SC 19397

Judicial District of New Britain


Taxation; Whether Municipality's Procurement of Waste Removal Services on Behalf of Commercial Residents Constitutes a Sale "for a Consideration"; Whether Services are Exempt from Sales Tax Pursuant to General Statutes 12-412 (95). Pursuant to General Statutes 7-273aa, the town of Groton, along with eleven other municipalities, formed the Southeastern Connecticut Regional Resources Recovery Authority (SCRRRA). SCRRRA developed a waste-to-energy facility to dispose of the region's solid waste. The town signed a municipal service agreement with SCRRRA, thereby gaining access to the facility for its disposal needs. The town provided refuse removal services to commercial, industrial and income-producing businesses within the town (end users), and it contracted with a trash hauler to take refuse from their properties to the SCRRRA facility. The town paid the hauler fees and SCRRRA trash disposal fees on an upfront basis and then submitted monthly bills to the end users to recover its outlays as well as its overhead costs. After conducting an audit of the dollar amount of the invoices, the Department of Revenue Services determined that the town improperly failed to collect sales tax from the end users for the refuse removal services. The trial court rendered judgment against the town in its subsequent administrative appeal, and this appeal followed. The town contends that the trial court improperly failed to undertake an analysis of the "true object" of the transaction. It argues that, under that analysis, the arrangement between the town and the commercial residents, whereby the town provides a traditional public service in accordance with its statutory mandate and realizes no profit in doing so, is not a "sale" subject to sales tax. The town further asserts that the transaction is not "for a consideration" and thus not a "sale" under Connecticut's sales tax statutes. It argues that it acts merely as a conduit for the end users in procuring refuse removal services pursuant to a statutorily authorized program and that the reimbursement for its operational expenses incurred on their behalf does not constitute a consideration for the services. Additionally, the town asserts that, even if the transactions constitute sales, the sales are exempt from taxation under General Statutes 12-412 (95) because they are made in connection with the operation of the waste-to-energy facility.