Zachs v. Groppo, 13317

• Decision Date: 07 June 1988
• Docket Number: No. 13317,13317
• Citation: 542 A.2d 1145,207 Conn. 683
• Court: Connecticut Supreme Court
• Parties: Henry ZACHS v. John G. GROPPO, Commissioner of Revenue Services.

Page 1145

542 A.2d 1145

207 Conn. 683

Henry ZACHS v. John G. GROPPO, Commissioner of Revenue Services.

No. 13317.

Supreme Court of Connecticut.

Argued March 3, 1988.

Decided June 7, 1988.

Edward T. Blair, Asst. Atty. Gen., with whom, on the brief, was Joseph I. Lieberman, Atty. Gen., for appellant (defendant).

F. Gina Gelb, Hartford for appellee (plaintiff).

Before PETERS, C.J., and SHEA, CALLAHAN, GLASS and SANTANIELLO, JJ.

CALLAHAN, Associate Justice.

The principal issue raised by this appeal is whether the one-way radio paging services operated by the plaintiff, Henry Zachs, doing business as Massachusetts Connecticut Mobile Telephone Company, are "telephone answering services" within the meaning of General Statutes § 12-407(2)(i)(G), and thus, subject to Connecticut sales and use tax. ¹ We find that they are not and, therefore, affirm the judgment of the trial court rendered in favor of the plaintiff.

The relevant facts are not in dispute. In 1975, the Connecticut legislature passed Public Acts 1975, No. 75-213, §§ 15 through 22, and 53, which amended General Statutes § 12-407 regarding the applicability of the state sales and use tax provisions. Prior to July 1, 1975, § 12-407(2)(i) imposed, in pertinent parts, a sales tax upon the sale of "telephone ... services." ² Public Acts 1975, No. 75-213, § 15, revised § 12-407(2)(i) by, inter alia, deleting "telephone ... services" and imposing a sales tax upon "telephone answering services." ³ ] Initially, this change became codified in § 12-407(2)(j)(I) ⁴ and thereafter was recodified in § 12-407(2)(i)(G).

Since 1961, the plaintiff has been engaged in various aspects of the telecommunications industry in New England, and has operated a telephone answering service, a cellular telephone business and a mobile radio telephone business. In 1970, he began a one-way pager or beeper service in Connecticut under the business name of Massachusetts Connecticut Mobile Telephone Company. In recognition of the enactment of Public Acts 1975, No. 75-213, § 15, the plaintiff's attorney forwarded a letter dated July 1, 1975, to Terrance O'Neill of the state tax department. The letter summarized the essential aspects of the plaintiff's portable radio telephone and radio paging businesses. In his letter, the plaintiff's attorney sought guidance with regard to the tax ramifications of the new amendment and posited the following question to the tax department: "[D]oes [Public Acts 1975, No. 75-213,] § 15(K), which taxes the leasing or rental of tangible personal property, apply to the furnishing of a service under F.C.C. tariff and regulation?" ⁵ Tax Commissioner Gerald J. Heffernan responded by letter dated November 21, 1975, in which he stated: "This will acknowledge receipt of your inquiry pertaining to the taxability of the equipment rented or leased by your clients to their customers. The department has reviewed the facts of this case and it is the determination of the department that your clients are in the business of renting or leasing tangible personal property. The rental income is subject to the tax pursuant to Public Act 75-213." Pursuant to the commissioner's letter, the plaintiff began collecting sales tax on the rental and sales of the paging or beeper equipment and the mobile radio telephone equipment. The plaintiff, however, did not charge or collect sales taxes on the monthly service charges paid by the subscribers of these services, apparently because the defendant's letter was silent on this issue.

In 1985, a revenue examiner from the Connecticut department of revenue services conducted a general audit of the plaintiff's books for the period of January 1, 1982, through December 31, 1984. ⁶ The examiner concluded that the revenues received by the plaintiff from the service charges for the paging or beeper services were subject to sales tax under § 12-407, as amended by Public Acts 75-213, § 15, and assessed the plaintiff back taxes in the amount of $354,557.90, exclusive of interest. Thereafter, the plaintiff petitioned for a reassessment, pursuant to General Statutes § 12-418(1); ⁷ the tax commissioner affirmed the examiner's assessment in full with interest. The tax commissioner based his decision, at least in part, upon § 12-426-27(b)(8) ⁸ of the regulations of Connecticut State Agencies which defines "telephone answering services" to include the "transmitting of telephone messages to the clients of those engaged in the business of providing such services."

