Rainforest Cafe v. Dept. of Revenue

• Decision Date: 08 September 2009
• Docket Number: No. 18153.,18153.
• Court: Connecticut Supreme Court
• Parties: RAINFOREST CAFE, INC. v. DEPARTMENT OF REVENUE SERVICES.

977 A.2d 650 293 Conn. 363 RAINFOREST CAFE, INC.
v.
DEPARTMENT OF REVENUE SERVICES. No. 18153. Supreme Court of Connecticut. Argued April 20, 2009. Decided September 8, 2009.

[977 A.2d 653]

Seth N. Stratton, with whom, on the brief, was Ben M. Krowicki, Hartford, for the appellant (plaintiff).

Rupal Shah Palanki, assistant attorney general, with whom, on the brief, were Richard Blumenthal, attorney general, and Paul M. Scimonelli, assistant attorney general, for the appellee (defendant).

Charles H. Lenore and Daniel L. Gottfried, Hartford, filed a brief for the Connecticut Business and Industry Association, Inc., as amicus curiae.

NORCOTT, KATZ, PALMER, VERTEFEUILLE and McLACHLAN, Js.

VERTEFEUILLE, J.

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The dispositive issue in this appeal¹ is whether a retailer can be both a "nonresident

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contractor," pursuant to General Statutes (Rev. to 1999) § 12-430(7), and a "retailer engaged in business in this state," pursuant to General Statutes (Rev. to 1999) § 12-411(3), under the Sales and Use Tax Act, General Statutes § 12-406 et seq. (act). The plaintiff, Rainforest Cafe, Inc., appeals from the summary judgment rendered by the trial court in favor of the defendant, the department of revenue services, in the plaintiff's tax appeal brought pursuant to General Statutes § 12-422.² The plaintiff claims that the trial court improperly determined that a nonresident contractor could not also be a retailer engaged in business in this state, and that the plaintiff therefore was not relieved of its tax liability under § 12-430(7) even though it had paid taxes pursuant to § 12-411(3). We agree with the plaintiff and, accordingly, we reverse the judgment of the trial court and remand the case for further proceedings.³

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The record contains the following undisputed facts and relevant procedural history. In mid-1999, the plaintiff⁴ entered into a contract with PCL Construction Services, Inc. (PCL), to construct a restaurant at the Westfarms Mall in Farmington. After PCL completed its construction of the restaurant, the plaintiff opened for business in February, 2000. PCL was a foreign corporation incorporated in Minnesota, although it had been conducting business in Connecticut since 1996 and was a registered taxpayer in this state.

The construction services provided by PCL were taxable under the act pursuant to General Statutes (Rev. to 1999) § 12-407(2)(i)(I).⁵ Consequently, the plaintiff, as the purchaser of the services, was responsible for paying taxes to the defendant. General Statutes (Rev. to 1999) § 12-411(1) and (2).⁶ The act established two

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procedures for obtaining payment of the taxes on PCL's services. The first, which applied to any taxpayer doing business with a "retailer engaged in business in this state"; General Statutes (Rev. to 1999) § 12-411(3);⁷ obligated the retailer to collect the tax from the taxpayer, remit the tax to the state, and give the taxpayer a receipt as proof of payment. See General Statutes (Rev. to 1999) § 12-411(2) and (3). The second procedure applied to any taxpayer conducting business with a "nonresident contractor"; General Statutes (Rev. to 1999) § 12-430(7)(b);⁸ which allowed the taxpayer either to deduct and withhold 5 percent of the contract price

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from the contractor and to pay this amount to the commissioner of revenue services directly as the tax, or to provide a guarantee bond for the same 5 percent amount. In the present case, the plaintiff complied with § 12-411(3), paid the tax to PCL and received receipts for its tax payments; PCL, however, did not remit the taxes collected from the plaintiff to the defendant.

In August, 2001, the plaintiff received notice that the defendant would conduct a sales and use tax audit of the plaintiff's business. This audit occurred in February, 2003, and resulted in the defendant assessing the plaintiff with a sales and use tax deficiency for the period from July 1, 1999, through December 31, 2000. The

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deficiency assessment consisted largely of taxes due on PCL's construction work.

