650 A.2d 641 | Conn. Super. Ct. | 1993
The issue in this tax appeal is whether the sale of photocopies to the public from vending machines installed in public libraries is exempt from the sales tax. The conclusion of this court is that such sales are not exempt.
In the years 1988, 1989, and 1990, the plaintiff's business consisted of installing, maintaining, and servicing coin operated photocopying machines in public libraries for use by the general public, including patrons of the libraries. Under agreements specifying that the plaintiff retained ownership of the copiers, the plaintiff installed, maintained, and serviced those machines in Connecticut public libraries. The plaintiff also provided paper, supplies, parts, and labor as needed by the machines. The plaintiff, who collected the funds from each machine and received all the revenue produced by the machines, paid a commission to the libraries for *254 allowing the plaintiff to install the machines on their premises. The contracts with the libraries also provided for the libraries to receive free copies each month and a discount on additional copies over the free limit. The plaintiff, as part of the arrangement, agreed to hold the libraries harmless from any claims arising out of the use of the machines on the library premises.
The plaintiff filed sales and use tax returns for each quarter in 1988, 1989, and 1990. The defendant commissioner of revenue services, after conducting a tax audit of those years, levied an additional assessment of sales and use tax in the amount of $67,277.24 plus a penalty of $10,823.60 and interest of $30,512.90 through June 30, 1991. The commissioner concluded that the sale of photocopies to persons using the plaintiff's photocopying machines located in public libraries was not exempt from the sales and use tax. The commissioner's argument is that the sale of photocopies was made by the plaintiff to the general public, not by the public libraries to the public, and therefore is not exempt as claimed by plaintiff under General Statutes §
The plaintiff's complaint makes two claims: (1) that the sales of photocopies by the plaintiff to the public were exempt under §
The question at the heart of both claims and this appeal is who was the seller and who were the buyers of the photocopies? It is clear from the facts in this case, as set forth above, that the photocopies were sold to the public by the plaintiff, not by the libraries. The public libraries were only the recipients of the income from the machines and the beneficiaries of free and discounted photocopies. The public libraries, in the stipulated facts, were never sellers as claimed by plaintiff.
The legislative history of this exemption clearly shows that the legislature had in mind exempting only sales to public libraries, not sales to the general public: "Senator [Lewis B.] Rome: Madam President, I urge acceptance of the Joint Committee's favorable report and passage of the bill. . . . The title of the bill [actually] is self-explanatory. The exemption appl[ies] to certain items, certain sales to the municipalities in Connecticut and also public libraries. I think it makes a good deal of sense and it's a good bill and it ought to pass." (Emphasis added.) 16 S. Proc., Pt. 6, 1973 Sess., p. 2983.
Although the plaintiff, at trial, argued that the public's perception was that the library was the seller of the photocopies, the public's perception is not a relevant factor in this case. The cases from other jurisdictions support this conclusion.
The facts in this action are similar to the facts inHarold W. Fuchs Agency, Inc. v. Dept. of Revenue, *256
The court concluded, however, that the city had limited control over the machines and that the use of the vending machines by the city employees did not bring the gross receipts within the exemption. The court held that control of the vending machines was relevant to whether the owner of the machine or the owner of the premises was the seller. It concluded that the plaintiff, the Fuchs Agency, was the retail seller because it had sold nothing to the city and the city did not exercise control over the machines. The responsibility for installation, servicing, and removal of the machines remained with the plaintiff. *257
In Harold W. Fuchs Agency, Inc., the librarian, although not collecting the money from the machines, did reload the machines and check for lost coins or other operational failures. In the present action, the library personnel did nothing, since the plaintiff assumed the full obligation to maintain and service the photocopy machines.
On the issue of control, the Harold W. Fuchs Agency, Inc.
decision cited Rowe Cigarette Service Co. v. Graves,
One of the contracts between the plaintiff and a library, which contract was attached to a joint supplemental stipulation of facts, recited that "[t]he Proprietor acknowledges that the aforementioned machines are the sole property of the Operator and that nothing in this agreement or in the relationship between the parties shall give the Proprietor any proprietary interest in said machines." The proprietor was the library. This contractual provision, to which the plaintiff was a party, clearly recognizes the plaintiff as the owner and operator of the vending machines, and the libraries as simply the possessors of the premises.
The plaintiff cites the case of Servomation Corp. v. Dept. ofRevenue,
The plaintiff argues that the merchandise sold in the schools and hospitals in Servomation Corp., had no relationship to the business of schools and hospitals, whereas photocopying in a library, as done in the present case, was an extension of the library's function. The plaintiff claims further that it is not necessary to determine who the seller is for the purpose of taxation, since the purpose of §
An argument similar to that made by the plaintiff, as to who is the seller, was raised in Denis Copy Co. v. Limbach,
Denis argued, as plaintiff does here, that it was not the vendor of copies sold through the coin-operated photocopy machines. It argued that the owners of the locations of the photocopy machines were the vendors in so far as interacting with their customers, the public.
The court in Denis Copy Co. concluded, as does the court here, that Denis owned the machines. It did not lease or sell the machines to the location owner. Denis was required to service, supply, and maintain the machines and to assume all liability arising from the operation of the machines. The court found nothing in the facts to support any claim that the location owner played any direct role in servicing the machinery operated by the customer. Id., 362. Similarly, this court finds nothing in the facts here to support plaintiff's claim that it was not the vendor.
Clearly, under the stipulated facts in this case, the plaintiff, Advanced Business Systems, Inc., owned, installed, serviced, removed, and collected receipts from the machines. The stipulated facts lack any suggestion that the libraries did anything to exert any form of ownership of the machines. The libraries were true landlords: they collected the rents for the location of the machines on their premises. Cf. Gay v. Supreme Distributors,
General Statutes §
Accordingly, the appeal is dismissed.