Tax News

CCH (cch.taxgroup.com) reports:

An auto manufacturer was barred by sovereign immunity from pursuing its claim for a refund of Connecticut sales taxes it had refunded to consumers who had purchased cars that were found defective under the state's lemon law. The manufacturer alleged, among other claims, that its rights to due process and equal protection under the state and federal constitutions were violated when the Commissioner of Revenue Services did not grant its claim for refund of the sales taxes it had paid. The Connecticut Supreme Court ruled, however, that the manufacturer was not an aggrieved taxpayer and did not fall within the class of persons entitled to a refund under the applicable statute because the manufacturer failed to allege that (1) it was the purchaser of the vehicles subject to the sales tax, and (2) it was responsible for payment of the original sales tax at the time of the original purchase that gave rise to the sales tax. The manufacturer was ineligible for the refund because it neither qualified as a "taxpayer" as that term is contemplated in the Sales and Use Taxes Act nor as that term is commonly understood.
Moreover, there was nothing either expressly or by implication in the language of the statute that imposed upon the manufacturer the obligation to refund the tax to the consumer to show that the Legislature statutorily waived the state's sovereign immunity, according to the court. There was no express indication that the Legislature intended to permit the manufacturer to recover any of the collateral charges such as sales tax required to be refunded to the consumer by the manufacturer upon the consumer's return of a defective vehicle. Although there are exceptions to the state's sovereign immunity, there must exist a proper factual basis in a complaint to support the applicability of those exceptions. The lemon law was intended to protect consumers of new automobiles. Consequently, sovereign immunity deprived the trial court of subject matter jurisdiction to consider the manufacturer's claim that the statutory obligation under the state's lemon law to refund sales taxes to consumers who return defective vehicles resulted in violations of the manufacturer's constitutional rights.
It was irrelevant to the court that it was the Commissioner's decision denying the refund that gave rise to the constitutional claims. The manufacturer sought money damages from the state for those alleged violations but had not received permission from the claims commissioner to bring the action and also had not pleaded a valid exception to the doctrine of sovereign immunity. As a result, the trial court had properly granted the Commissioner's motion to dismiss because the manufacturer's claims were barred by sovereign immunity.
Subscribers to CCH Tax Research NetWork may view the opinion in its entirety.
DaimlerChrysler Corp. v. Law, Connecticut Supreme Court, No. SC 17892, officially released December 18, 2007.