240 Conn. 531 | Conn. | 1997
Opinion
The dispositive issue in this appeal is whether the plaintiff, under the circumstances of this case, is liable for the payment of a use tax, pursuant to General Statutes §§ 12-411 and 12-407 (5), on catalogs advertising the plaintiffs merchandise that were printed and mailed to Connecticut residents from outside the state. After the defendant, the commissioner of revenue services (commissioner), imposed a use tax on the catalogs mailed to Connecticut residents, the plaintiff, Sharper Image Corporation (Sharper Image), challenged the assessment by appealing to the Superior Court. The Superior Court affirmed the commissioner’s action, and Sharper Image appealed to the Appellate Court. The Appellate Court affirmed the judgment of the Superior Court, but requested certification for review of its decision to this court pursuant to Practice Book § 4135,
The facts as stipulated to by the parties were set out in the Appellate Court decision. “Sharper Image is a Delaware corporation with headquarters in San Francisco, California. It is engaged nationally and internationally in the retail sale of merchandise, and makes both in-store and mail order sales.
“In Connecticut, Sharper Image maintains one store in Stamford and one store in Hartford. In addition to its store sales, Sharper Image makes sales by means of telephone and mail orders transmitted to its San Francisco office. It collects and remits to the commissioner the Connecticut sales and use taxes levied on sales made at its stores in Connecticut and on its mail order sales. [Sharper Image] concedes that it has a nexus with Connecticut for purposes of sales and use tax collection.
“Sharper Image publishes monthly catalogs. The catalogs advertise the products that are available for sale both by catalog orders and at the retail stores, although some products are exclusively catalog order products.
“Sharper Image contracts for the printing and distribution of catalogs from its San Francisco headquarters. It has entered into a contract with Mid-American Web Press, Inc., doing business as Foote & Davies of Lincoln,
“The catalogs are printed and labeled by Foote & Davies. Foote & Davies transports the catalogs to the mail by way of United States Postal Service (postal service) trailers located at the Foote & Davies facility in Nebraska. Sharper Image’s San Francisco headquarters provides Foote & Davies with a mailing list, which contains the names of customers and prospective customers to whom catalogs are to be sent. The catalogs are addressed to the person named or the current resident at the address listed on the label, and are sent by third class mail.
“Neither Sharper Image nor Foote & Davies can withdraw or redirect the catalogs from the mail once they are placed in the postal service trailers. If catalogs are not delivered to the addressee, [Sharper Image] does not receive a refund or credit from the postal service for the postage or the value of the catalogs lost. Catalogs that the postal service is unable to deliver are destroyed.
“Sharper Image has never withdrawn or redirected the catalogs from the mail, or ever taken physical possession of the catalogs mailed to Connecticut residents.
“In addition to the catalogs mailed to Connecticut residents, Foote & Davies mails catalogs to Sharper Image’s Connecticut stores where they are available for employees and customers. Sharper Image paid the use tax on these catalogs because they were received in Connecticut by its Connecticut employees at its Connecticut stores. Sharper Image does not contest the amount of the taxes assessed on the catalogs at issue, but rather challenges the state’s right to levy any taxes on catalogs mailed to Connecticut residents.” Sharper Image Corp. v. Miller, supra, 42 Conn. App. 311-13.
Because the “matter was presented to the trial court entirely on the pleadings, stipulations of the parties and a single plaintiffs exhibit”; id., 313; we, like the Appellate Court, conduct a plenary review of the trial court’s decision “and we must decide whether its conclusions are legally and logically correct and find support in the facts that appear in the record.” United
This case requires us to examine the purpose and application of the Connecticut use tax, and the statutory scheme attached to that tax. “The Sales and Use Tax[es] Act [General Statutes § 12-406 et seq.] imposes both taxes and places their ultimate burden on the purchaser. . . . The two taxes are [however] different in conception . . . [and] are assessments upon different transactions .... A sales tax is a tax on the freedom of purchase .... A use tax is a tax on the enjoyment of that which was purchased. . . . [Generally a sales tax is imposed on items acquired within the state and a use tax is imposed on items acquired outside the state for use within this state.” (Citations omitted; internal quotation marks omitted.) Steelcase, Inc. v. Crystal, 238 Conn. 571, 578, 680 A.2d 289 (1996). “The use tax . . . was developed to safeguard [s]tate sales tax revenues from erosion by purchases of goods outside the [s]tate, and to protect local merchants from loss of business to border and other [s]tates that either have no sales tax or whose sales tax rate is lower than that of the merchant’s [s]tate.” 2 J. Hellerstein & W. Hellerstein, State Taxation (1992) § 16.01, p. 16-2.
