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TOWN OF GROTON v. COMMISSIONER

OF REVENUE SERVICES ET AL.

(SC 19397)

Rogers, C. J., and Palmer, Zarella, Eveleigh, Espinosa and Robinson, Js.

Argued January 5—officially released June 30, 2015

Bryan P. Fiengo, with whom, on the brief, was Eric

W. Callahan, for the appellant (plaintiff).

Dinah J. Bee, assistant attorney general, with whom,

on the brief, was George Jepsen, attorney general, for

the appellees (defendants).
Opinion

ROBINSON, J. The sole issue in this appeal is whether

the fees that a municipality charges for refuse removal

services provided to industrial, commercial, or income

producing real properties are subject to the sales tax

under General Statutes § 12-408 (1) (A)1 when that

municipality does not make a profit on those fees

because they are either used to defray the municipality’s

overhead expenses in administering the refuse removal

program, or to pay the service charges of other participants in the refuse disposal process. The plaintiff, the

town of Groton, appeals2

from the judgment of the trial

court dismissing its tax appeal from the decision of

the named defendant, the Commissioner of Revenue

Services,3

to render a sales and use tax assessment

against it in the amount of $240,653.89. On appeal, the

plaintiff claims, inter alia, that the trial court improperly

applied numerous cases from this court, in particular

AirKaman, Inc. v. Groppo, 221 Conn. 751, 607 A.2d 410

(1992), in concluding that its arrangement of refuse

collection services for industrial, commercial, or

income producing real properties, on a revenue neutral

basis, constituted a sale for ‘‘consideration’’ subject to

the sales tax under § 12-408 (1) (A). We agree with the

plaintiff and, accordingly, reverse the judgment of the

trial court.

The record reveals the following relevant undisputed

facts, as found by the trial court, and procedural history.

The plaintiff is a municipal corporation organized under

the laws of the state of Connecticut. On or about

November 13, 1985, the plaintiff became a member of

the Southeastern Connecticut Regional Resources

Recovery Authority (regional authority), which was

formed pursuant to General Statutes § 7-273aa et seq.

The regional authority operates a waste-to-energy facility (waste facility) in Preston. The plaintiff entered into

a ‘‘municipal service agreement’’ with the regional

authority, which provided the plaintiff with access to

the waste facility for its disposal needs in exchange

for a per ton fee. That agreement imposes a minimum

delivery requirement on the plaintiff.

In August, 1998, the plaintiff adopted an ordinance

that created a municipal resource recovery authority,

known as the Town of Groton Resource Recovery

Authority (town authority), with offices located at the

plaintiff’s town hall. In January, 1999, the plaintiff

adopted an ordinance putting the removal, transport,

and disposal of solid waste from commercial, industrial,

and income producing businesses within the plaintiff’s

geographical area, known as ‘‘end users,’’ under the

management of the town authority. During the time

period at issue in the present appeal, the plaintiff contracted with a private trash hauler to take refuse from

the end users’ properties to the waste facility. The end

users would apply to the town authority for service
from the trash hauler, and would select the size of the

necessary trash receptacles and the frequency of trash

pickups from their properties; these elections would

determine the fee charged by the trash hauler. The trash

hauler would then transport the refuse to the regional

authority’s waste facility for disposal at the charge of

$60 per ton.

The hauler and the regional authority bill the plaintiff

for their fees on a monthly basis. The plaintiff pays the

invoices of the hauler and the regional authority in full

each month. After making those payments to the hauler

and the regional authority, the plaintiff then bills each

end user on a monthly basis for its share of the hauler’s

fee, the regional authority’s fee, and the plaintiff’s overhead expenses of $3.58 per ton of waste to administer

the program.4 The end users’ monthly payments cover

the payments that the plaintiff advances to the trash

hauler and the regional authority; the total outlays and

receipts from the end users create a ‘‘ ‘break even’ ’’

situation for the plaintiff, which does not profit from

providing this service. The plaintiff did not apply state

sales tax to the invoices that it issued to the end users,

and did not remit sales tax to the defendant for these

services.

Following a sales and use tax audit relating to its

billings to industrial, commercial, or income producing

real property for refuse and sanitary waste removal,

the defendant issued a notice of assessment in the

amount of $240,866.06, for sales taxes and interest due

for the period from May 1, 2007, through September

30, 2010. The plaintiff subsequently filed a protest contesting the validity of that assessment with the defendant. By a letter dated September 14, 2011, the

defendant denied the plaintiff’s protest, and issued a

revised assessment in the amount of $240,653.89.5

The plaintiff appealed from the decision of the defendant to the trial court in accordance with General Statutes § 12-422. The trial court concluded that the plaintiff

had failed to establish that the tax assessment was

incorrect, observing that refuse removal is a type of

service under General Statutes § 12-407 (a) (2) (I) and

(37) (I),6 as explicated by the defendant’s regulations;

see Regs., Conn. State Agencies § 12-407 (2) (i) (I)-1 (g)

(1);7 and, therefore, is subject to sales tax under § 12-

408 (1) (A), given that the plaintiff did ‘‘not dispute that

the [defendant] met the requirement of consideration

with regard to the exchange of cash by the ‘end users’

to the [plaintiff].’’ The trial court disagreed with the

plaintiff’s argument that, under AirKaman, Inc. v.

