The Connecticut Department of Revenue ruled on how to tax warranty contracts on real property.
Connecticut taxes services to industrial, commercial, or income-producing property. These include services to residential property rented to a tenant. Repair services to tangible personal property are also taxable. Services to residential real property occupied by its owner, however, are generally not taxable.
As a result, warranty contracts for income-producing property are taxable. Home warranty contracts for owner-occupied properties are not taxable. If a contract includes taxable services to tangible personal property, the seller can separately state and collect tax on charges for those services.