Thereafter the plaintiff filed this appeal to the Superior Court pursuant to General Statutes § 12-422. ⁹ The trial court, Maloney, J., sustained the plaintiff's appeal and found: "(1) that the plaintiff's beeper paging system is not a 'telephone answering service' within the commonly approved usage of that term; (2) that the defendant commissioner's interpretation of the law and regulations to the contrary in this case is inconsistent with his past practice; and (3) the legislature has not considered the paging system as taxable under the sales tax law ... [and] that the plaintiff's beeper paging system is not a 'telephone answering service' as that term is used in General Statutes Sec. 12-407(2)(i)(G)." Thereafter, judgment was rendered in favor of the plaintiff. The defendant, John G. Groppo, commissioner of revenue services, filed this appeal to the Appellate Court, which was transferred to this court pursuant to Practice Book § 4023.

The principal issue raised on appeal involves the interpretation of the phrase "telephone answering services" as now contained within § 12-407(2)(i)(G). The defendant argues that the wording of § 12-407(2)(i)(G) is clear and unambiguous, and that, by ascribing the common, everyday meaning to the term "telephone answering services," the one-way paging services provided by the plaintiff are clearly subject to the sales tax levied by General Statutes § 12-408(1). The defendant also asserts that § 12-426-27(a) and (b)(8) of the Regulations of Connecticut State Agencies support his position that the trial court erred in concluding that the service provided by the plaintiff to its subscribers "falls short of the 'conventional telephone answering service.' " We disagree.

The trial court, in reaching its decision, properly conducted a de novo review of the defendant's appeal which was filed pursuant to General Statutes § 12-422. See Kimberly-Clark Corporation v. Dubno, 204 Conn. 137, 144-45, 527 A.2d 679 (1987). " ' "On appeal, it is the function of this court to determine whether the decision of the trial court is clearly erroneous. See Practice Book [§ 4061]." ' " Id., 153. In this appeal, the defendant is challenging the trial court's construction of § 12-407(2)(i)(G) which involves a question of law. Therefore, 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. Id.; see also Pandolphe's Auto Parts, Inc. v. Manchester, 181 Conn. 217, 221-22, 435 A.2d 24 (1980).

At the outset, we note that taxing statutes are to be strictly construed; White Oak Corporation v. Department of Revenue Services, 198 Conn. 413, 421, 503 A.2d 582 (1986); Naylor v. Brown, 166 Conn. 581, 587, 353 A.2d 709 (1974); and statutory ambiguities in the imposition of such taxes must be resolved in favor of the taxpayer and against the taxing authority. ¹⁰ Texaco Refining & Marketing Co. v. Commissioner, 202 Conn. 583, 588-89, 522 A.2d 771 (1987); Schlumberger Technology Corporation v. Dubno, 202 Conn. 412, 423, 521 A.2d 569 (1987). In addition, courts must construe statutory provisions as they are written; Orticelli v. Powers, 197 Conn. 9, 13-14, 495 A.2d 1023 (1985); McDonald v. Haynes Medical Laboratory, Inc., 192 Conn. 327, 334, 471 A.2d 646 (1984); and in a manner so as to give effect to the apparent intent of the legislature. State v. White, 204 Conn. 410, 421, 528 A.2d 811 (1987); Beloff v. Progressive Casualty Ins. Co., 203 Conn. 45, 54, 523 A.2d 477 (1987). If, however, the wording of the statute is unclear, the legislative intent must be ascertained by examining the language of the statute, its legislative history and the purpose the statute is to serve. State v. Dolphin, 203 Conn. 506, 521, 525 A.2d 509 (1987); Rhodes v. Hartford, 201 Conn. 89, 93, 513 A.2d 124 (1986).

The defendant argues that under the plain and ordinary understanding of a telephone answering service, common sense dictates that one-way paging or beeper services should be included within the meaning of "telephone answering services." We disagree.

In order to address this claim specifically, an understanding of the plaintiff's paging or beeper services is required. A subscriber to the plaintiff's services is assigned a telephone number. One wishing to contact the subscriber dials this number on an ordinary telephone. The transmission is sent to the telephone company by wire, and telephone company equipment in turn relays the transmission by wire to a computerized switching terminal at the plaintiff's office. The switching terminal automatically and electronically relays the signal, either by radio wave or by wire, to a transmitter located on a mountain top. From there the transmitter sends out a radio signal to the paging units carried by the subscribers. The pager, which is tuned in to a special radio frequency, is activated by the transmitted radio waves.

The plaintiff offers three types of pagers. ¹¹ The first is a tone-only pager. When activated, it emits a beeping sound. The tone-only pager can be programmed to emit a limited number of sequence beeps to indicate to the subscriber the identity of the caller, e.g., one beep for the subscriber's home, two beeps for subscriber's office, etc. The second is a digital display paging unit. When activated, it will digitally display up to twenty-three characters representing the telephone number of the...