Groppo, supra, 221 Conn. 751, ‘‘there is no sale of services where the [plaintiff] provides services and

receives by way of consideration a reimbursement of its

own expenses in providing such services,’’ concluding

instead that AirKaman, Inc., ‘‘does not stand for a

general rule that all ‘conduit’ situations are not subject
to sales tax,’’ given the agency relationships established

in that case, which were not present in this case. The

court further concluded that, ‘‘while the [plaintiff] sends

an invoice for its costs to the end users, and the end

users comply by paying this invoice, there is still justification to find that there was a sale of services by’’ the

plaintiff, which was ‘‘for a consideration.’’ Finally, the

trial courtrejected the plaintiff’s claim that it ‘‘is exempt

from the sales tax because the function of trash removal

is a traditional governmental function,’’ observing that

the plaintiff ‘‘has not demonstrated that Connecticut

has a constitutional or statutory provision exempting

municipalities that sell services, even if related to government functions, from the imposition of state sales

tax.’’8 Accordingly, the trial court rendered judgment

dismissing the plaintiff’s tax appeal. This appeal

followed.

On appeal, the plaintiff claims, inter alia, that the

trial court improperly concluded that the fees that it

collected for refuse removal were subject to the sales

tax. Specifically, the plaintiff contends that the trial

court improperly failed to consider the ‘‘ ‘true object’ ’’

of the transaction in accordance with AirKaman, Inc.

v. Groppo, supra, 221 Conn. 751, namely, that its fees

were a mere pass-through arrangement on which it did

not turn a profit in carrying out the statutorily authorized, governmental function of garbage collection via

a municipal or regional authority, as distinguished from

acting in a proprietary capacity for purposes of corporate benefit or profit for the municipality. Citing Sal

Tinnerello & Sons, Inc. v. Stonington, 141 F.3d 46 (2d

Cir.), cert. denied, 525 U.S. 923, 119 S. Ct. 278, 142 L.

Ed. 2d 230 (1998), the plaintiff emphasizes that its fees

were not sales or part of a commercial enterprise, but

rather, were ‘‘ ‘benefit assessments’ ’’ to pay for the

governmental function of solid waste collection. To this

end, the plaintiff argues that, under the ‘‘true object’’

inquiry required by AirKaman, Inc., unlike in the commercial profit seeking context, it was a ‘‘mere conduit’’

between the end users and the hauler and regional

authority and, therefore, the fees that it charged were

a dollarfor dollarreimbursement that did not constitute

the ‘‘consideration’’ required by § 12-407 (a) (2) (I) to

render services taxable, further relying on the principle

that ambiguities in taxing statutes are construed in favor

of the taxpayer.

In response, the defendant contends that the trial

court properly determined that refuse removal services

are subject to the sales tax under the plain language of

the applicable statutes and implementing regulation,

namely, § 12-407 (a) (2) (I) and (37) (I), and § 12-407

(2) (i) (I)-1 (g) (1) of the Regulations of Connecticut

State Agencies. Relying on Andersen Consulting, LLP

v. Gavin, 255 Conn. 498, 767 A.2d 692 (2001), the defendant contends that the ‘‘true object’’ test of AirKaman,

Inc. v. Groppo, supra, 221 Conn. 763–64, does not apply
when the service at issue ‘‘clearly falls under a relevant

statute or regulation.’’ The defendant further argues

that the plaintiff’s power to provide for or regulate

the provision of trash removal services under General

Statutes § 7-148 (c) (4) (H)9 does not render it exempt

from the sales tax, because ‘‘there is no public mandate

that the refuse removal services be provided by a municipality at cost,’’ nor any legislative intention to ‘‘exempt

from sales tax the provision of those services simply

because the [plaintiff]—for salutary purposes—decided

to arrange and bill for the services itself,’’ noting that

General Statutes § 7-273bb (a) (9)10 specifically authorizes municipal and regional authorities to ‘‘[c]harge

reasonable fees’’forthose services. Citing cases upholding the imposition of sales taxes on off-street parking

or extra duty police officers provided by municipalities;

see, e.g., Plainfield v. Commissioner of Revenue Services, 213 Conn. 269, 567 A.2d 379 (1989); North Hempstead v. Regan, 171 App. Div. 2d 165, 574 N.Y.S.2d 851

(1991), aff’d, 80 N.Y.2d 936, 605 N.E.2d 867, 591 N.Y.S.2d

131 (1992); the defendant also contends that a municipality’s decision to ‘‘[provide] services that are in the

public interest to constituents does not mean that the

services are not subject to the sales tax,’’ observing that

municipalities and private actors are equally subject to

the sales tax when they provide the same services,

regardless of profit motive. The defendant then relies

on our treatment of AirKaman, Inc., in HVT, Inc. v.

