Robert Emmet & Son Oil & Supply Co. v. Sullivan

• Decision Date: 06 May 1969
• Citation: 158 Conn. 234,45 A.L.R.3d 1261,259 A.2d 636
• Parties: , 45 A.L.R.3d 1261 The ROBERT EMMET AND SON OIL AND SUPPLY COMPANY v. John L. SULLIVAN, Tax Commissioner.
• Court: Connecticut Supreme Court

Page 636

259 A.2d 636

158 Conn. 234, 45 A.L.R.3d 1261

The ROBERT EMMET AND SON OIL AND SUPPLY COMPANY v. John L. SULLIVAN, Tax Commissioner.

Supreme Court of Connecticut.

May 6, 1969.

Alex Lloyd, Hartford, with whom, on the brief, was Russell L. Post, Jr., Hartford, for plaintiff.

Richard A. Gitlin, Asst. Atty. Gen., with whom, on the brief, were Robert K. Killian, Atty. Gen., and Ralph G. Murphy, Asst. Atty. Gen., for defendant.

Before KING, C.J., and ALCORN, HOUSE, THIM and RYAN, JJ.

HOUSE, Associate Justice.

This case comes before us by reservation from the Superior Court. The parties stipulated to the facts giving rise to the controversy, and these may be briefly summarized. The plaintiff, a Connecticut corporation having its principal place of business in Stonington, is appealing from a determination made by the defendant tax commissioner as to its tax liability. In January, 1968, the plaintiff purchased for use in Connecticut a new automobile from The John Ahr Ford Company, hereinafter referred to as the seller. The seller is a licensed Rhode Island motor vehicle dealer with a principal place of business in Westerly, Rhode Island, and has no place of business in Connecticut. The listed purchase price of the automobile was $4100. In part payment, the plaintiff traded in a 1967 automobile, receiving a trade-in allowance therefor of $2740, leaving a net cash price paid of 1360. No sales or use tax was paid to the state of Rhode Island, which exempts from taxation the purchase of an automobile by a nonresident where the car is not registered in that state. Had plaintiff paid a sales or use tax to Rhode Island upon the purchase or use of this automobile, it would have received credit for the amount so paid toward the subsequent use tax liability in Connecticut. A few days after purchasing the car, the plaintiff registered it at the New London office of the Connecticut satate motor vehicle department. As a condition precedent to that registration, it was required to, and did, pay to the state of Connecticut a tax on the purchase equal to 3.5 percent of the $4100 sales price for a total tax of $143.50 as imposed by chapter 219 (§§ 12-406-12-432a) of the Connecticut General Statutes. Had the plaintiff purchased the automobile from a motor vehicle dealer licensed under the provisions of subdivision (D) of part III of chapter 246 (§§ 14-51-14-65a) of the General Statutes, the 3.5 percent tax payable would have been computed on the basis of the net cash price of $1360, there being provision for credit against the total sales price for the value of the trade-in allowance under § 12-430(4) of the General Statutes when the purchase is from such a dealer. In those circumstances, the tax payable would have been $47.60. All Connecticut motor vehicle dealers must be licensed under the provisions of subdivision (D) of part III of chapter 246 of the General Statutes, but no out-of-state dealer can be licensed under those provisions. The plaintiff paid, under protest, the $95.90 portion of the tax attributable to the amount allowed by the seller for the trade-in vehicle. It then, by written petition to the state tax commissioner, claimed a refund of the $95.90 paid under protest and requested and was given a hearing on its claim as provided by statute. See General Statutes § 12-421. From the disallowance of its claim for a refund, the plaintiff appealed to the Superior Court. See General Statutes § 12-422. The reservation from that court seeks the answers to three questions. ¹

As the stipulated facts disclose, therefore, under the Connecticut statutes, a resident who purchases a motor vehicle for use in this state and as part payment of the purchase price trades in another automobile is required to pay a greater tax if he purchases the motor vehicle from an out-of-state dealer than he would be required to pay if he made a purchase on the same terms from a dealer within the state. This has been so since 1961.

As originally enacted in 1947, the sales and use tax act contained no provision that in the event of a trade-in of a motor vehicle the tax should apply only on the difference between the sale price of the motor vehicle and the amount allowed on the trade-in. Public Acts 1947, No. 228; Sup.1947, c. 78a. At a special session of the General Assembly in 1948, the act was amended to provide that '(w)here a trade-in of a motor vehicle is received by a retailer holding a valid seller's permit, upon the sale of another motor vehicle to a consumer, the tax is only on the difference between the sale price of the motor vehicle purchased and the amount allowed on the motor vehicle traded in on such purchase.' Public Acts, Spec.Sess., Feb.1948, No. 1, § 17 (Rev.1949, § 2114(5)). In 1951 the act was amended to give the same favorable tax treatment in the event of a trade-in of a farm tractor and also to delete the word 'retailer' and substitute 'licensed motor vehicle dealer.' Public Acts 1951, Nos. 164, 305 (Cum.Sup.1955, § 1176d). In 1961 the act was again amended (Public Acts 1961, No. 399) to read as it now does in § 12-430(4) of the General Statutes (Rev. to 1964), and thus exempt from the tax the amount allowed on the motor vehicle traded in where the trade-in is received by a motor vehicle dealer 'licensed under the provisions of subdivision (D) of part III of chapter 246 and holding a valid seller's permit.' As the parties have stipulated that no out-of-state dealer can be licensed under the provisions of subdivision (D) of the III of chapter 246 of the General Statutes, the result of the 1961 amendment is that, if a purchaser trading in a motor vehicle as part payment for another car to be used in this state buys from a Connecticut dealer, he is liable for a tax only on the difference between the trade-in allowance and the full purchase price, whereas if he makes the same transaction with a seller in another state he is liable for a tax on the full purchase price without credit for the trade-in allowance. ²

