Fusco-Amatruda Co. v. Tax Commissioner

• Decision Date: 17 June 1975
• Docket Number: FUSCO-AMATRUDA
• Citation: Fusco-Amatruda Co. v. Tax Commissioner, 362 A.2d 847, 168 Conn. 597 (Conn. 1975)
• Parties: COMPANY et al. v. TAX COMMISSIONER, State of Connecticut.
• Court: Connecticut Supreme Court

Page 847

362 A.2d 847

168 Conn. 597

FUSCO-AMATRUDA COMPANY et al. v. TAX COMMISSIONER, State of Connecticut.

Supreme Court of Connecticut.

June 17, 1975.

Richard B. Cramer, New Haven, for appellant (plaintiff New Haven Jewish Community Council Housing Corporation).

Richard K. Greenberg, Asst. Atty. Gen., with whom were Ralph G. Murphy, Asst. Atty. Gen., and, on the brief, Carl R. Ajello, attorney general, for appellee (defendant).

Before HOUSE, C.J., and COTTER, LOISELLE, MacDONALD and BOGDANSKI, JJ.

COTTER, Associate Justice.

This is an appeal from a judgment of the Court of Common Pleas dismissing an intervening plaintiff's appeal from a deficiency assessment of a sales and use tax by the defendant against the named plaintiff, hereinafter Fusco, based solely upon purchases of materials used and consumed in the construction of a building for the intervening plaintiff, New Haven Jewish Community Council Housing Corporation, hereinafter Housing Corporation, the sole appellant prosecuting this appeal. It was tried to the court on a stipulation of facts between the parties which was made a part of the record.

The Housing Corporation is a nonstock, nonprofit corporation organized in 1965 for the purpose, as stated in its certificate of incorporation, of providing housing for the elderly on a nonprofit basis. In furtherance of this purpose the Housing Corporation contracted with Fusco, a general contractor, on February 21, 1969, for the construction of an apartment building for the elderly. Construction began March 10, 1969, and was substantially completed March 1, 1971; initial occupancy took place thereafter on March 17. Purchases of all materials involved were made by the general contractor.

Pursuant to his authority under General Statutes § 12-415, the defendant tax commissioner on April 10, 1972, issued a deficiency tax asessment against Fusco based upon purchases of materials used and consumed in the construction of the Housing Corporation's apartment for the elderly. ¹ Fusco appealed that assessment to the Court of Common Pleas pursuant to General Statutes § 12-422; a motion by the Housing Corporation to intervene as coplaintiff was granted. The court found the issues for the defendant and dismissed that appeal.

On this appeal from that judgment, the Housing Corporation claims that Fusco was entitled to an exemption from the sales and use tax deficiency assessment under applicable statutory provisions and regulations promulgated by the defendant. We have stated that '(s)tatutes which grant exemptions from taxation must be strictly construed'; Renz v. Monroe, 162 Conn. 559, 562, 295 A.2d 558, 560; 68 Am.Jur.2d, Sales and Use Taxes, § 11; in addition, the burden of proving that an assessment of a deficiency tax was erroneous is on the plaintiff. General Statutes § 12-421; cf. Stone v. Sullivan, 154 Conn. 498, 501, 227 A.2d 76.

A sales tax is imposed on all retailers making sales in Connecticut by General Statutes § 12-408(1). Reimbursement for the tax thereby imposed, furthermore, 'shall be collected by the retailer from the consumer and such tax reimbursement termed 'tax' in this and the following subsections, shall be paid by the consummer to the retailer . . ..' General Statutes § 12-408(2). While the statute does not define the term 'consumer,' it is generally held that a general contractor who purchases material from a retailer for use in the construction of a building for his customer is the 'consumer' of those materials within the meaning of that term as it appears in statutes similar to § 12-408 imposing a sales tax. G. S. Lyon & Sons Lumber & Manufacturing Co. v. Department of Revenue, 23 Ill.2d 180, 185, 177 N.E.2d 316; State v. J. Watts Kearny & Sons, 181 La. 554, 559, 160 So. 77; State v. Christhilf, 170 Md. 586, 591, 185 A. 456; St. Louis v. Smith, 342 Mo. 317, 321, 114 S.W.2d 1017; Olson Construction Co. v. State Tax Commission, 12 Utah 2d 42, 44, 361 P.2d 1112. Fusco, as the 'consumer' of the materials purchased for the construction of the apartment building for the Housing Corporation, was obligated under § 12-408(2) to reimburse the retailers from whom those materials were purchased and upon whom the sales tax was imposed pursuant to § 12-408(1).