Law, 300 Conn. 623, 16 A.3d 686 (2011), and contends

that the trial court properly interpreted AirKaman,

Inc., in concluding that the fees collected by the plaintiff

constituted consideration subject to sales tax, rather

than a mere conduit or pass-through to another party,

because the plaintiff provided an actual service to the

end users. We disagree with the defendant, and conclude that the refuse removal fees that the plaintiff

charged to the commercial, industrial, and income producing end users on a revenue neutral basis were not

subject to the sales tax under § 12-408 (1) (A).

The plaintiff’s claims ‘‘[present] an issue of statutory

interpretation, which is a question of law over which

we exercise plenary review. . . . The principles that

govern statutory construction are well established.

When construing a statute, [o]ur fundamental objective

is to ascertain and give effect to the apparent intent of

the legislature. . . . In other words, we seek to determine, in a reasoned manner, the meaning of the statutory language as applied to the facts of [the] case,

including the question of whether the language actually

does apply. . . . In seeking to determine that meaning,

General Statutes § 1-2z directs us first to consider the

text of the statute itself and its relationship to other

statutes. If, after examining such text and considering

such relationship, the meaning of such text is plain and

unambiguous and does not yield absurd or unworkable

results, extratextual evidence of the meaning of the
statute shall not be considered. . . . When a statute is

not plain and unambiguous, we also look for interpretive guidance 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 . . . . We

recognize that terms in a statute are to be assigned

their ordinary meaning, unless context dictates otherwise . . . .

‘‘[A]long with these principles, we are also guided by

the applicable rules of statutory construction specifically associated with the interpretation of tax statutes.

. . . [W]hen the issue is the imposition of a tax, rather

than a claimed right to an exemption or a deduction,

the governing authorities must be strictly construed

against the commissioner . . . and in favor of the taxpayer. . . . Nevertheless, [i]t is also true . . . that

such strict construction neither requires nor permits

the contravention of the true intent and purpose of the

statute as expressed in the language used.’’ (Citations

omitted; internal quotation marks omitted.) Scholastic

Book Clubs, Inc. v. Commissioner of Revenue Services,

304 Conn. 204, 213–14, 38 A.3d 1183, cert. denied,

U.S. , 133 S. Ct. 425, 184 L. Ed. 2d 255 (2012). Moreover, ‘‘[i]n interpreting [statutory] language . . . we do

not write on a clean slate, but are bound by our previous

judicial interpretations of this language and the purpose

of the statute.’’ (Internal quotation marks omitted.)

Commissioner of Public Safety v. Freedom of Information Commission, 312 Conn. 513, 527, 93 A.3d 1142

(2014).

Thus, in determining whether the plaintiff’s refuse

removal services were supported by the ‘‘consideration’’ required for the imposition of a sales tax under

§ 12-408 (1) (A), we begin with a review of AirKaman,

Inc. v. Groppo, supra, 221 Conn. 751. In that case, ‘‘Uniroyal, Inc. (Uniroyal), entered into a lease with the state

of Connecticut in which Uniroyal agreed to manage

the fixed base operation of the Oxford Airport from

November 1, 1969, through October 31, 1989. Uniroyal

was permitted to sublet with the approval of the state.

In December, 1981, Uniroyal entered into a sublease

with [AirKaman, Inc. (AirKaman)], in which AirKaman

agreed to assume Uniroyal’s duties for the fixed base

operation of the airport from December, 1981, through

December, 1984. The sublease provided that AirKaman

would receive as compensation $650 per week plus

40 percent of the net income generated. In addition,

AirKaman would be reimbursed for all costs incurred

in connection with the fixed base operation. . . . While

the [sublease was] in effect, AirKaman . . . billed Uniroyal for the management fee (the fixed weekly fee

plus the percentage of profit) and for reimbursement

of operating costs, which included payroll and payroll

expenses, accounting fees, payroll services fees and
insurance premiums.’’ Id., 753–54; see also id., 763

(observing that ‘‘[t]he lease agreements between Uniroyal and [AirKaman] disclose arrangements whereby

[AirKaman] essentially undertook to act as Uniroyal’s

agent by managing the fixed base operation, which

included collecting revenue and paying expenses on

behalf of Uniroyal’’ [emphasis added]). The issue in

AirKaman, Inc., of import to the present case is

whether the ‘‘payroll reimbursement received by [AirKaman was] taxable as consideration for the rendering

of management services.’’11 Id., 754.