The sales tax (General Statutes § 12-408) imposed on purchases made in Connecticut and the use tax (General Statutes § 12-411) imposed on the use in Connecticut of goods purchased out of the state are complementary to one another and as first enacted and before the 1961 amendment had the purpose of taxing Connecticut purchasers equally whether they did their purchasing within or without the state. Avco Mfg. Corporation v. Connelly, 145 Conn. 161, 172, 140 A.2d 479; United Aircraft Corporation v. O'Connor, 141 Conn. 530, 536, 107 A.2d 398; Connecticut Light & Power Co. v. Walsh, 134 Conn. 295, 299, 57 A.2d 128, 1 A.L.R.2d 453. In both intrastate and interstate transactions, the ultimate burden of the sales tax and the use tax falls on the purchaser. Avco Mfg. Corporation v. Connelly, supra, 145 Conn. 171, 140 A.2d 479; see also Kern-Limerick, Inc. v. Scurlock, 347 U.S. 10, 74 S.Ct. 403, 98 L.Ed. 546; Alabama v. King & Boozer, 314 U.S. 1, 62 S.Ct. 43, 86 L.Ed. 3. The greater tax levied on out-of-state motor vehicle purchases since 1961 as a result of the enactment of § 12-430(4) provides a direct financial incentive to intrastate rather than interstate purchases. It has been stipulated that in the present case that tax differential amounts to $95.90, and it is the claim of the plaintiff that this discrimination in favor of intrastate transactions is unconstitutional because it violates the provisions of article I, § 8, clause 3, of the United States constitution, which grants to congress the power to regulate commerce among the several states.

The problem of trade-in deductions is not a new one. See comment, 'The Trade-in Deduction: Discrimination under the Sales and Use Taxes,' 37 N.Y.U.L.Rev. 306.

'[I]t must be regarded as settled that no State can, consistently with the Federal Constitution, impose upon the products of other States, brought therein for sale or use, or upon citizens because engaged in the sale therein, or the transportation thereto, of the products of other States, more onerous public burdens or taxes than it imposes upon the like products of its own territory.' Guy v. Baltimore, 100 U.S. 434, 439, 25 L.Ed. 743. A state statute which is discriminatory, 'operating to the disadvantage of the products of other States when introduced into the first mentioned State, is, in effect, a regulation in restraint of commerce among the States, and as such is a usurpation of the power conferred by the Constitution upon the Congress of the United States.' Walling v. Michigan, 116 U.S. 446, 455, 6 S.Ct. 454, 29 L.Ed. 691. A state may not, through the guise of taxation or otherwise, prohibit or unduly impede the flow of products from other states. See H. P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 69 S.Ct. 657, 93 L.Ed. 865; Nippert v. Richmond, 327 U.S. 416, 66 S.Ct. 586, 90 L.Ed. 760; Baldwin v. G. A. F. Seelig, Inc., 294 U.S. 511, 55 S.Ct. 497,79 L.Ed. 1031; Brown v. Maryland, 25 U.S. (12 Wheat.) 416, 6 L.Ed. 678. 'Forms of state taxation whose tendency is to prohibit the commerce or place it at a disadvantage as compared or in competition with intrastate commerce, and any state tax which discriminates against the commerce, are familiar examples of the exercise of state taxing power in an unconstitutional manner, because of its obvious regulatory effect upon commerce between the states.' McGoldrick v. Berwind-White Coal Mining Co., 309 U.S. 33, 45, 60 S.Ct. 388, 84 L.Ed. 565; see also Memphis Steam Laundry Cleaner, Inc. v. Stone, 342 U.S. 389, 72 S.Ct. 424, 96 L.Ed. 436; Breard v. City of Alexandria, 341 U.S. 622, 71 S.Ct. 920, 95 L.Ed. 1233; 15 Am.Jur.2d Commerce, § 18; notes, 153 A.L.R. 609, 129 A.L.R. 222.

The constitutional test of any tax incident to interstate sales is whether there is any discrimination in the tax treatment by the taxing state against such transactions in favor of intrastate transactions. Use taxes and other compensating taxes incident to interstate sales have,...