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Town of Groton v. Commissioner of Revenue Services

Supreme Court of Connecticut

June 30, 2015

TOWN OF GROTON
v.
COMMISSIONER OF REVENUE SERVICES ET AL

Argued, June 5, 2015

Appeal from the named defendant's assessment of certain sales and use tax deficiencies against the plaintiff, brought to the Superior Court in the judicial district of New Britain, Tax Session, and tried to the court, Cohn, J.; judgment for the defendants dismissing the plaintiff's appeal, from which the plaintiff appealed.

SYLLABUS

The plaintiff town, which had provided refuse removal services to certain commercial, industrial, and income producing businesses, appealed to the trial court from the assessment of a sales and use tax pertaining to those services bye the defendant Commissioner of Revenue Services. The plaintiff had entered into contracts with private trash haulers and a regional resource recovery authority for bulk transportation and disposal of refuse from the businesses, whereby the hauler and the authority would bill the plaintiff, which, in turn, recouped the costs of these services proportionately from each business. The plaintiff did not apply state sales tax to the invoices billed to the businesses and did not remit sales tax to the defendant. The trial court dismissed the plaintiff's appeal concluding, inter alia, that the plaintiff had failed to prove that the defendant's assessment was incorrect, observing that refuse removal was a service subject to the sales tax pursuant to statute (§ 12-408 [1] [A]). Specifically, the trial court rejected the plaintiff's contention that, because the plaintiff received only a reimbursement of its expenses, its services were exempt from sales tax under this court's decision in AirKaman, Inc. v. Groppo (221 Conn. 751, 607 A.2d 410). The trial court further concluded that there was a sale of services by the plaintiff for consideration, and that the services provided were not exempt from sales tax merely because refuse removal is traditionally considered to be a governmental function. On the plaintiff's appeal from the trial court's judgment, the plaintiff claimed that the trial court improperly concluded that the fees that it collected for refuse removal were subject to the sales tax. Held that the trial court improperly dismissed the plaintiff's appeal, this court having concluded that the refuse removal fees charged by the plaintiff were not subject to sales tax because the consideration required for the imposition of that tax pursuant to § 12-408 (1) (A) did not exist where the plaintiff functioned as a mere conduit between the businesses, the trash haulers and the regional authority, and was not otherwise attempting to engage in a proprietary function in competition with the private sector.

Bryan P. Fiengo, with whom, on the brief, was Eric W. Callahan, for the appellant (plaintiff).

Dinah J. Bee, assistant attorney general, with whom, on the brief, was George Jepsen, attorney general, for the appellees (defendants).

Rogers, C. J., and Palmer, Zarella, Eveleigh, Espinosa and Robinson, Js.

OPINION

Page 38

ROBINSON, J.

[317 Conn. 320] The sole issue in this appeal is whether the fees that a municipality charges for refuse removal services provided to industrial, commercial, or income producing real properties are subject to the sales tax under General Statutes § 12-408 (1) (A)[1]

Page 39

when that [317 Conn. 321] municipality does not make a profit on those fees because they are either used to defray the municipality's overhead expenses in administering the refuse removal program, or to pay the service charges of other participants in the refuse disposal process. The plaintiff, the town of Groton, appeals[2] from the judgment of the trial court dismissing its tax appeal from the decision of the named defendant, the Commissioner of Revenue Services,[3] to render a sales and use tax assessment against it in the amount of $240,653.89. On appeal, the plaintiff claims, inter alia, that the trial court improperly applied numerous cases from this court, in particular AirKaman, Inc. v. Groppo, 221 Conn. 751, 607 A.2d 410 (1992), in concluding that its arrangement of refuse collection services for industrial, commercial, or income producing real properties, on a revenue neutral basis, constituted a sale for " consideration" subject to the sales tax under § 12-408 (1) (A). We agree with the plaintiff and, accordingly, reverse the judgment of the trial court.

The record reveals the following relevant undisputed facts, as found by the trial court, and procedural history. The plaintiff is a municipal corporation organized under the laws of the state of Connecticut. On or about November 13, 1985, the plaintiff became a member of the Southeastern Connecticut Regional Resources Recovery Authority (regional authority), which was formed pursuant to General Statutes § 7-273aa et seq. The regional authority operates a waste-to-energy facility (waste facility) in Preston. The plaintiff entered into [317 Conn. 322] a " municipal service agreement" with the regional authority, which provided the plaintiff with access to the waste facility for its disposal needs in exchange for a per ton fee. That agreement imposes a minimum delivery requirement on the plaintiff.

In August, 1998, the plaintiff adopted an ordinance that created a municipal resource recovery authority, known as the Town of Groton Resource Recovery Authority (town authority), with offices located at the plaintiff's town hall. In January, 1999, the plaintiff adopted an ordinance putting the removal, transport, and disposal of solid waste from commercial, industrial, and income producing businesses within the plaintiff's geographical area, known as " end users," under the management of the town authority. During the time period at issue in the present appeal, the ...


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