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Dish Network, LLC v. Commissioner of Revenue Services

Supreme Court of Connecticut

October 2, 2018

DISH NETWORK, LLC
v.
COMMISSIONER OF REVENUE SERVICES

          Argued March 29, 2018

         Procedural History

         Appeals from the decisions of the defendant denying the plaintiff's claims for a tax refund, brought to the Superior Court in the judicial district of New Britain, where the court, Cohn, J., granted the plaintiff's motions for summary judgment in part and the defendant's motions for summary judgment in part; thereafter, the court rendered judgments in accordance with a stipulation filed by the parties, from which the defendant appealed and the plaintiff cross appealed. Reversed in part; judgments directed.

          John Langmaid, assistant attorney general, with whom were Louis P. Bucari and, on the brief, George Jepsen, attorney general, for the appellant-cross appellee (defendant).

          Nicholas G. Green, with whom were Jeffrey P. Mueller and, on the brief, Charles H. Lenore and Andrew N. Wogman, for the appellee-cross appellant (plaintiff).

          Palmer, McDonald, Robinson, Mullins and Kahn, Js. [*]

          OPINION

          ROBINSON, J.

         The principal issue in this case is the extent to which General Statutes § 12-256 (b) (2)[1]imposes a tax on gross earnings from a satellite television operator's business operations in this state, which include the transmission of video programming, the sale and lease of equipment required to view that programming, the installation and maintenance of such equipment, digital video recording (DVR) service, and payment related fees. The defendant, the Commissioner of Revenue Services (commissioner), appeals, and the plaintiff, Dish Network, LLC, cross appeals, from the judgment of the trial court sustaining in part the plaintiff's tax appeals and ordering a refund of taxes previously paid on earnings from the sale of certain goods and services.[2] Addressing the parties' various contentions, we reach the following conclusions: (1) the trial court properly determined that General Statutes § 12-268i[3] does not provide the exclusive procedure for challenging a tax assessment for a tax period that has been the subject of an audit, and, therefore, the plaintiff was not barred from seeking a refund for certain audited tax periods pursuant to General Statutes § 12-268c (a) (1);[4] (2) § 12-256 (b) (2) imposes a tax on gross earnings from the transmission of video programming by satellite and certain payment related fees, but not the sale, lease, installation, or maintenance of equipment or DVR service; and (3) the trial court properly determined that the plaintiff was not entitled to interest on the refund pursuant to § 12-268c (b) (1).[5] Accordingly, we reverse in part the judgments of the trial court.

         The record reveals the following procedural history and facts that were found by the trial court or that are not disputed. The plaintiff, a limited liability company with its principal place of business in Colorado, is in the business of providing satellite delivered digital television to subscribers across the country, including in Connecticut. In order to provide this service, the plaintiff transmits video programming from its facilities to one or more satellites orbiting the Earth. The satellites then transmit the programming to an antenna, known as a satellite dish, which is connected to a receiver at the subscriber's location.[6]

         In order to receive a particular package of video programming, individual subscribers must enter into a contract with the plaintiff. In addition to charging a fee for the transmission of video programming, these contracts allow the plaintiff to charge subscribers for the purchase or lease of satellite dishes and related equipment, equipment installation and maintenance, DVR service, and subscriptions to Dish Magazine, which is delivered by the United States Postal Service. The contracts also allow the plaintiff to impose fees for the failure of a subscriber to pay bills on time, for reconnecting the subscriber after being disconnected for nonpayment, and for certain types of payment plans (payment related fees).[7]

         Under § 12-256 (b), the plaintiff is required to ‘‘pay a quarterly tax upon the gross earnings from . . . . (2) the transmission to subscribers in this state of video programming by satellite . . . .'' Pursuant to this provision, the plaintiff filed timely tax returns for the first, second, third, and fourth quarters of 2006, the first quarter of 2007, the third and fourth quarters of 2010, and the first quarter of 2011 (disputed tax periods).[8] In July 2008, the commissioner conducted a field audit of the plaintiff's returns for the first, second, and third quarters of 2006 (audited tax periods) pursuant to General Statutes § 12-268g[9] and sent a notice of the result to the plaintiff. The commissioner also sent the plaintiff a billing notice for the audited tax periods. The plaintiff never challenged the audit results.

         The plaintiff ultimately filed amended tax returns and sought refunds pursuant to § 12-268c (a) (1) for all of the disputed tax periods, including the audited tax periods. The plaintiff claimed that it had paid taxes on gross earnings from the sale of both programming services and nonprogramming goods and services during the relevant periods when, according to the plaintiff, the only earnings subject to taxation under § 12-256 (b) (2) were its gross earnings from the sale of programming services. The commissioner concluded that, to the contrary, the plaintiff's gross earnings from the sale of both programming services and nonprogramming goods and services were subject to taxation under § 12-256 (b) (2). Accordingly, the commissioner denied the plaintiff's requests for refunds.

