636 A.2d 885 | Conn. Super. Ct. | 1993
This is a case in which the commissioner of revenue services (commissioner) has found a sizable deficiency because of an asserted invoice defect that turns out not, in fact, to be fatal. The taxpayer has duly appealed to this court. After conducting a hearing de novo, I find that, under the controlling statute, the taxpayer must prevail.
Smedley Crane Service, Inc. (Smedley), the taxpayer, leases cranes to contractors. The cranes are leased both with and without crews. Each crane, when used, has a crew of two persons, an operator who runs the crane and an oiler who maintains it. There are separate charges for the crane and the crew, and both charges are fairly standard. (The labor is exclusively union.) The problem in this case has arisen because of the different sales tax consequences of the lease of the equipment and the lease of the crew.
General Statute §
The tax on the leasing of tangible personal property was enacted in 1975. Public Acts 1975, No. 75-213, § 15. In 1980, the commissioner promulgated a regulation concerning the leasing of tangible personal property. One sentence of that regulation is in dispute here: "Gross receipts do not include the amount charged for the operator where the lessor supplies an operator for the leased property if the amount charged is for the compensation of the operator, is reasonable and is segregated in the invoice." Regs., Conn. State Agencies §
If the commissioner has correctly identified the question, the commissioner must prevail. The parties have stipulated that two invoices are "representative" of *8 the invoices in question. One invoice, involving the rental of a twenty ton crane, is as follows:
Rental — 20 ton crane 6 hrs. crane w/operator @ 125.00 hr. (overtime) 750.00 2 hrs. operator only @ 85.00 hr. 170.00 Ct. state tax 20.25 ----------- $940.25
A second, slightly more complicated, invoice is as follows:
Rental — 50 ton crane w/crew 2/1 8 hrs. crane w/crew 1000.00 2/2 8 hrs. 35 ton crane w/crew 850.00 2/3 8 hrs. 35 ton crane w/crew 850.00 2/4 4 hrs. crew only @ 95.00/hr. 380.00 2/5 8 hrs. ton crane w/crew 850.00 Ct. state tax 50.40 ---------- $3980.40
As the commissioner points out, neither invoice "segregates" the amount charged for the operator. That, in his view, is the end of the case. This is because the regulation allows no proof of compliance with the statute other than a "segregated" invoice. Essentially, the regulation turns the absence of this particular form of proof into a conclusive presumption against the taxpayer. Put another way, the regulation redefines what is taxable and what is not.
Is the regulation, thus applied, valid? In answering this question it is useful to consult other portions of §
The legislature, however, chose not to use such language in §
A tax appeal is an appeal de novo. Kimberly-ClarkCorp. v. Dubno,
The testimony of the Smedley officials on this point is strongly corroborated by the invoices themselves. The invoices plainly show both that crews were leased *10 as well as cranes and that the Connecticut sales tax was actually paid. In fact, while Smedley's invoices are not in full compliance with the regulation in question, their deviation from the regulation's "segregation" requirement is relatively slight. Anyone with a grasp of middle school algebra can easily calculate the amount charged for the equipment rental on any given invoice by extrapolating that amount from the tax imposed. One may then calculate the amount charged for the crew simply by subtracting the amount charged for the equipment from the amount charged for the equipment plus the crew. In other words, if one knows the tax rate and has a rudimentary command of algebra, the information necessary to determine the amount charged for the crew is indeed contained in the invoices in question.
Smedley has established by uncontradicted, credible evidence submitted at the hearing de novo that it faithfully paid the correct amount of tax on the tangible personal property that it leased. It owes no tax on the lease of crews. Any other holding would give a wholly undeserved windfall to the state by taxing services that are not statutorily taxable. Smedley's appeal must, therefore, be sustained.