Declaratory Ruling No. 2003-1

Petroleum Products Gross Earnings Tax

Fuel for Residential Heating Purposes


FACTS:

Whether number 6 fuel oil used exclusively for residential heating purposes is exempt from the petroleum products gross earnings tax as set forth in Conn. Gen. Stat. §12-587.

DECLARATORY RULING:

Conn. Gen. Stat. §12-587(b)(2) does not include the phrase “number 6 fuel oil used exclusively for residential heating purposes.”  Therefore, number 6 fuel oil used exclusively for residential heating purposes is not exempt from the petroleum products gross earnings tax.

DISCUSSION:

A.     Background

The petroleum products gross earnings tax is imposed under Conn. Gen. Stat. §12-587 on the gross earnings derived from a company’s first sale of petroleum products in Connecticut .  The first sale of a number of specific petroleum products within Connecticut , as described in Conn. Gen. Stat. §12-587(b)(2), is exempt from tax.  Number 6 fuel oil used exclusively for residential heating purposes is not included among these products.

The Co-op asserts that, despite the absence of express language in Conn. Gen. Stat. §12-587(b)(2), number 6 fuel oil used exclusively for residential heating purposes should be exempt from tax.  The Co-op alleges that the existence of various tax statutes and published Departmental materials concerning fuel for heating purposes evidences the legislature’s intent to exempt all fuel, including number 6 fuel oil, for the purpose of residential heating. 

To support this claim, the Co-op makes a number of observations.  First, the Co-op notes that while its particular use of number 6 fuel oil is not exempt from tax, nevertheless under Conn. Gen. Stat. §12-587(b)(2)(G), number 6 fuel oil is exempt from tax when used exclusively by manufacturers.  Second, number 2 heating oil, number 1 oil and propane gas used exclusively for heating purposes are exempt from tax under Conn. Gen. Stat. §12-587(b)(2)(B), (C) and (D) respectively.  Third, the Co-op points out that under Conn. Gen. Stat. §12-412(16), sales of all fuel used for residential heating purposes are exempt from sales and use taxes.

B.     Statutory Construction

The Co-op’s argument that its distributor is entitled to an exemption from the petroleum products gross earnings tax for number 6 fuel oil requires that the Department interpret Conn. Gen. Stat. §12-587.  In Ruling No. 92-6, the Department dealt with a similar issue involving the interpretation of a former subsection of Conn. Gen. Stat. §12-587.  Although that issue differed because it construed a statute imposing a tax, the Department relied upon the Connecticut Supreme Court’s guidance on statutory construction in Robinson v. Unemployment Security Board of Review, 181 Conn. 1, 6, 434 A.2d 293 (1980):

[A] cardinal rule of statutory construction is that statutes are to be construed to give effect to the apparent intention of the lawmaking body. Farms Country Club, Inc. v. Carini, 172 Conn. 439, 444, 374 A.2d 1094; Jarvis Acres, Inc. v. Zoning Commission, 163 Conn. 41, 46, 301 A.2d 244; McAdams v. Barbieri, 143 Conn. 405, 416, 123 A.2d 182; 2A Sutherland, Statutory Construction (4th Ed.) §45.05. If the language of the statute is clear, it is assumed that the intention is expressed by the words themselves and therefore there is no need to construe the statute; Anderson v. Ludgin, 175 Conn. 545, 552, 400 A.2d 712; for where the wording is plain, courts will not speculate as to any supposed intention because the question before a court then is not what the legislature actually intended but what intention it expressed by the words that it used. Doe v. Institute of Living, Inc., 175 Conn. 49, 68, 392 A.2d 491; Lee v. Lee, 145 Conn. 355, 358, 143 A.2d 154. (Citation omitted).

Ruling No. 92-6, at 2.

1.      Plain Meaning Rule

At the outset, we observe that the language of Conn. Gen. Stat. §12-587(b)(2) expressly sets forth the allowable exemptions from tax.  The phrase, “number 6 fuel oil used exclusively for residential heating purposes,” is absent from the statute.  Under the “plain meaning rule,” the language of the statute as written did not provide an exemption for number 6 fuel oil for residential heating under Conn. Gen. Stat. §12-587(b)(2). Conn. Pub. Acts 03-154, §1, codified the “plain meaning rule” and limits when outside sources may be used to interpret statutory language.  It provides that

[t]he meaning of a statute shall, in the first instance, be ascertained from 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.