“In construing any statute, [including taxing statutes] we seek to ascertain and give effect to the apparent intent of the legislature. ... In seeking to discern that intent, we look to the words of the statute itself, to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its relationship to existing legislation and common law principles governing the same general subject matter.” (Citation omitted; internal quotation marks omitted.) Steelcase, Inc. v. Crystal, supra, 238 Conn. 577-78.
The general rule is that “when the issue is the imposition of a tax, rather than a claimed right to an exemption
The relevant statutes are as follows. General Statutes § 12-411 (1) provides in pertinent part: “An excise tax
The crux of Sharper Image’s argument is that, under the circumstances of this case, the distribution of its catalogs in Connecticut did not meet the definition of “use” contained in § 12-407 (5). Specifically, Sharper Image argues that it did not own the catalogs once they were mailed from outside of Connecticut by Foote & Davies and, even if it did own the catalogs, it did not “exercise a right or power” over the catalogs incident to that ownership in Connecticut.
The main thrust of Sharper Image’s argument is that it did not exercise a right or power over the catalogs in Connecticut within the meaning of the word “use” provided for in § 12-407 (5). We are unpersuaded. Although Sharper Image neither stored, accepted nor consumed the catalogs in this state, it did cause them to be distributed in Connecticut, which satisfies the broad taxable event of “other use” set forth in § 12-411 (1). We conclude that distribution falls within the plain language of “other use.”
The United States Supreme Court, in D. H. Holmes Co., Ltd. v. McNamara, 486 U.S. 24, 108 S. Ct. 1619, 100 L. Ed. 2d 21 (1988), in the context of a constitutional challenge under the commerce clause, addressed an argument similar to the one espoused by Sharper Image in this case with respect to control of its catalogs. In D. H. Holmes Co., Ltd., the court concluded that the taxpayer had a substantial nexus with the taxing state because, among other things, it had sufficient control over its catalogs mailed into that state even though the catalogs were delivered for distribution to the United States postal service outside the state by the printers the taxpayer had hired. Id., 32. Similar to the present case, the taxpayer in D. H. Holmes Co., Ltd., ordered and paid for its catalogs, supplied the list of residents to whom the catalogs were to be delivered, and had the catalogs turned over to the United States postal service, all of which occurred in a state other than the taxing state. Id., 26. The distribution of the catalogs to the residents, as in this case, was not for a benevolent purpose, but, rather, was for the business purposes of the taxpayer. Id., 32. Justice Rehnquist, writing for a unanimous court, stated that the taxpayer’s “contention that it lacked sufficient control over the catalogs’ distribution [in the taxing state] to be subject to the use tax
The Arizona Court of Appeals, in Service Merchandise Co. v. Dept. of Revenue, 937 P.2d 336 (Ariz. App. 1996),
The court in Service Merchandise Co. addressed the plaintiffs arguments, which are strikingly similar to Sharper Image’s arguments in this case, as follows: “[The taxpayer] concedes that it exercised rights incidental to ownership while the catalogs were outside Arizona. Its officers and employees in Tennessee entered into contracts with the printers, determined the
“However, [the taxpayer] denies that it exercised any such rights in Arizona. It contends that every act incidental to its ownership occurred in Tennessee. [The taxpayer] further argues that while its acts in Tennessee caused the materials to be distributed in Arizona, it exercised no control over the materials after the printers shipped or mailed them from their out-of-Arizona locations.
“We hold that distribution of the catalogs and fliers in Arizona was a use by [the taxpayer] incidental to its ownership. [The taxpayer] contracted for the right to have the catalogs distributed to specified Arizona customers at particular times during the year. Although the distribution contracts were consummated outside Arizona, the rights to control when, where, how, to whom and whether the catalogs would be delivered were exercised in Arizona through [the taxpayer’s] agents. We see no reason to treat [the taxpayer] differently for tax purposes merely because it employed agents to do in Arizona what it could have done itself.” Id.
“It is true that our statute does not specifically mention distribution. However, it would be redundant to do so in light of Arizona’s broad definition of ‘use.’ Arizona law defines use as the exercise of any right or power over tangible personal property incidental to owning the property .... Because distribution is a right incidental to ownership, it was unnecessary for the [legislature to specifically include it in the definition of use.” (Citation omitted; internal quotation marks omitted.) Id., 339.
Accordingly, we conclude that Sharper Image exercised a “right or power” over its catalogs in Connecticut by orchestrating the distribution of the catalogs to Connecticut residents.