In holding that the payroll reimbursements were not

‘‘consideration’’ under § 12-408 (1), this court first cited

Dine Out Tonight Club, Inc. v. Dept. of Revenue Services, 210 Conn. 567, 571, 556 A.2d 580 (1989), and

American Totalisator Co. v. Dubno, 210 Conn. 401,

406, 555 A.2d 414 (1989), and stated that, ‘‘[t]o decide

whether and to what extent a sales tax is applicable,

we must determine the true object of the transaction

between [AirKaman] and Uniroyal.’’12 AirKaman, Inc.

v. Groppo, supra, 221 Conn. 763. It then observed that

‘‘§ 12-408 (1) levies a tax on ‘any sales as defined in

subsection (2) of section 12-407, at retail, in this state

for a consideration . . . .’ ’’ (Emphasis in original.) Id.,

763–64. Because the sales tax statutes did not define

the term ‘‘consideration,’’ the court then ‘‘look[ed] to

the dictionary definition to ascertain its commonly

approved usage, [as] something given as recompense,

a payment, reward.’’ (Internal quotation marks omitted.)Id., 764, quoting Webster’s Third New International

Dictionary (1971). The court emphasized that the commissioner’s ‘‘notion that reimbursement for out-ofpocket expenditures could constitute a consideration

for services rendered is contrary to the concept of payment or recompense.’’ (Emphasis added.) AirKaman,

Inc. v. Groppo, supra, 764. The court rejected what

it characterized as the ‘‘commissioner’s view’’ that ‘‘a

company that agreed to manage a business for another

company and received only reimbursement for incidental expenses incurred in the management of that business and no fee or other profit from the arrangement

would have to pay a tax on the reimbursementreceived.

The imposition of a sales tax under such circumstances

would be improper because a mere transfer of expenses

between parties cannot be regarded as a sale of services.

That is precisely the situation in this case, in which the

fee earned by [AirKaman] clearly constituted payment

for managerial services rendered, while the reimbursement received by [it] was simply the return of moneys

expended by [AirKaman] on Uniroyal’s behalf. [AirKaman] acted as a mere conduit for Uniroyal with respect

to operational expenses and realized no recompense

for its services simply by being reimbursed by Uniroyal

for its outlay.’’ (Emphasis added.) Id. Thus, the court

concluded that, ‘‘[w]ithout evidence that the payroll

reimbursement included some payment to [AirKaman]
for [its] managerial services in addition to the amounts

[it] had expended . . . such reimbursement is not taxable as a consideration forthe rendering of management

services.’’13 Id., 765.

Guided by the analytical structure ofAirKaman,Inc.,

we agree with the defendant that the applicable statutes

and regulations plainly identify refuse removal services

as services subject to the sales tax generally, such as

when provided by a direct contractual arrangement

between a property owner or manager and a commercial provider. See General Statutes § 12-407 (a) (2) (I)

and (37) (I); Regs., Conn. State Agencies § 12-407 (2)

(i) (I)-1 (g) (1). Nevertheless, that does not relieve us

from examining the ‘‘true object’’ of the transaction at

issue to determine whether there is ‘‘consideration’’ for

purposes of triggering the sales tax under § 12-408 (1).

See AirKaman, Inc. v. Groppo, supra, 221 Conn.

762–65; see also footnote 18 of this opinion and accompanying text.

In considering the true object of the transaction at

issue in this case, we are guided by the well established

proposition that ‘‘stringent control over the collection

of garbage is indispensable to the public health and

safety’’ and, therefore, municipalities validly may exercise their powers to regulate sanitation within their

boundaries. Strub v. Deerfield, 19 Ill. 2d 401, 403, 167

N.E.2d 178 (1960); see also Nehrbas v. Lloyd Harbor,

2 N.Y.2d 190, 194, 140 N.E.2d 241, 159 N.Y.S.2d 145

(1957). Indeed, as the United States Court of Appeals

forthe SecondCircuit has observed in rejecting a constitutional contracts clause challenge to a similar waste

disposal scheme, ‘‘the objective of safe and efficient

waste disposal undoubtedly is a legitimate public goal.

Imposing the costs of solid waste disposal on an equitable, user-fee basis rather than utilizing general tax revenue is also a legitimate public goal.’’ Sal Tinnerello &

Sons, Inc. v. Stonington, supra, 141 F.3d 54; see also

USA Recycling, Inc. v. Babylon, 66 F.3d 1272, 1283 (2d

Cir. 1995) (‘‘New York law makes clear that the [t]own

is fulfilling a governmental duty, not making a sale,

when it provides garbage services. New York municipalities have a duty to ensure proper collection and disposal of trash for the well-being and health of the

community.’’), cert. denied, 517 U.S. 1135, 116 S. Ct.

1419, 134 L. Ed. 2d 544 (1996).

It is evident that the requisite consideration did not

exist to sustain the imposition of the sales tax on the

transaction in this case because the plaintiff functioned

as a ‘‘mere conduit’’14 between the end users and the

trash haulers and the regional authority with respect

to those entities’ portion of the fees levied on the end

users.15 See AirKaman,Inc. v. Groppo, supra, 221 Conn.

764. Second, the administrative overhead portion of the

fee, which was a reimbursement for the expenditures

incurred by the plaintiff in administering the program,
was revenue neutral and did not reflect an attempt

by the plaintiff to engage in a proprietary function in

competition with the private sector.16 Rather, this fee

structure is the plaintiff’s attempt to consolidate and

fund the important municipal governmental function of

sanitation more equitably and efficiently than by using

general tax revenues to pay for the expenses involved,

including by outsourcing garbage pick up to a private

sector vendor rather than using municipal human

resources and equipment for that task.17 See USA

Recycling, Inc. v. Babylon, supra, 66 F.3d 1284–85.