Since the legislative intent of a statute is found not in what the legislature may or may not have meant to say, but by what it did say, see Lees v. Middlesex Ins. Co., 219 Conn. 644, 652, 594 A.2d 952 (1991), the absence of a specific exemption for number 6 fuel oil for residential heating from Conn. Gen. Stat. §12-587(b)(2) evidences a legislative intent that there be no such exemption.

2.      Legislative Intent

Even if we were to look beyond the plain meaning of the statute as the Court had done in State v. Courchesne, 262 Conn. 537, 816 A.2d 562 (2003) to “consider all relevant sources of the meaning of the language at issue…” the result would be the same.  Id at 577.

The legislative history of Conn. Gen. Stat. §12-587 is silent with respect to exempting number 6 fuel oil for residential heating purposes.  The express exemptions from tax for number 1 oil, number 2 heating oil and propane gas for heating and number 6 fuel oil used by manufacturers are the only evidence of the General Assembly’s intent.  Currently, number 6 fuel oil for residential heating is only exempt from sales and use taxes under Conn. Gen. Stat. §12-412(16) as a “fuel used for heating purposes.”  The Co-op suggests that the speckled pattern of exemptions in Conn. Gen. Stat. §12-587 and the sales and use taxes provisions is evidence of a greater intent to exempt all fuel for heating purposes.  We disagree.

The General Assembly could have expressly exempted all fuel or no fuel from taxation.  It did not.  It is well within the scope of the legislature’s authority to make distinctions between and among classes for taxation or exemption. United Illuminating Company v. New Haven, 179 Conn. 627, 640, 427 A.2d 830 (1980).  The legislature has broad discretion regarding classification in the field of taxation. Id.   Thus, the General Assembly is not prohibited from making classifications as it has in this case, permitting an exemption from Conn. Gen. Stat. §12-587 for a particular use of number 6 fuel oil --manufacturing -- while not providing an exemption for a different use of the same fuel oil -- residential heating.

3.      Exemptions To Be Strictly Construed

Even if there were some ambiguity in the exemptions under Conn. Gen. Stat. §12-587(b)(2) or Conn. Gen. Stat. §12-412(16), the ambiguity would have to be resolved against allowing an exemption.  The Connecticut Supreme Court has held, “[f]irst, statutes that provide exemptions from taxation are a matter of legislative grace that must be strictly construed against the taxpayer. Second, any ambiguity in the statutory formulation of an exemption must be resolved against the taxpayer. Third, the taxpayer must bear the burden of proving the error in an adverse assessment concerning an exemption.”  Petco Insulation Company, Inc. v. Crystal, 231 Conn. 315, 320, 649 A.2d 790 (1994) (quoting Plastic Tooling Aids Laboratory, Inc. v. Commissioner of Revenue Services, 213 Conn. 365, 369, 567 A.2d 1218 (1990)).

The Co-op relies on the existence of exemptions from Conn. Gen. Stat. §12-587 of other types of fuel and fuel oils, the exemption from Conn. Gen. Stat. §12-587 of number 6 fuel oil used by manufacturers and the exemption from sales and use taxes of number 6 fuel oil for heating purposes together with citing the existence of published Department materials concerning these topics to argue that number 6 fuel oil for residential heating purposes should be exempt from tax imposed under Conn. Gen. Stat. §12-587.  We find this argument unpersuasive.  (See Petco, supra, where the Court found that the plaintiff failed to sustain its burden of proving a contrary legislative intent by relying on a single comment by a ranking member of the General Assembly).  We note that the facts in this case fall well short of the facts in Petco.  Here, there is not a scintilla of evidence that the General Assembly even contemplated exempting number 6 fuel oil used for residential heating purposes from tax under Conn. Gen. Stat. §12-587.  The existence of other Departmental materials is irrelevant to this inquiry.

Pam Law                                                                                   
Commissioner of Revenue Services
12/10/03