DRS: Ruling 94-21, Sales and Use Taxes / Professional Services / Business Management and Management Consulting Services

 

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

450 Columbus Blvd
Hartford CT 06103
 
 
 
 
 
 

 
 

 

This Ruling is cited in Ruling 97-1

Ruling 94-21

Sales and Use Taxes
Professional Services
Business Management and Management Consulting Services


FACTS:

An individual with advanced degrees in chemistry ("the Chemist") renders consultation services on the chemical properties of hair care and hair color to the manufacturer of hair care and hair color products.


ISSUES:

Whether the Chemist's consultation services are taxable "business analysis, management, management consulting and public relations services" under Conn. Gen. Stat. 12-407(2)(i)(J) and Conn. Agencies Regs. 12-407(2)(i)(J)-1.


DISCUSSION:

Conn. Gen. Stat. 12-407(2)(i)(J) imposes sales and use taxes on "business analysis, management, management consulting and public relations services" ("business management services"). Conn. Agencies Regs. 12-407(2)(i)(J)-1 provides that to be taxable, business management services must relate to the service recipient's "core business" or "human resource management activities."

"The term 'core business activities' means and includes activities directly related to a service recipient's lines of business involving sales of products, property, goods or services to others..." Conn. Agencies Regs. 12-407(2)(i)(J)-1(h). Because the service recipient is in the business of selling hair care and hair color products, the Chemist's consulting services directly relate to the service recipient's core business.

However, Conn. Gen. Stat. 12-407(2)(i)(J) does not apply where

the services rendered are professional services that are rendered by a member of a profession, acting in such member's professional capacity, and that are commonly associated with such profession. The term "profession" means any generally acknowledged professional occupation requiring a degree, license or specialized training, including, but not limited to, the medical, legal, accounting and actuarial professions...

Conn. Agencies Regs. 12-407(2)(i)(J)-1(c)(3).

"Chemistry" is defined as "the science of the composition, structure, properties, and reactions of matter, especially of atomic and molecular systems; the composition, structure, properties and reactions of a substance." Webster, New Riverside University Dictionary. Therefore, the practice of chemistry requires specialized training, and chemistry is a "profession" within the meaning of Conn. Agencies Regs. 12-407(2)(i)(J)-1(c)(3).

The Chemist's advanced degrees indicate that he is a member of a "profession" within the meaning of Conn. Agencies Regs. 12-407(2)(i)(J)-1(c)(3). Furthermore, the Chemist is acting in his professional capacity when he consults on the chemical properties of the service recipient's products. Such services are commonly associated with the Chemist's profession.


RULING:

The Chemist is a member of a "profession" within the meaning of Conn. Agencies Regs. 12-407(2)(i)(J)-1(c)(3). The Chemist renders chemical consultation services in his professional capacity. Such chemical consultation services are commonly associated with the practice of chemistry. Therefore, the professional services exception in Conn. Agencies Regs. 12-407(2)(i)(J)-1(c)(3) applies and the Chemist's consultation services are not taxable "business analysis, management, management consulting and public relations services" under Conn. Gen. Stat. 12-407(2)(i)(J).

This Ruling amplifies Ruling No. 94-12.


LEGAL DIVISION

November 10, 1994