Contrary to the defendant’s arguments, this court’s

more recent decisions in HVT, Inc. v. Law, supra, 300

Conn. 623, and Andersen Consulting, LLP v. Gavin,

supra, 255 Conn. 498, do not undermine the persuasive

value of AirKaman, Inc. v. Groppo, supra, 221 Conn.

751, because both cases are distinguishable given that

the element of ‘‘consideration’’ under § 12-408 (1) (A)

was not at issue therein. First, we disagree with the

defendant’s reliance on Andersen Consulting, LLP, for

the proposition that the true object test is inapplicable

given the plain and unambiguous statutory and regulatory language rendering refuse collection service subject to the sales tax.18 See General Statutes § 12-407 (a)

(2) (I) and (37) (I); Regs., Conn. State Agencies § 12-

407 (2) (i) (I)-1 (g) (1). Our application of AirKaman,

Inc., in the present case is not inconsistent with this

court’s decision not to apply the true object test in

Andersen Consulting, LLP, because, unlike in AirKaman, Inc., Andersen Consulting, LLP, did not raise the

separate issue of whether the services whose taxability

was at issue under the definitions set forth in § 12-407

were provided for ‘‘consideration’’ under § 12-408 (1)

(A). Compare AirKaman, Inc. v. Groppo, supra, 762–65

(determining whether ‘‘actual operation of a business

is included within the term ‘management services’ ’’

before considering whether all of those services had

been provided for ‘‘consideration’’), with Andersen

Consulting, LLP v. Gavin, supra, 527–28 (solely considering whether ‘‘services provided to develop, create or

produce software are taxable as computer services’’).

Our recent decision in HVT, Inc. v. Law, supra, 300

Conn. 623, is similarly distinguishable. In that case, we

concluded that an automobile leasing company was

obligated to pay sales tax on the amount of the registration renewal fees that its lessees paid on its behalf

directly to the Department of Motor Vehicles.19 Id., 625–

26. In so holding, we rejected the leasing company’s

reliance on the mere conduit analysis from AirKaman,

Inc., stating that AirKaman,Inc., ‘‘stands forthe proposition that a preexisting financial obligation of the customer cannot later be parlayed into the retailer’s taxable

gross receipts if the retailer first satisfies the obligation

and is later reimbursed by the customer.’’20 (Emphasis

omitted.) Id., 637. We agree with the plaintiff that HVT,

Inc., is distinguishable from the present case for the
more basic reason that the existence of consideration

was not an issue of law in that case, given that it was

undisputed in HVT, Inc., there was a ‘‘sale’’ for ‘‘consideration’’ under § 12-408 (1), namely, the underlying vehicle lease. In contrast, whether the refuse collection

services facilitated by the plaintiff constituted a ‘‘sale’’

for ‘‘consideration’’ is the very issue in contention in

this appeal.

Guided by the true object test and mere conduit theory setforth inAirKaman,Inc., we,therefore, conclude

thatthe trial courtimproperly determined that consideration existed to support the defendant’s assessment of

the plaintiff for sales tax in connection with its revenue

neutral program for the collection of refuse generated

by commercial, industrial, or income producing real

properties. The trial court, therefore, improperly dismissed the plaintiff’s appeal from the sales tax assessment imposed by the defendant.

The judgment is reversed and the case is remanded

with direction to sustain the plaintiff’s appeal.

In this opinion the other justices concurred.

1 General Statutes § 12-408 (1) (A) provides: ‘‘For the privilege of making

any sales, as defined in subdivision (2) of subsection (a) of section 12-407,

at retail, in this state for a consideration, a tax is hereby imposed on all

retailers at the rate of six and thirty-five-hundredths per cent of the gross

receipts of any retailer from the sale of all tangible personal property sold

at retail or from the rendering of any services constituting a sale in accordance with subdivision (2) of subsection (a) of section 12-407 . . . .’’

We note that § 12-408 (1) (A) has been the subject of several recent

amendments by our legislature. See, e.g., Public Acts 2013, No. 13-184, § 77.

These amendments contain, among other things, changes to the applicable

tax rate. See Public Acts 2011, No. 11-6, § 93. Because these amendments

have no bearing on the merits of the present appeal, in the interest of

simplicity, we refer to the current revision of the statute.

2 The plaintiff appealed from the judgment of the trial courtto theAppellate

Court, and we transferred the appeal to this court pursuant to General

Statutes § 51-199 (c) and Practice Book § 65-1.

3 We note that the Department of Revenue Services is also a defendant

in the present case. In the interest of simplicity, references to the defendant

in this opinion include both the Department of Revenue Services and the

Commissioner of Revenue Services. When necessary, we refer to these

parties individually as the department and the commissioner.

