Search Department of Revenue Services Filtered Topic Search

CONNECTICUT COURT CASES

CONNECTICUT SUPERIOR COURT

In Vincenzo Verna et al. v. Commissioner of Revenue Services, 261 Conn. 102 (July 2002), the Connecticut Supreme Court construed the term "unimproved land" for purposes of applying the real estate conveyance tax. The court concluded that a blockhouse that remained on the plaintiff’s property at the time of its conveyance constituted an improvement to the property. Therefore, because of the presence of the blockhouse, the court held that the plaintiff’s property was not unimproved land for purposes of the real estate conveyance tax. Consequently, the court affirmed the trial court’s decision.


CONNECTICUT SUPERIOR COURT (TAX SESSION)

In Greenwich Hospital v. Commissioner of Revenue Services, No. CV 99 0498326S (July 30, 2001), the Superior Court granted the Department’s motion for partial summary judgment, ruling that the hospital gross earnings tax, which is a tax on the amount of a hospital’s total charges for all patient care services, applies to items of tangible personal property used by hospitals in performing patient care services.

In Greenwich Hospital v. Commissioner of Revenue Services, No. CV 99 0498326S (October 3, 2001), the Superior Court granted the Department’s Motion for Articulation. In granting the Department’s motion, the court held that its statement in its Memorandum of Decision of July 30, 2001 that "the attendant items of tangible personal property that are necessary for the hospital to complete its delivery of patient care services" is synonymous with the definition of patient care services contained in Conn. Gen. Stat. §12-263a(8).

In Millward Brown, Inc. v. Commissioner of Revenue Services, No. CV 98 0492472S (August 8, 2001), the Superior Court ruled that because the taxpayer derived its income during the tax periods in question from the use of tangible personal property, the taxpayer properly apportioned its income using the three-factor formula of Conn. Gen. Stat. §12-218(c).

In Edward D. Sullivan, et al v. Commissioner of Revenue Services, No. CV 99 0495538S (August 10, 2001), the Superior Court upheld the Department’s real estate conveyance tax assessment on the taxpayer’s transfer of real property that he solely owned to a limited liability company of which he and his wife were the sole members. Although the taxpayer argued that the property was subject to a continuing partnership on the date of conveyance, the court found that the facts did not support this contention Consequently, the court found that the real estate conveyance tax applied to the transfer.

In Rodney Viccari v. State of Connecticut, Commissioner of Revenue Services, No. CV 98 0492597S (September 5, 2001), the Superior Court ruled in favor of the taxpayer. Relying on two previous Connecticut Supreme Court cases involving the application of the use tax (Conn. Gen. Stat. §12-411) to boats purchased outside Connecticut, the court held that three conditions must exist in order for the tax to apply: First, there must be a purchase of tangible personal property; second, the purchase must have been made for the purpose of storage, use or other consumption in this state; and third, there must have been such storage, use or other consumption. Based on the evidence and testimony presented in this case, the court found that the taxpayer did not purchase his boat with the intent to use it in Connecticut. Therefore, the court held the use of the boat in Connecticut was not subject to use tax.

In Andrew J. Mandell v. Commissioner of Revenue Services, No. CV 00 0504213S (October 15, 2001), the Superior Court ruled in favor of the taxpayer, finding that the real estate conveyance tax did not apply to the taxpayer’s transfer of his property to a limited liability company of which he was the sole member. The court, in finding that, for tax purposes, the taxpayer owned the real property that was the subject of this appeal both before and after the conveyance of such property, held that there was no consideration paid by Mandell Properties, LLC to the taxpayer for the transfer of the property.

In Revere Ferris v. Commissioner of Revenue Services, No. CV 99 0498479S (October 18, 2001), the Superior Court, finding no distinction between the facts of this case and the facts in Andrew J. Mandell v. Commissioner of Revenue Services, ruled in favor of the taxpayer in this real estate conveyance tax case. The court found that, for tax purposes, the taxpayer owned the real property that was the subject of this appeal both before and after his conveyance of the property and that no consideration was paid in connection with the transfer of the property. The court therefore held that no tax was due. As in Andrew J. Mandell v. Commissioner of Revenue Services, the taxpayer in this case transferred his property to a limited liability company, of which he was the sole member.

