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Ruling 92-13

Sales and Use Taxes Intangible Property Refuse Removal


A Connecticut municipality (hereinafter "the Town") has entered into a contract with a regional resources recovery authority (hereinafter "the Authority") for the disposal of solid waste that is generated by Town homeowners at a regional resources recovery facility operated by the Authority (hereinafter "the Facility"). The Town has enacted a "pay-as-you-throw" ordinance under which the trash of its resident homeowners will only be collected if it is placed in a specially colored and marked disposal bag made available by the Town. Such a bag must be used even if a resident homeowner brings trash to the Facility directly. The use of specially colored and marked disposal bags enables the Authority to determine how much of the solid waste being disposed of at the Facility is generated by Town residents and enables the Authority to charge towns on a pro rata basis for their share of the costs of operating the Facility. The fee charged upon distribution of the bags is substantially more than a resident would pay to purchase "plain" bags at a retail store, because it is calculated to fully cover the Town's costs under its contract with the Authority for the disposal of trash of Town homeowners at the Facility. Town homeowners "purchase" the bags at the Town Hall or at local retail stores which act as agents for the Town in distributing the bags and in collecting the fee charged upon the distribution of the bags.


Whether the distribution of specially colored and marked trash bags for a fee to Town residents under an ordinance requiring the use of such trash bags, where the fee is intended to fully cover the Town's contractual costs of disposal of the trash of Town residents at the Facility, is a sale of tangible personal property or is, instead, an indicium of an intangible right and an incidental aid to its exercise.


Conn. Gen. Stat. §12-407(2)(a) imposes sales and use taxes upon the sale of tangible personal property within this state. No tax is imposed upon the sale of intangible property.

A determination of whether the charges for the trash bags are subject to sales and use taxes depends upon whether, and to what extent, the true object of the residents in "purchasing" the bags is to acquire the disposal bags themselves or to purchase the intangible right to dispose of their trash at the Facility under the Town's contract with the Authority. "The determinant is the intention of the parties." Dine Out Tonight Club v. Department of Revenue Services, 210 Conn. 567, 572, 556 A.2d 580 (1989). The analysis for determining the true object of the Town's residents in "purchasing" the special disposal bags is similar to the analysis applied by the court in Dine Out Tonight, supra, to a dining club's membership cards:

Manifestly, the sine qua non of the transaction between the club and its members is the intangible right to receive free meals and access to the knowledge of an expanding list of restaurants that provide them. The membership card and directory are merely indicia of that intangible right and incidental aids to its exercise. [Citations omitted.]

Id., at 572.

The sine qua non, or true object, of Town homeowners in paying the distribution fees for the special disposal bags is the intangible right to dispose of their trash at the Facility pursuant to the Town's contract with the Authority. If the residents were merely concerned with purchasing trash bags to hold their garbage, they could purchase "plain" bags at a lower price. Instead, the specially marked and colored disposal bags are intended to indicate to the trash collectors that the homeowner has purchased the right of access to the Facility in advance. The bags are also a means for the Town and the Facility to keep track of the amount of waste the Town delivers to the Facility. The use of the trash bags in the "pay-as-you-throw" scheme is analogous to the use of stickers granting entry to landfills. There, as here, an individual does not purchase a mere item of tangible property, but the right to dispose of trash at a landfill, to which right the transfer of the sticker is incidental.

Furthermore, an analysis similar to that used by the court in White Oak Corporation v. Department of Revenue Services, 198 Conn. 413, 503 A.2d 582 (1986), compels the conclusion that the Town "uses" the bags as an incidental part of its scheme to provide access to the Facility, given the intent of the Town and its residents and the incidental nature of the disposal bags themselves to the "pay-as-you-throw" scheme. Therefore, sales and use taxes would be due on the Town's purchases of the bags, but for the exemption provided in Conn. Gen. Stat. §12-412(1) for purchases by political subdivisions of the State of Connecticut.


No sales and use taxes are due on the Town's charges to its resident homeowners for the special disposal bags, because the true object of the transaction is the acquisition of an intangible right of access to the Facility, not the purchase of trash bags. Although the purchase of the bags by the Town in connection with its scheme to provide access to the Facility would otherwise be taxable, the purchase by the Town of the disposal bags is exempted under Conn. Gen. Stat. §12-412(1) from sales and use taxes.


July 21, 1992