4 The plaintiff calculates the end users’ monthly bills by using a chart that

reflects the expenses for hauling, disposal, and overhead.

5 The defendant determined that $182.97 of the initial sales and use tax

assessment was improper, and reduced the plaintiff’s tax liability accordingly. It directed the payment of a refund in the amount of $212.17 because,

prior to protesting the assessment, the plaintiff had deposited a cash bond

in the original assessment amount of $240,866.06.

6 General Statutes § 12-407 (a) (2) provides in relevant part: ‘‘ ‘Sale’ and

‘selling’ mean and include . . .

‘‘(I) The rendering of certain services, as defined in subdivision (37) of

this subsection, for a consideration, exclusive of such services rendered by

an employee for the employer . . . .’’

General Statutes § 12-407 (a) (37) provides in relevant part: ‘‘ ‘Services’

for purposes of subdivision (2) of this subsection, means . . .

‘‘(I) Services to industrial, commercial or income-producing real property,

including, but not limited to, such services as management, electrical, plumbing, painting and carpentry . . . .’’

We note that, although § 12-407 has been the subject of several recent

amendments by the legislature; see, e.g., Public Acts 2011, No. 11-6, § 88;

those amendments have no bearing on the merits of this appeal. In the

interest of simplicity, unless otherwise noted, we referto the currentrevision

of the statute.
7 Section 12-407 (2) (i) (I)-1 (g) (1) of the Regulations of Connecticut State

Agencies provides: ‘‘In general. Except as otherwise provided in subdivision

(2) of this subsection, services to industrial, commercial or income-producing real property mean those services set out in section 12-407 (2) (i) (I)

of the general statutes (namely, management, electrical, plumbing, painting

and carpentry services) and include but are not limited to such services

affecting real property as roofing, siding, excavating, foundation work, plastering, heating, air conditioning, ventilation, welding, flooring, sandblasting,

carpeting, elevator or escalator work, wallpapering, masonry, refuse

removal, demolition and structural inspection.’’ (Emphasis added.)

8 The trial court also rejected the plaintiff’s additional contention that the

sales tax exemption set forth in General Statutes (Rev. to 2007) § 12-412

(95) for ‘‘tangible personal property . . . used or otherwise consumed in

the operation of a solid waste-to-energy facility,’’ applied to the transaction at

issue, holding that the exemption was limited to only the regional authority’s

expenses in operating the waste facility. Although the plaintiff renews this

claim on appeal, we need not reach its merits and, accordingly, express no

opinion on that aspect of the trial court’s judgment.

9 General Statutes § 7-148 (c) provides in relevant part: ‘‘Any municipality

shall have the power to do any of the following, in addition to all powers

granted to municipalities under the Constitution and general statutes . . . .

‘‘(4) . . . (H) Provide for or regulate the collection and disposal of garbage, trash, rubbish, waste material and ashes by contract or otherwise,

including prohibiting the throwing or placing of such materials on the highways . . . .’’

We note that, although § 7-148 has been the subject of several recent

amendments by the legislature; see, e.g., Public Acts 2010, No. 10-152, § 7;

those amendments have no bearing on the merits of this appeal. In the

interest of simplicity, we refer to the current revision of the statute.

10 General Statutes § 7-273bb (a) provides in relevant part: ‘‘Any municipal

or regional resource recovery authority created pursuant to this chapter

shall have the power to . . .

‘‘(9) Charge reasonable fees for the services it performs and waive, suspend, reduce or otherwise modify such fees, provided such user fees shall

apply uniformly within each municipality to all users who are provided with

waste management services with respect to a given type or category of

wastes, in accordance with criteria established by the authority, and provided further no change may be made in user fees without at least sixty

days prior notice to the users affected thereby . . . .’’

We note that, although § 7-273bb was amended by the legislature in 2014;

see Public Acts 2014, No. 14-94, §§ 80, 81; that amendment has no bearing

on the merits of this appeal. In the interest of simplicity, we refer to the

current revision of the statute.

11 The first issue in AirKaman, Inc., was whether the ‘‘day-to-day operational management services’’ provided by AirKaman were taxable as ‘‘management services’’ under the definition of General Statutes (Rev. to 1985)

§ 12-407 (2) (i) (K). AirKaman, Inc. v. Groppo, supra, 221 Conn. 754. After

engaging in an extensive review of the statute, legislative history, and regulations,this court concluded that‘‘the actual operation of a business is included

within the term management services . . . .’’ (Internal quotation marks

omitted.) Id., 762.

