Connecticut Theater Foundation, Inc. v. Brown

• Decision Date: 26 February 1980
• Court: Connecticut Supreme Court
• Parties: CONNECTICUT THEATER FOUNDATION, INC. v. F. George BROWN, Tax Commissioner of the State of Connecticut.

Page 863

427 A.2d 863

179 Conn. 672

CONNECTICUT THEATER FOUNDATION, INC. v. F. George BROWN, Tax Commissioner of the State of Connecticut.

Supreme Court of Connecticut.

Argued Nov. 9, 1979.

Decided Feb. 26, 1980.

Robert L. Klein, Asst. Atty. Gen., with whom, on brief, were Carl R. Ajello, Atty. Gen., and Ralph G. Murphy, Asst. Atty. Gen., for appellant (defendant).

William B. Rush, Bridgeport, with whom were Christopher R. Loomis and, on brief, W. Parker Seeley, Bridgeport, for appellee (plaintiff).

Before COTTER, C. J., and BOGDANSKI, PETERS, HEALEY and PARSKEY, JJ.

PARSKEY, Associate Justice.

In 1973 the plaintiff, a nonstock, nonprofit Connecticut corporation, commenced operation of the Westport Country Playhouse, a summer theater. Shortly after the beginning of its 1973 season the plaintiff applied to the Connecticut tax department for an exemption from the admissions tax imposed under chapter 225 of the General Statutes. It also applied to the Internal Revenue Service (IRS) for exemption from the federal income tax. In April 1974, the IRS granted the plaintiff the requested exemption effective "from the date of its inception," which covered the commencement of the plaintiff's business in 1973. In June 1974, the state tax department issued the plaintiff an exemption certificate for future admissions tax liability, but precluded application of the exemption to the audit period of June through September 1973. The tax commissioner later issued a deficiency assessment against the plaintiff for the admissions tax allegedly due on the receipts collected by the plaintiff during the 1973 audit period. The plaintiff appealed the commissioner's decision to the Court of Common Pleas. After trial on a stipulation of facts the court set aside the deficiency assessment.

General Statutes § 12-541(a) imposes a tax of 10 percent of the admission charge to any place of amusement, entertainment or recreation. The plaintiff admits that it is a taxable entity within the definition of subsection (a) of the statute, but contends that it qualifies for exemption under the provisions of subsection (b) which exclude organizations exempt from federal income taxes. ¹

The plaintiff argues that it qualified as a tax exempt organization during the 1973 audit period because the subsequent IRS determination of its exempt status was made retroactive to the commencement of its operations. The plaintiff's argument ignores both the character of the admissions tax and the statutory provisions concerning when the tax is due and payable. The admissions tax is a transaction tax. The taxable event is the admission charge to the patron. At that point the tax is imposed on the person making the charge, giving that person the right of reimbursement from the purchaser. Section 12-547 clearly provides that the admissions tax must be computed and paid in the month following that in which it was collected. For an exemption to operate so as to relieve the taxpayer of liability it must therefore exist at the time the tax is to be collected from the patron. Absent such exemption the taxpayer acts as the agent of the state when it collects the tax from its patrons. It is stipulated that at the time of the admissions in question and for several months thereafter the plaintiff was not exempt under § 12-541(b) because it was neither an organization exempt for federal income tax purposes nor an organization determined by the commissioner of revenue services to be of a similar nature. The plaintiff did not qualify for the § 12-541(b)(1) exemption until the IRS made a determination of its taxable status some seven months after the taxable period in question. During the 1973 summer season the admission charges that the plaintiff received were not exempt from the admissions tax and the plaintiff was therefore required to pay that tax when due.

An additional factor in favor of imposing the admissions tax here is that the plaintiff actually did collect the amount of this tax from its patrons during this period. Although the trial court concluded in its memorandum of decision and its limited finding that the price of each ticket "was a flat $2.50 and was not contingent on a finding of taxability," this conclusion is at odds with the stipulated and admitted facts. It was stipulated that each ticket sold bore the following legend: "In the event the excise tax is repealed the amount shown as tax will become a part of the established price." This language clearly indicates that a portion of the revenue collected was designated as tax should the tax be deemed applicable. The plaintiff confirms this fact by the admission in its brief that it "collected an amount equal to the tax possibly due."

Although the conditional language of the ticket legend is inartfully drafted, it may reasonably be interpreted to mean that the portion of the ticket revenue designated as tax would become part of the price in the event that the tax is inapplicable. Because we have concluded on the basis of strict statutory interpretation that the admissions tax did in fact apply to these receipts, then that designated portion of the revenue was collected as a tax and should rightfully be turned over to the state.

The plaintiff argues that to permit the state to collect the tax in this instance would frustrate the legislative policy expressed in § 12-541(b) to exempt certain qualifying organizations, such as the...