         The plaintiff appealed to the trial court from the commissioner's decisions pursuant to General Statutes § 12-268l.[10] Thereafter, the plaintiff filed a motion for summary judgment, contending that it was entitled, as a matter of law, to a refund of the taxes that it paid pursuant to § 12-256 (b) (2) on gross earnings from the sale of nonprogramming goods and services. The commissioner then filed a motion seeking partial summary judgment, contending that, to the contrary, the plaintiff's gross earnings from the sale of nonprogramming goods and services were, as a matter of law, subject to taxation under § 12-256 (b) (2).[11] The commissioner further claimed that the plaintiff's appeal with respect to the audited tax periods was barred because the amounts owed for those periods had been finally determined pursuant to the audit, the plaintiff had failed to exhaust its administrative remedies by challenging the audit result pursuant to § 12-268i, and the statute authorizing refund claims, § 12-268c, did not provide an alternative route for the plaintiff to contest the final assessment for the audited tax periods.

         With respect to the commissioner's claim that the plaintiff was barred from seeking a refund for the audited tax periods because it failed to challenge the audit result pursuant to § 12-268i, the trial court concluded that that statute does not provide the exclusive administrative remedy for the overpayment of taxes for a tax period that has been subject to an audit. Rather, the court concluded that ‘‘§§ 12-268c and 12-268i stand independently, '' and that § 12-268c provides an alternative procedure for correcting an overpayment of taxes under these circumstances. Accordingly, the court concluded that the plaintiff's claim with respect to the audited tax periods was not barred.

         The court then turned to the plaintiff's claim that it was entitled to a refund of taxes paid on gross earnings from the sale of nonprogramming goods and services. The court noted that § 12-256 (b) required the plaintiff to pay taxes ‘‘upon the gross earnings from . . . the transmission to subscribers in this state of video programming by satellite . . . .'' The court then observed that dictionaries have defined ‘‘ ‘from' as indicating ‘the source or original or moving force of something.' '' The court further noted that the language of § 12-256 (b) (2) stands in contrast to the language of § 12-256 (b) (1), which expressly imposes a tax on the gross earnings from ‘‘the lines, facilities, apparatus and auxiliary equipment in this state used for operating a community antenna television system . . . .''[12] Applying the principles that related parts of a statute provide guidance in determining the meaning of a statutory provision; see State v. Ehlers, 252 Conn. 579, 590, 750 A.2d 1079 (2000) (‘‘[r]elated statutory provisions, or statutes in pari materia, often provide guidance in determining the meaning [of statutory language]'' [internal quotation marks omitted]); and that tax statutes must be strictly construed; see Zachs v. Groppo, 207 Conn. 683, 689, 542 A.2d 1145 (1988); the trial court concluded that the plaintiff's gross earnings from the sale of equipment, installation and maintenance of equipment, and subscriptions to Dish Magazine are not gross earnings ‘‘from . . . the transmission . . . of video programming by satellite'' and that, therefore, the plaintiff was entitled to a refund of the taxes that it had paid on those gross earnings. The court also concluded, however, that payment related fees and DVR service are sufficiently related to ‘‘the source, '' i.e., ‘‘transmission to subscribers in this state of video programming by satellite''; General Statutes § 12-256 (b) (2); that they constituted programming services subject to taxation.

         The trial court then noted that the parties had not yet addressed the amount of the refund that was due to the plaintiff. Accordingly, the court ordered the parties to confer on that issue and to report back to the court. Thereafter, the parties submitted a joint stipulation to the court setting forth the amounts due to the plaintiff. On the basis of the stipulation, the trial court rendered judgment in favor of the plaintiff in the amount of $886, 845.

         The plaintiff then filed a motion requesting that the trial court award interest on the $886, 845 refund pursuant to § 12-268c (b) (1). The trial court concluded that § 12-268c (b) (1) applies ‘‘only to the situation where the commissioner . . . allows for a refund due to overpayment. The correct statute referring to interest after a successful tax appeal from a gross earning tax payment is § 12-268l.'' The court denied the plaintiff's motion because an interest award pursuant to § 12-268l is ‘‘primarily an equitable determination and a matter lying within the discretion of the trial court''; (internal quotation marks omitted) Wheelabrator Bridgeport, L.P. v. Bridgeport, 320 Conn. 332, 371, 133 A.3d 402 (2016); and the plaintiff had presented no evidence that the equities weighed in favor of granting an interest award. In addition, the court concluded that the plaintiff was not entitled to interest because it had voluntarily agreed to the stipulation of damages, which did not include interest on the refund.

