Clarification on Property Management Fee Tax on Condo Unit

D.P. from Hartford County writes:

Dear Mister Condo,

Thank you for responding to my question regarding sales tax. To clarify, the tax that is being charged is a tax on the property manager’s fee for the percentage of their fee based on the number of “rented units”. It is not a tax on common fees but a tax on the management company fee. The property manager said to us that it is a state law that this tax be paid. Please clarify is you are aware of this state tax. Thank you.

Mister Condo replies:

D.P., thank you for the clarification. I am very much aware of this tax and you can read about it as well at http://www.ct.gov/drs/lib/drs/publications/pubsip/2006/ip06-35.pdf. In particular, read Page 20 if this book and you’ll see a very clear explanation. How it works in Connecticut is that rental units qualify as commercial property for income and are subject to sales tax on the management fees. Units that are owner-occupied are not subject to the commercial property management fee tax. Sounds like your property manager was right on top of this. Kudos!