The use tax, General Statutes § 12-411, is imposed 'on the storage, use or other consumption in this state of tangible personal property, purchased from any retailer for storage, use or other consumption in this state . . ..' § 12-411(1). "By the use tax, a broader basis of taxation is established by the inclusion of purchases made without as well as within the state." Stetson v. Sullivan, 152 Conn. 649, 653, 211 A.2d 685, 686, quoting Connecticut Light & Power Co. v. Walsh, 134 Conn. 295, 299, 57 A.2d 128. As we stated on an earlier occasion, in commenting upon the purpose of the use tax, '(s)peaking generally, the sales tax is imposed upon transactions within the state, and the use tax upon articles bought in other states which, if bought in Connecticut, would be subject to the sales tax.' United Aircraft Corporation v. O'Connor, 141 Conn. 530, 536, 107 A.2d 398, 401. Liability to pay the tax is upon the person 'storing, using or otherwise consuming in this state tangible personal property purchased from a retailer . . ..' § 12-411(2). However, § 12-430(5) provides for a credit against any sales tax paid on that property to another state. Thus the use tax is meant to complement the sales tax. Avco Mfg. Corporation v. Connelly, 145 Conn. 161, 172, 140 A.2d 479, 485. The person 'consuming in this state tangible personal property purchased from a retailer' and used in the construction of a building pursuant to a construction contract is ordinarily the general contractor. It is the general contractor who 'uses or consumes lumber and the like. He has no intention of reselling the lumber or the other items of construction material which he buys. He is not in the business of selling materials. He is in the business of using them to build houses: the business of contracting, or of selling houses.' G. S. Lyon & Sons Lumber & Manufacturing Co. v. Department of Revenue, supra, 23 Ill.2d 185, 177 N.E.2d 319. We also have stated '(i)n both intrastate and interstate transactions, the ultimate burden of the sales tax and the use tax falls on the purchaser.' Robert Emmet & Son Oil & Supply Co. v. Sullivan, 158 Conn. 234, 239, 259 A.2d 636, 639. Under this reasoning, Fusco, as the general contractor and purchaser of materials in this case, would be the party liable for payment of any use tax that might legitimately be imposed pursuant to § 12-411.

Under General Statutes § 12-412, sales and use taxes imposed by §§ 12-408 and 12-411 'shall not apply to the gross receipts from the sale of and the storage, use or other consumption in this state with respect to the following items: . . . (h) . . . Sales of tangible personal property to charitable and religious organizations.' The term 'sale' under the statute is defined, in pertinent part, to mean '(a)ny transfer of title, exchange or barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consideration.' § 12-407(2)(a). Although the Housing Corporation was issued a tax exemption permit as a 'charitable or religious organization' by the defendant on September 24, 1971, there has been no showing that the purchase of materials to be used in the construction of the Housing Corporation's apartment for the elderly constituted 'sales' of such property to the Housing Corporation within the meaning of §§ 12-407(2)(a) and 12-412(h) thus qualifying the purchase of those materials for an exemption from the sales and use tax under § 12-412(h). Such purchase might be characterized as a 'sale to' the Housing Corporation if the language in the contract between Fusco and the Housing Corporation and the surrounding circumstances supported a conclusion that title to the materials in question passed directly from the retailer or retailers to the Housing Corporation when purchased by Fusco. Avco Mfg. Corporation v. Connelly, supra, 145 Conn. 169, 175, 140 A.2d 479. However, unlike the contract in Avco, which expressly provided for transfer to and vesting of title in the government of the materials acquired by the general contractor; ibid., 165 n.2, 140 A.2d 479; the pertinent portion of the contract between the Housing Corporation and Fusco, made a part of the record, merely provides that Fusco was to furnish, 'at his (its or their) own proper cost and expense . . . all the materials, supplies, machinery, equipment, tools, superintendence, labor, insurance, and other accessories and services necessary to complete the said project.' Nowhere in the record is it suggested that the Housing Corporation was in any way meant to become the titleholder or owner of the materials used by Fusco in its construction of the apartment for the elderly at the time of Fusco's purchase of those materials, such that that purchase might be held to constitute an exempt sale 'of tangible personal property' to the Housing Corporation under § 12-412(h).

Nonetheless, a regulation promulgated by the defendant tax commissioner purports to exempt contractors in Fusco's position from payment of taxes imposed upon 'the purchase of all materials or supplies used by him in fulfilling . . . any . . . kind of construction contract . . . where such contractor enters into a construction contract with a religious or charitable organization holding a valid exemption permit.' Reg. No. 18(b)(3) (now § 12-426-18(b)(3) of the Regulations of Connecticut State Agencies). Regulation No. 16, predecessor of regulation No. 18, became effective October 1, 1947. 15 Conn.L.J., No. 19, pp. 7, 8. It was amended on May 1, 1948; 15 Conn.L.J., No. 50, pp. 7, 8; since that time, it has remained unchanged except for the renumbering of the regulations. The general statutes in effect at the time the amended...