In Stewart J. Leonard, Sr. d/b/a Stew Leonard’s Diary v. Commissioner of Revenue Services, No. CV 98 0492503S (November 15, 2001), the Superior Court found in favor of the taxpayer in phase two of this bifurcated trial. The Department assessed a sales and use tax deficiency and a twenty-five per cent penalty against the taxpayer for the period from February 28, 1989 through March 31, 1992. Because the taxpayer had destroyed its original books and records, the examiner could not perform an audit of those books and records. The Department therefore based its assessment on amounts set forth in a plea agreement between the taxpayer and the federal government, establishing underreported income amounts for each of the years in question. Although there is no question that the taxpayer altered business records to change the amount of gross receipts reported for federal income tax purposes, the court found that the Department presented no evidence that the taxpayer altered or destroyed any business records involving the reporting or collection of Connecticut sales tax during the period in question. The court further found that the amounts in the federal plea agreement were arbitrary and for settlement purposes only. Accordingly, the court held that the Department’s reliance on the taxpayer's plea agreement with the federal government was not a proper basis for the imposition of a sales tax deficiency assessment and twenty-five per cent penalty against the taxpayer for the period from February 28, 1989 through March 31, 1992.

In Stewart J. Leonard, Sr. d/b/a Stew Leonard’s Diary v. Commissioner of Revenue Services, No. CV 98 0492503S (March 27, 2002), the Superior Court articulated its basis for holding that the statute of limitations provided in Conn. Gen. Stat. §12-415(f) barred the Department from assessing sales and use taxes against the taxpayer and its basis for disallowing the Department’s imposition of a fraud penalty under Conn. Gen. Stat. §12-415(d). According to the court, the basis for its holdings was that the Department failed to meet its burden of proving fraud or intent to evade Connecticut sales tax by the taxpayer.

In NERAC, Inc. v Commissioner of Revenue Services, No. CV 99 0493548S (November 30, 2001), the Superior Court ruled in favor of the taxpayer. The issue in this case was whether database information conveyed to the taxpayer on magnetic tapes was intangible or tangible personal property. The court, finding that the true object of the transaction was not tangible personal property in the form of magnetic tapes, but instead was the information contained on the tapes, held that the transaction was not subject to tax.

In Dennis Gavigan v. Commissioner of Revenue Services, No. CV 01 0508067S (January 18, 2002), the Superior Court granted the Department’s motion to dismiss, finding that the taxpayer failed to properly serve its complaint. Because the taxpayer failed to have a sheriff serve its complaint on the Attorney General in accordance with the requirements of Conn. Gen. Stat. §12-730 and Conn. Gen. Stat. §52-64, the court held that it lacked subject matter jurisdiction to decide the case. In Air Tiger, Inc. v. Commissioner of Revenue Services, No. CV 99 0496956S (March 27, 2002), the Superior Court ruled in favor of the Department. The court found that the taxpayer’s gross receipts were not derived from air commerce or transportation but rather from payments it received from the leasing of an aircraft. Consequently, the court held that the lease payments the taxpayer received from the lease of such aircraft were subject to Connecticut sales tax pursuant to Conn. Gen. Stat. §12-407(2)(j). [Felicia: As instructed, I have added the appropriate statutory cite. In its decision, however, the court never specifically mentions Conn. Gen. Stat. §12-407(2)(j), which was the basis for the Department’s assessment in this case. Rather, the court simply held that the rental payments at issue are subject to Connecticut sales tax.]

In Men’s World, Inc. v. Commissioner of Revenue Services, No. CV 99 0494630S (March 27, 2002), the Superior Court ruled in favor of the taxpayer. The sole issue on appeal was whether a $3 damage waiver charge made by the taxpayer with respect to its rental of formal wear was properly excludable from gross receipts in determining the rental cost of a tuxedo for purposes of Conn. Gen. Stat. §12-412(47). By not adding the damage waiver to the tuxedo rental fee, the taxpayer was able to keep the total rental fee below $50, and thus exempt from tax under Conn. Gen. Stat. §12-412(47). Finding that the damage waiver charge was not insurance, but was an optional charge at the customer's election, the court concluded that the damage waiver charge was not part of the rental price of the tuxedo.


