Connecticut Limousine Service, Inc. v. Sullivan

• Decision Date: 07 December 1966
• Docket Number: 138631,139495,Nos. 138629,s. 138629
• Citation: 28 Conn.Supp. 42,248 A.2d 578
• Court: Connecticut Superior Court
• Parties: CONNECTICUT LIMOUSINE SERVICE, INC. v. John L. SULLIVAN, Tax Commissioner (two cases). Edward DiLAURO, Jr. v. John L. SULLIVAN, Tax Commissioner.

Page 578

248 A.2d 578

28 Conn.Supp. 42

CONNECTICUT LIMOUSINE SERVICE, INC. v. John L. SULLIVAN, Tax Commissioner (two cases).

Edward DiLAURO, Jr. v. John L. SULLIVAN, Tax Commissioner.

Nos. 138629, 138631, 139495.

Superior Court of Connecticut Hartford County.

Dec. 7, 1966. ¹

Day, Berry & Howard, Hartford, for plaintiffs.

Walter T. Faulkner and Ralph G. Murphy, Asst. Attys. Gen., for defendant.

TEDESCO, Judge.

The three above-entitled cases were tried together before the Superior Court in the county of Hartford since they touch upon the same question of fact and law. The plaintiff Edward DiLauro, Jr., conducted a business known as New Haven-Fairfield Airport Service and subsequently incorporated that business and named it Connecticut Limousine Service, Inc. These parties are the plaintiffs in these actions for either a claim for a refund of a sales tax or an appeal from the assessment of a sales tax on the purchase of motor vehicles used in the transportation of passengers from points in Connecticut directly to the New York and New Jersey airports. The plaintiffs purchased motor vehicles through duly licensed motor vehicle dealers in Connecticut. The plaintiffs paid the sales tax in cases Nos. 138629 and 138631, but the state is claiming a sales tax in case No. 139495, concerning the purchase of motor vehicles used by the plaintiffs. In connection with the purchase order of the motor vehicles of the dealers, the plaintiffs instructed the dealers to direct the manufacturers in Michigan to send the vehicles to Ft. Smith, Arkansas, to be subjected to 'stretching,' which is a process by which the familiar elongated airport vehicle is made longer by several feet. The stretching process consists of adding lengths of parts to the body and internal works of a car so that more passengers can by accommodated than in a normal pleasure vehicle.

After the vehicles were stretched, they were driven to New Haven and arrangements were made for the inspection of the vehicles by the Connecticut public utilities commission, and registrations for the vehicles were obtained from the Connecticut department of motor vehicles. The vehicles were garaged in New Haven, and the office of the plaintiffs was located in New Haven. Subsequently, the United States interstate commerce commission issued to the plaintiffs a certificate of public convenience and necessity to use vehicles only for the interstate carrying of passengers and their baggage from various points in Connecticut to airports in New York and New Jersey. There was testimony that none of the passengers were allowed to leave the vehicles within the boundaries of a state. Once a passenger boarded a vehicle, he was transported to either New York or New Jersey. Therefore, the fact that the vehicles were used only for interstate business was firmly established.

The question posed is whether the sales and use tax is payable on these vehicles to the state of Connecticut even though they are used exclusively in interstate business, and whether the imposition of a Connecticut sales tax is a direct imposition on the freedom of commercial flow from one state to another.

Under the commerce clause; U.S.Const. art. 1, § 8, cl. 3; the validity of a state tax depends on the consideration of a constitutional policy having a reference to the substantial effects, actual or potential, of the particular tax in suppressing or unduly burdening interstate commerce. Interstate commerce is not totally immune from state taxation. Interstate business must pay its way. The commerce clause does not relieve those engaged in interstate commerce even though the tax increases the cost of doing interstate business.

A reading of the cases does not, however, readily answer the question involved in this case. There are many decisions which state that a state tax cannot be imposed on business which is involved in interstate commerce.

The state may impose property taxes on property having a situs within its territory, though the property is used in interstate commerce. The courts have even held that foreign-owned railroad rolling stock in a state may be taxed although it is employed in interstate commerce. Note, 49 A.L.R. 1099, 1112. In Pullman's Palace-Car Co. v. Twombly, C.C., 29 F. 658, the court said a state tax is imposed for the reason that the state has a duty to protect the property (sleeping car), the state must provide protection, this protection costs money, and the tax is the owner's proper payment therefor. The commerce clause was not violated by the imposition of a state gross income tax where books were bound and sent across state lines to purchasers who were selling out of state for delivery out of state. Gross Income Tax Division v. W. B. Conkey Co., 228 Ind. 352, 90 N.E.2d 805, cert. denied, 340 U.S. 941, 71 S.Ct. 504, 95 L.Ed. 679; note, 67 A.L.R.2d 1322, 1350. The mere knowledge of the seller in the taxing state of an intended out of state destination was said not to convert an intrastate transaction to an interstate transaction. A state tax is not forbidden by the commerce clause. A business must carry its fair share of the cost of the state government for the return of the business it derives from the state. The usual complaint is multiple taxation, but that is not the claim here. Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450, 79 S.Ct. 357, 3 L.Ed.2d 421.

It is well to pause and note that the Conkey and the Portland Cement cases, supra, are very similar to the plaintiffs' case here. A tax on a corporation for the sale of railroad ties purchased in one state and sold to a railroad company for work to be done on them in another state was allowed. The ties were properly taxed because they were sold, delivered, and loaded on railroad cars to go to another state. Dept. of Treasury v. Wood preserving Corporation, 313 U.S. 62, 61 S.Ct. 885, 85 L.Ed. 1188; note, 115 A.L.R. 952.

A Nevada corporation manufactured in Utah pipes to be used on specific out-of-state jobs. Delivery was made and title passed in Utah, and then the material was hauled out of state. The Court said that since the title passed and delivery to the purchaser took place in Utah, the commerce clause did not prevent Utah from collecting a tax. The court said that a state may levy and collect a sales tax. State Tax Commission v. Pacific States Cast Iron Pipe Co., 372 U.S. 605, 83 S.Ct. 925, 10 L.Ed.2d 8.

In American Oil Co. v. Neill, 86 Idaho 7, 24, 383 P.2d 350, 361, the court said that '(t)he inhibition against imposition of a tax upon interstate commerce is not as to the tax itself, but only when the tax becomes an undue burden upon interstate...