-407(2)(m) before January 1, 2003, and under Conn. Gen. Stat. §12-407(a)(2)(M) thereafter.);
  • Rentals of storage trailers, such as trailers delivered to construction sites (Such rentals are rentals of tangible personal property, but may be exempt from tax under Conn. Gen. Stat. §12-412(70).);
  • Rental of entire buildings for storage by a single customer, such as warehouses, garages, or hangars;
  • Rental of any space for conducting business, such as offices, factories, or retail space;
  • Rental of kennels or other spaces to shelter animals; and
  • Rental of living areas such as apartments, condominiums, or houses.

Moving and Storage Companies:  Some moving companies also sell storage of property.  If the storage is in a warehouse area, and the moving company handles, stores, and retrieves a customer’s property and does not allow the customer to have free access to a designated storage space (usually termed “warehouse storage”), then the storage is not subject to tax as the furnishing of space for storage.

However, if a moving company sells storage of space as defined above (usually termed “self-storage”), the storage is subject to sales and use taxes, even if the moving company delivers and places the customer’s property in the storage space.  A moving company must separately state its charges for taxable storage from its charges for delivery, loading, and unloading services, which are not subject to tax.


Additional Fees and Incentives: Service providers that furnish taxable space for storage sometimes charge customers additional fees, such as auction fees, lien fees, and certified mail fees.  These charges are also subject to sales and use taxes.  Late fees are subject to tax if the fees are for additional periods of storage, but if the late fees are interest charges on late payments, they are not subject to tax.

Sales and use taxes apply to the reduced amount when service providers give early payment discounts or other cash discounts or honor coupons.


Other Items Supplied by Retailers: If any retailer furnishing taxable or nontaxable storage makes charges to customers for items such as dollies, furniture pads, boxes, racks, or cabinets, the charges are subject to sales and use taxes as the sale or rental of tangible personal property.  The retailer should separately state these charges.


Transitional Rules: All charges for space for storage for periods on and after July 1, 2002, are subject to 6% sales and use taxes, and charges for periods before July 1, 2002, are not taxable.  Service providers must charge the tax in the tax period for which any taxable services are rendered, and remit the tax with the return for that period.  (Even if the customer does not pay the tax, the service provider is liable for the tax.)

If a customer has paid in advance for periods both before and after July 1, 2002, the payment attributable to periods on and after July 1, 2002, is subject to tax, and the service provider must bill the customer for the tax during July 2002 and remit the tax with the return for that period. 

If a customer has abandoned a space for storage but has already paid in advance for the space, the payment for periods on and after July 1, 2002, will not be taxable, provided the customer no longer has access to the space, even if the service provider keeps the customer’s payment.

Example 1: A customer has paid in advance in January 2002 for space for storage for the entire calendar year.  The service provider must bill the customer for the tax for the period from July 2002 through December 2002 (six months, or 6/12 of the advance payment), and collect and remit that tax with the return for July 2002.

Example 2: A customer pays a service provider in July 2002 for storage charges billed for periods prior to July 2002.  No tax is due on this payment because the space for storage was provided before the service became subject to sales and use taxes.


Information for New Retailers: Service providers that will be charging and remitting sales and use taxes for the first time should consult Informational Publication 2000(26), Getting Started In Business, for information on how to register as retailers and file sales and use tax returns.  This publication is available on the DRS Web site.


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 an informal interpretation of Connecticut tax law by DRS and may be referred to for general guidance by taxpayers or tax practitioners.


For Further Information: Please call DRS 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: www.ct.gov/drs
  • 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.

SN 2002(9)
Sales and Use Taxes
2002 Legislation – Storage
Issued: 07/26/2002