The plaintiff then appealed from the deficiency assessment to the Superior Court pursuant to § 12-422. See footnote 2 of this opinion. The defendant thereafter filed a motion for summary judgment, claiming that PCL was a nonresident contractor and that the plaintiff had failed to follow the withholding provisions of § 12-430(7)(b). The plaintiff filed both an opposition to the defendant's motion and a cross motion for summary judgment, asserting, first, that the statute of limitations⁹ barred the deficiency assessment and also that the plaintiff had been absolved of all tax liability because it had paid PCL the tax due and obtained receipts pursuant to § 12-411(2) and (3). The defendant replied that the plaintiff had failed to file timely tax returns, which tolled the statute of limitations under General Statutes (Rev. to 2001) § 12-415(f). The trial court granted the defendant's motion for summary judgment, reasoning that PCL was a nonresident contractor and that the plaintiff should have complied with § 12-430(7)(b)(i), despite its payment of the taxes under § 12-411(3). The trial court rejected the claims raised by the parties regarding the statute of limitations but, sua sponte, concluded that the plaintiff's failure to comply with § 12-430(7) evinced an intent to evade under § 12-415(f), thereby tolling the statute of limitations.

The plaintiff moved for reargument, contending that the term "retailer engaged in business in this state" under § 12-411(3) is separately defined from, and thus

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not mutually exclusive from, the term "nonresident contractor" under § 12-430(7). The plaintiff further claimed that an "intent to evade" under § 12-415(f) required a factual inquiry that was not appropriate for disposition by summary judgment. The trial court ultimately denied the plaintiff's motion for reargument and determined that, because there was no factual dispute regarding the plaintiff's failure to comply with § 12-430(7)(b), the plaintiff had evidenced an intent to evade the provisions of the act, which thereby tolled the statute of limitations. The trial court subsequently rendered summary judgment in favor of the defendant. This appeal followed.

On appeal to this court, the plaintiff claims that the trial court improperly determined that PCL was a nonresident contractor under § 12-430(7) and, thus, could not have been a retailer engaged in business in this state under § 12-411(3). More specifically, the plaintiff contends that PCL qualifies as a retailer engaged in

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business in this state and that the trial court failed to recognize that the plaintiff's tax liability previously had been extinguished by virtue of its compliance with § 12-411(3). In response, the defendant claims that the trial court properly determined that, because the plaintiff was required but failed to comply with the requirements of § 12-430(7), it is statutorily liable for the tax deficiency assessment. As an alternate ground for affirmance, the defendant contends that the plaintiff also failed to file a tax return despite its obligation to do so by virtue of purchases it made from vendors other than PCL during the audit period. We agree with the plaintiff that the terms "retailer engaged in business in this state" and "nonresident contractor" are not mutually exclusive, and, accordingly, that the act allowed the plaintiff to comply with § 12-411(3) to satisfy its tax obligation. We therefore conclude that the trial court improperly granted the defendant's motion for summary

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judgment. In addition, we do not reach the merits of the defendant's alternate ground for affirmance because we conclude that a genuine issue of material fact remains as to the plaintiff's tax filings.

As a preliminary matter, we set forth the applicable standard of review for appeals from the entry of summary judgment. "Practice Book § 17-49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.... The party moving for summary judgment has the burden of showing the absence of any genuine issue of material fact and that the party is, therefore, entitled to judgment as a matter of law.... On appeal, we must determine whether the legal conclusions reached by the trial court are legally and logically correct and whether they find support in the facts set out in the memorandum of decision of the trial court.... Our review of the trial court's decision to grant the defendant's motion for summary judgment is plenary." (Internal quotation marks omitted.) Zulick v. Patrons Mutual Ins. Co., 287 Conn. 367, 372, 949 A.2d 1084 (2008). "[A] sales and use tax appeal taken pursuant to § 12-422 is a trial de novo." (Internal quotation marks omitted.) Leonard v. Commissioner of Revenue Services, 264 Conn. 286, 294, 823 A.2d 1184 (2003).

The plaintiff's claim challenging the trial court's interpretation of §§ 12-430(7) and 12-411(3) is also subject to plenary review. See, e.g., Stiffler v. Continental Ins. Co., 288 Conn. 38, 42, 950 A.2d 1270 (2008); Considine v. Waterbury, 279 Conn. 830, 836, 905 A.2d 70 (2006). "Issues of statutory construction raise questions of law, over which we exercise plenary review.... The process

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of statutory interpretation involves the determination of the meaning of the statutory language as applied to the facts of the case, including the question of whether the language does so apply.... When construing a statute, [o]ur fundamental objective is to ascertain and give effect to the apparent intent of the...