         The commissioner then filed an appeal, claiming that the trial court improperly determined that (1) the plaintiff's claim for a refund with respect to the audited tax periods was not barred, and (2) the plaintiff's gross earnings on the sale of nonprogramming goods and services were not subject to taxation under § 12-256 (b) (2). The plaintiff then cross appealed, claiming that (1) the trial court improperly determined that payment related fees and gross earnings from the provision of DVR service are subject to taxation pursuant to § 12-256 (b) (2), and (2) the plaintiff was not entitled to interest on the refund pursuant to § 12-268c (b) (1). See footnote 2 of this opinion. We agree with the plaintiff that the trial court improperly determined that gross earnings from the provision of DVR service are subject to taxation under § 12-256 (b) (2), and we reject the parties' other claims.

         I

         We first address the commissioner's claim that the trial court improperly determined that § 12-268i does not provide the exclusive procedure for challenging the assessment after an audit and, therefore, that the plaintiff was not barred from seeking a refund for the audited tax periods pursuant to § 12-268c.[13] We disagree.

         Whether § 12-268i provides the exclusive procedure for seeking a refund of an overpayment when the commissioner has previously conducted an audit for the tax period in question presents a question of statutory interpretation subject to plenary review. See, e.g., Perez-Dickson v. Bridgeport, 304 Conn. 483, 507, 43 A.3d 69 (2012). ‘‘When construing a statute, [o]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature. . . . In other words, we seek to determine, in a reasoned manner, the meaning of the statutory language as applied to the facts of [the] case, including the question of whether the language actually does apply. . . . In seeking to determine that meaning [General Statutes] § 1-2z directs us first to consider the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extratextual evidence of the meaning of the statute shall not be considered.'' (Internal quotation marks omitted.) Id., 507-508.

         We begin with a review of the statutory language. Section 12-268g provides in relevant part that ‘‘[t]he commissioner shall, within three years after the due date for the filing of a return . . . examine it and, in case any error is disclosed by such examination, shall, within thirty days after such disclosure, notify the taxpayer thereof. . . .'' Section § 12-268i provides in relevant part that ‘‘[a]ny taxpayer aggrieved by the action of the commissioner or his authorized agent in fixing the amount of any tax . . . may apply to the commissioner, in writing, within sixty days after the notice of such action is delivered or mailed to it, for a hearing and a correction of the amount of such tax . . . .'' Section 12-268c (a) (1) provides in relevant part that ‘‘[a]ny company . . . believing that it has overpaid any taxes due under the provisions of chapter 210, 211 or 212 may file a claim for refund in writing with the commissioner within three years from the due date for which such overpayment was made . . . .''

         The commissioner claims that, when the commissioner has audited a tax return for a specific tax period pursuant to § 12-268g and notified the taxpayer of errors that were discovered, and the taxpayer has failed to challenge the audit result within sixty days pursuant to § 12-268i, the taxpayer is then barred from requesting a refund for any overpayment of taxes during the audited period pursuant to § 12-268c (a) (1). The commissioner contends that allowing a taxpayer to file a refund claim pursuant to § 12-268c (a) (1) in these circumstances- under which a refund claim may be filed ‘‘within three years from the due date for which such overpayment was made''-would ‘‘[eliminate] the finality of audit determinations'' and render meaningless the sixty day time limitation contained in § 12-268i. Thus, under the commissioner's interpretation of the statutory scheme, if the commissioner discovers an error in a tax return during an audit conducted pursuant to § 12-268g, and the taxpayer does not dispute that specific error, the taxpayer must then either (1) conduct its own comprehensive audit to ensure that there was no overpayment of taxes during the audited period for any reason and, if it discovers an overpayment, challenge the audit result and assessment within sixty days, or (2) be forever foreclosed from seeking a refund of the overpayment.

         Nothing in the language of § 12-268g, however, suggests that there is any such burden on the taxpayer. To the contrary, the statute provides that the commissioner shall examine the taxpayer's tax return. See General Statutes § 12-268g (‘‘[t]he commissioner shall, within three years after the due date for the filing of a return . . . examine it''). In turn, this suggests that, if the commissioner finds an error, the taxpayer has sixty days under § 12-268i to challenge that specific finding of error by filing what is the effective equivalent of an appeal from the audit result, and that the taxpayer is not required to identify at that time any and all overpayments made during the audited period, regardless of whether they are related in any manner to the error found by the commissioner. Indeed, an appeal from an administrative ruling ordinarily does not provide the appellant with the opportunity-much less impose the obligation-to raise claims that are entirely unrelated to the ruling being appealed from. Accordingly, it is reasonable to conclude that overpayments made during the audited period that are discovered by the taxpayer are governed by § 12-268c, which authorizes taxpayers to seek a refund by filing a claim with the commissioner within three years of the due date for the overpayment. See General Statutes § 12-268c (a) (1) (‘‘[a]ny company . . . believing that it has overpaid any taxes . . . may file a claim for refund in writing with the commissioner within three years from the due date for which such overpayment was made'').