Connecticut’s Taxes

The Department collected
nearly $9.1 billion in revenue
for fiscal year 2001-02.

80% of collections
were attributable to the Income Tax and 
Sales & Use Tax.


State Revenue Sources

Fiscal Year Ending

Tax Type & Citation

June 30, 2000

June 30, 2001

June 30, 2002

Admissions & Dues Tax Ch. 225

$ 26,651,148

$ 25,742,422

$ 26,849,216

Alcoholic Beverages Tax Ch. 220

40,964,731

41,145,655

41,618,820

Automobile Rental Surcharge Ch. 228h

549,713

127,365

84,754.52

Capital Gains, Dividends & Interest Tax Ch. 224

139,123

189,620

167,042

Cigarette Tax Ch. 214

117,425,635

115,136,385

156,766,569

Community Antenna TV Systems Cos. Ch. 211

24,698,633

28,640,293

29,667,698

Connecticut Estate Tax Ch. 217

29,925,060

70,123,053

78,610,645

Controlled Substances Ch. 228d

962

87,135

147,547

Controlling Interest Transfer Ch. 228b

924,195

1,165,395

1,366,896

Corporation Business Tax Ch. 208 & 209

585,261,737

546,662,053

371,783,975

Dry Cleaners Surcharge Ch. 211b

766,029

922,830

906,281

Electric and Power Companies Ch. 212

28,376,064

27,865,890

30,882,437

Fiduciary Estate Tax Ch. 218a

5,178

5,265

5,215

Gas Companies Ch. 212

32,858,100

50,591,376

31,181,829

Gas and Electric Companies Ch. 212

79,978,795

73,393,178

74,762,744

Gift Tax Ch. 228c

32,765,696

28,206,636

19,953,803

Hazardous Waste Tax Ch. 445

994,813

390,114

83,223

Health Care Centers Ch. 207

37,187,076

28,893,604

41,280,791

Hospital Gross Earnings Ch. 211a

69,180,430

334,106

38,128

Income Tax Ch. 229

4,238,128,647

4,743,440,250

4,266,291,049

Insurance Companies, Domestic Ch. 207

26,874,578

26,332,115

31,063,908

Insurance Companies, Foreign Ch. 207

131,900,557

129,879,387

135,999,108

Motor Carrier Road Tax Ch. 222

10,078,118

10,274,045

8,780,096

Motor Vehicle Fuels Tax Ch. 221

496,658,719

407,559,662

421,805,196

Nursing Home Provider Tax Ch. 228f

492

0

0

Occupational Tax Ch. 876

5,914,532

5,937,106

5,947,456

Petroleum Tax (Oil Companies) Ch. 227

103,338,078

127,567,873

100,113,929

Railroad Companies Ch. 210

167,364

55,585

103,605

Real Estate Conveyance Tax Ch. 223

113,642,688

111,113,467

119,351,195

Sales and Use Taxes Ch. 219

3,106,764,984

3,184,327,113

3,064,794,682

Seed Oyster Tax Ch. 491

308

0

0

Solid Waste Ch. 446d

2,218,677

2,274,489

2,245,933

Steam Companies Ch. 212

184,515

0

0

Succession Tax Ch. 216

198,142,011

182,673,179

74,476,175

Telecommunications Ch. 210a

7

90

0

Tire Fee Ch. 446d

5,447

(14)

0

Tobacco Products Ch. 214a

4,951,833

4,492,025

4,443,667

Tourism Account Surcharge Ch. 228e

4,780,821

4,876,640

4,536,350

Unauthorized Insurers Ch. 698d

1,880,792

1,762,499

2,905,424

Unrelated Business Income Tax Ch. 208a

2,061,711

3,735,458

2,392,948

Total

9,556,347,998

$9,985,923,344

$9,151,408,334