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.

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