The judgment of the Appellate Court is affirmed.
In this opinion the other justices concurred.
At the time that the Appellate Court requested certification, Practice Book § 4135 provided as follows: “The determination whether there shall be a request for certification by the appellate panel shall be made during its consideration of the case. The affirmative vote of two or more judges of the panel shall be necessary for a request for certification. If the panel votes to request certification, it shall issue an opinion in the case, setting forth the grounds of its decision and a finding that there is a substantial question of law which should be reviewed by the supreme court, together with a clear statement of what the question is.”
Effective September 3,1996, the rule was substantially changed to provide as follows: “If at any time before decision the appellate court determines that it is appropriate for supreme court review, the appellate court may file a brief statement of the reasons why transfer is appropriate. The supreme court shall treat the statement as a motion to transfer under Sec. 4024 and shall promptly decide whether to transfer the case to itself.”
We granted the request for certification, limited to the following question: “Under the circumstances of this case, was the taxpayer liable for payment of a Connecticut use tax on its catalogs that were mailed to Connecticut residents?” Sharper Image Corp. v. Miller, 238 Conn. 907, 908, 679 A.2d 2 (1996).
We base our decision on the construction of the applicable use tax statutes and, consequently, we do not reach the economic benefits analysis that was part of the Appellate Court’s decision. See Val-Pak of Central Connecticut North, Inc. v. Commissioner of Revenue Services, 44 Conn. Sup. 133, 142, 670 A.2d 343 (1994), aff'd, 235 Conn. 737, 669 A.2d 1211 (1996).
General Statutes § 12-430 (5) provides: “Payment of sales or use tax to another state. If any service or article of tangible personal property has already been subjected to a sales or use tax by any other state or political subdivision thereof and payment made thereon in respect to its sale or use in an amount less than the tax imposed by this chapter, the provisions of this chapter shall apply, but at a rate measured by the difference, only, between the rate herein fixed and the rate by which the previous tax upon the sale or use was computed. If such tax imposed in such other state or political subdivision thereof is equivalent to or in excess of the rate imposed
We find it useful to note what is not in dispute in this appeal. Although raised before the trial court, Sharper Image did not argue on appeal that the use tax on the catalogs is a tax on interstate commerce in violation of the United States constitution’s commerce clause. The substantial nexus in this case that provides the factual underpinning to support tire constitutional imposition of the use tax on Sharper Image was the business and name recognition generated at its Connecticut stores as a result of the distribution of its catalogs in Connecticut. See D. H. Holmes Co., Ltd. v. McNamara, 486 U.S. 24, 31, 108 S. Ct. 1619, 100 L. Ed. 2d 21 (1988).
In addition, Sharper Image does not contest the use tax assessed on the
Sharper Image’s reliance on § 142 of the Connecticut Sales and Use Tax Manual is unavailing. That manual, which supports Sharper Image’s position,
We recognize that other jurisdictions have come to different conclusions based upon the interpretation of their own use tax statutes. See, e.g., Sharper Image Corp. v. Dept. of Treasury, 216 Mich. App. 698, 550 N.W.2d 596 (1996). Nonetheless, we are unpersuaded by those decisions.
Although the taxpayer in D. H. Holmes Co., Ltd., was incorporated and had its principal place of business in the taxing state, the court did not focus on those facts for the purpose of determining whether the taxpayer had sufficient control over the catalogs distributed in the taxing state.
We also recognize that in D. H. Holmes Co., Ltd., undelivered catalogs were returned to the taxpayer, while in the present case they were destroyed by the postal service. This is not, in our opinion, a significant factor in determining whether the taxpayer exercises a right or power over the catalogs.
The plaintiff in Service Merchandise Co. filed a petition for review by the Arizona Supreme Court, which was denied on May 20, 1997.
See Talbots, Inc. v. Schwartzberg, 928 P.2d 822, 824 (Colo. App. 1996) (Although use tax statute contained term “distributing,” court, nonetheless relied solely on definition of “use” and stated that “[t]he broad scope of
“Arizona imposes a tax on the use or consumption in this state of tangible personal property purchased from a retailer .... Every person . . . using or consuming in this state tangible personal property purchased from a retailer is liable for the tax. . . . ‘Use’ and ‘consumption’ are defined by statute as the exercise of any right or power over tangible personal property incidental to owning the property ..” (Citations omitted; internal quotation marks omitted.) Service Merchandise Co. v. Dept. of Revenue, supra, 937 P.2d 338. We conclude that our use tax statutes are as broad, if not broader, than the Arizona use tax statutes at issue in Service Merchandise Co.