         The commissioner's interpretation of the relevant statutes is also unworkable because, as the plaintiff in the present case points out, there are circumstances under which a taxpayer may not even have a claim for a refund until long after the audit result has become final. For example, a taxpayer that provided a refund to a customer for a payment received during the audit period after the sixty day period for challenging an audit result had expired, but before the three year period for seeking a refund pursuant to § 12-268c had expired, would be left without effective recourse. The commissioner asserted at oral argument before this court that a taxpayer may seek relief pursuant to General Statutes § 12-39s[14] under these circumstances, but that statute provides far less protection to taxpayers who have overpaid their taxes than § 12-268c does because refund claims pursuant§ 12-39s, unlike claims pursuant to § 12-268c, ‘‘are committed to the [commissioner's] sole discretion, and [the courts are], therefore, without jurisdiction to evaluate [their] merits . . . .'' Chatterjee v. Commissioner of Revenue Services, 277 Conn. 681, 693, 894 A.2d 919 (2006). Accordingly, we cannot conclude that the legislature intended that § 12-39s would apply to refund claims that, for reasons entirely beyond the control of the taxpayer, could not be discovered within sixty days of an audit result, but that are discovered within three years of the overpayment.

         We conclude, therefore, that the trial court properly determined that the fact that an audit result has become final because the taxpayer has failed to challenge it within sixty days pursuant to § 12-268i does not necessarily mean that the taxpayer is barred from seeking a refund of overpayments made during the audited period pursuant to § 12-268c. We emphasize that we are not holding that a taxpayer may relitigate a specific audit result that has become final by requesting a refund of payments that were made on the basis of the specific error that the commissioner found. Principles of res judicata or collateral estoppel, as well as the policy disfavoring collateral attacks on final decisions, would likely bar any such claim. See Weiss v. Weiss, 297 Conn. 446, 459, 998 A.2d 766 (2010) (‘‘[r]es judicata prevents a litigant from reasserting a claim that has already been decided on the merits'' [internal quotation marks omitted]); Convalescent Center of Bloomfield, Inc. v. Dept. of Income Maintenance, 208 Conn. 187, 200-201, 544 A.2d 604 (1988) (‘‘[u]nless a litigant can show an absence of subject matter jurisdiction that makes the prior judgment of a tribunal entirely invalid, he or she must resort to direct proceedings to correct perceived wrongs in the tribunal's conclusive decision''); Doyle v. Universal Underwriters Ins. Co., 179 Conn.App. 9, 14, 178 A.3d 445 (2017) (‘‘[c]ollateral estoppel precludes a party from relitigating issues and facts actually and necessarily determined in an earlier proceeding between the same parties'' [internal quotation marks omitted]); see also Lafayette v. General Dynamics Corp., 255 Conn. 762, 773, 770 A.2d 1 (2001) (‘‘[a]s a general proposition, the governing principle is that administrative adjudications have a preclusive effect when the parties have had an adequate opportunity to litigate'' [internal quotation marks omitted]). We do conclude, however, that the fact that the commissioner has conducted an audit does not mean that a taxpayer must either make a claim within sixty days for any and all overpayments made during the audited period, regardless of whether the overpayments are related to the audit result or are discoverable at the time, or be forever barred from seeking a refund of those overpayments. In the present case, the commissioner does not argue that the claims that the plaintiff raised in its requests for a refund pursuant to § 12-268c were related in any way to errors that the commissioner discovered during the audits. Accordingly, we conclude that the trial court properly determined that the plaintiff's claim for a refund for the audited periods is not barred.

         II

         We next address the parties' claims with respect to the scope of the plaintiff's earnings that are subject to taxation under § 12-256 (b) (2). The commissioner claims on appeal that the trial court improperly determined § 12-256 (b) (2) does not subject the plaintiff's gross earnings from the sale and lease of equipment or from equipment installation and maintenance to taxation. The plaintiff claims in its cross appeal that the trial court improperly determined that earnings from the sale of DVR service and payment related fees are subject to taxation under § 12-256 (b) (2).[15] We reject the commissioner's claim on appeal. We also reject the plaintiff's claim that the trial ...


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