12 This court’s decision in Dine Out Tonight Club, Inc. v. Dept. of Revenue

Services, supra, 210 Conn. 567, illustrates the application of the ‘‘true object’’

test well. In Dine Out Tonight Club, Inc., we first noted that, under the

statutes then at issue, ‘‘[o]nly the sale of tangible personal property at retail

is subject to the imposition of the Connecticut sales tax’’; id., 570; and that

the ‘‘Connecticut sales tax does not . . . extend to the sale of intangible

rights.’’ Id., 571. Applying the true object test, we concluded that a dining

club’s membership fees that entitled members to free meals at participating

restaurants were not subject to the sales tax. We rejected the commissioner’s

argument that the membership card and restaurant directory that the club

provided to its members were ‘‘tangible personal property,’’ noting that we

‘‘must therefore ascertain whether the true object of that transaction is to

provide club members with a card and a directory or to bestow upon

them the intangible right to free meals under specified conditions. . . . The

determinant is the intention of the parties. . . . We think that intention is

evident. Obviously, prospective club members are not enticed to pay the

plaintiff for the prospect of obtaining a card and a directory, items that

would be of little or no value without the concomitant right to receive free

meals. Conversely, the plaintiff could not expect to stay in business by
offering for sale only a card and a directory. Manifestly, the sine qua non

of the transaction between the club and its members is the intangible right

to receive free meals and access to the knowledge of an expanding list of

restaurants that provide them. . . . The membership card and directory

are merely indicia of that intangible right and incidental aids to its exercise.

. . . Because the transaction between the plaintiff club and its members is

essentially the conveyance of an intangible right to free meals, the plaintiff’s

membership fees are not subject to the imposition of the Connecticut sales

tax.’’ (Citations omitted.) Id., 572–73.

13 We note that, in 1992, the legislature subsequently modified the sales

tax statutes, specifically the definitions in § 12-407 (8) and (9); Public Acts,

Spec. Sess., May, 1992, No. 92-17, §§ 21, 23; in response to AirKaman,

Inc. v. Groppo, supra, 221 Conn. 751, to make clear that payroll related

reimbursements are taxable aspects of ‘‘managementfees,’’ subjectto certain

narrow exemptions. See Renaissance Management Co. v. Commissioner

of Revenue Services, 48 Conn. Supp. 221, 223–26, 838 A.2d 260 (2002), aff’d,

267 Conn. 188, 836 A.2d 1180 (2003) (per curiam).

14 We acknowledge that the trial court cited Mandell v. Gavin, 262 Conn.

659, 816 A.2d 619 (2003), and observed that the plaintiff ‘‘does not dispute

that the commissioner met the requirement of consideration with regard to

the exchange of cash by the ‘end users’ to the [plaintiff].’’ In Mandell, this

court concluded that consideration did not exist to support the imposition

of a conveyance tax under General Statutes (Rev. to 2003) § 12-494 (a) when

an individual taxpayer ‘‘unilaterally’’ transferred real property to a limited

liability company of which he was the sole member, by means of a quitclaim

deed expressly stating that there was ‘‘no consideration,’’ because the company had not promised ‘‘any performance or return promise,’’ and ‘‘neither

the [taxpayer] nor the company made any promises or exchanges regarding

the transfer whatsoever.’’ Id., 669; see also id., 668–69 (noting well established legal definitions of ‘‘consideration’’ as requiring ‘‘bargained for

. . . exchange’’).

We note that this court’s decision in Mandell did not cite or limit the

‘‘mere conduit’’ rule set forth in AirKaman, Inc. v. Groppo, supra, 221 Conn.

764. Indeed, Mandell’s reasoning, holding that there was no bargained for

exchange when an individual taxpayer quitclaimed real property to a limited

liability company of which he was the sole member when no money or

other performance was exchanged, is not inconsistent with the mere conduit

theory in AirKaman, Inc. Finally, this concession before the trial court, to

the extent it implicates a point of law concerning the interpretation of the

tax statutes, is not binding upon us in any event. See, e.g., Coley v. Hartford,

312 Conn. 150, 168–69 n.14, 95 A.3d 480 (2014); State v. Putnoki, 200 Conn.

208, 219 n.6, 510 A.2d 1329 (1986).

15 We acknowledge the defendant’s reliance on this court’s police extra

duty cases, Plainfield v. Commissioner of Revenue Services, supra, 213

Conn. 269, and Berlin v. Commissioner of Revenue Services, 207 Conn.

289, 540 A.2d 1051 (1988), which held subject to sales tax the fees charged

by towns to private entities that engaged town police officers in extra duty

work in accordance with General Statutes § 7-284, despite the fact that the

towns merely passed the fees on to the police officers at the contractual

overtime rate after necessary deductions, and did not themselves turn a

profit. These cases are distinguishable, based on both the nature of the

tasks involved and the finding of consideration. In Plainfield, we emphasized

that the nature of the task at issue, namely, the provision of police officers

to provide security at the dog racing track, was ‘‘private,’’ insofar as the

legislature mandated the track pay for those services under § 7-284.

Plainfield v. Commissioner of Revenue Services, supra, 272–73. We agreed

with the trial court that the town, ‘‘by furnishing officers to the track, stands

in essentially the same position as would a private contractor furnishing

security personnel for the same purpose. Since the [town] concedes that

such a private contractor would have been subject to the sales tax, we hold

that the trial court did not err in resolving this issue in favor of the . . .

commissioner.’’ Id., 275–76.

In Berlin, we addressed whether there was sufficient consideration, and

upheld the trial court’s findings that there was consideration insofar as the

town ‘‘benefited either directly or indirectly from the off-duty arrangement.

The provision for such off-duty work in the union contract is obviously an

important incentive to the [town’s] police officers, both to enter police work

and to approve the collective bargaining agreement. The [town] benefited

to the extent that such a contract provision contributed to labor peace with

its police officers. It is reasonable to conclude further that the [town] also

benefited from the added police presence in the town.’’ Berlin v. Commissioner of Revenue Services, supra, 207 Conn. 294–95. Notwithstanding the

plaintiff’s apparent concession in the trial court; see footnote 14 of this

opinion; the trial court’s finding of consideration is not consistent with the

case law.

16 Given the governmental function of garbage collection, we deem distinguishable the off-street parking cases cited by the defendant for the proposition that a municipality does not exempt itself for sales tax liability by failing
to turn a profit on a service that it provides to its constituents, namely,

North Hempstead v. Regan, supra, 171 App. Div. 2d 165, and Stamford v.

Commissioner of Revenue Services, Superior Court, judicial district of New

Britain, Docket No. CV-99-0493545-S (December 13, 2000). Indeed, in holding

that a town had to pay sales tax on receipts from the operation of an offstreet parking lot, the New York Appellate Division emphasized that, under

New York law, ‘‘the operation of municipal parking lots has been repeatedly

held to be a proprietary function, not a governmental one,’’ observing that

off-street parking is ‘‘a service also ordinarily provided by private vendors,

who, by making parking available, also serve this same public interest [of

promoting traffic flow on streets] but are taxed nonetheless.’’ North Hempstead v. Regan, supra, 167–68. Our state’s leading decision on this point is

generally in accord, holding in the tort immunity context that the operation

of off-street parking facilities such as garages is generally a proprietary

function, although that remains a question of fact and a ‘‘small or nominal

fee’’ that is not charged ‘‘as a means to derive a profit from the activity’’

may well leave governmental immunity intact. Doran v. Waterbury Parking

Authority, 35 Conn. Supp. 280, 282, 408 A.2d 277 (1979); see also id., 282–83

(‘‘The operation of a ramp garage by a municipality may admittedly be in

the public interest in that it lessens congestion in the streets and promotes

the flow of traffic. It appears to this court, however, that the activity has

traditionally been an undertaking provided in a private capacity for commercial advantage. This court cannot, in good conscience, hold thatthe operation

of a ramp garage constitutes a governmental function.’’).

17 Indeed, as was discussed at oral argument before this court, there would

have been no sales tax liability for the plaintiff had it used general tax

revenues to pay for garbage collection, eitherthrough contract with a private

hauler or by use of municipal employees and equipment.

18 In particular, the defendant relies on our statement in Andersen Consulting, LLP, that ‘‘[w]e have never applied the true object test, a judgemade rule, so as to exclude from the purview of a statute or regulation a

service that, upon applying proper principles of statutory and regulatory

construction and absent a finding that the service was merely incidental to

the transaction, would otherwise fall underthe relevant statute orregulation.

Instead, we have applied the so-called true object test in generally two

contexts: (1) where what would otherwise bring the transaction under the

purview of the relevant taxing statute is merely incidental to the objective

of the transaction . . . and (2) where the applicability of the sales tax

depends on the purpose of the sale, which is necessarily a question of

intent.’’ (Citations omitted.) Andersen Consulting, LLP v. Gavin, supra, 255

Conn. 526–27.

19 In HVT, Inc., we concluded that the ‘‘renewal fees paid by lessees

directly to the [Department of Motor Vehicles] are gross receipts as defined

by § 12-407 (a) (9) (A)’’ because, under the plain language of the statute,

‘‘the retailer need not actually [receive] the payments for them to be considered gross receipts. Finally, the definition of gross receipts provides that

there can be no deduction for any other expense from the payment or

periodic payments from leases . . . .’’ (Internal quotation marks omitted.)

HVT, Inc. v. Law, supra, 300 Conn. 630. We emphasized that the lessor’s

‘‘preexisting—and continuing—legal obligation . . . to register and reregister its leased motor vehicles, making that activity integral to the business

transaction,’’ and noted the lack of a specific exemption for registration

fees from gross receipts, unlike that provided for property tax reimbursements. Id., 630–32.

20 We then observed that ‘‘it is undisputed that the lessees, as customers,

did not have a preexisting contractual or statutory obligation to pay the

renewal fees to the [Department of Motor Vehicles] before the lessees

entered into their leases . . . that obligation belongs solely to the lessor,

as the retailer and vehicle owner. Because the original obligation to pay the

renewal fees belonged to and remained with the plaintiff, the lessees’ payment of those fees to the [Department of Motor Vehicles], and, in some

cases, to the plaintiff, cannot qualify as reimbursements to the plaintiff

excluded from taxation under AirKaman, Inc.’’ (Emphasis omitted.) HVT,

Inc. v. Law, supra, 300 Conn. 638.