Were utility-purchased energy upgrades for Connecticut state buildings subject to sales tax?

Plain-English summary

In October 1992, Connecticut’s AG said sales and use tax did not apply to goods that participating utilities procured for a mandated conservation program in state buildings. The program arose from a statute and a 1991 public act requiring utilities and the Office of Policy and Management to work together on energy improvements. Utilities bought and installed lighting and other equipment, and the state took title when the goods were installed.

The AG distinguished an ordinary contractor buying goods to perform a state contract. Here, the utilities and state shared statutory duties; the goods were provided exclusively for state facilities, and title passed to the state. He treated the arrangement as the equivalent of a direct sale to Connecticut under the state-purchase exemption. The answer depended on that specific program and transfer of title, not on every utility purchase.

Utility companies at the time

The opinion treated purchases for the mandated state-building program as exempt when the installed goods became state property.

State facility and tax officials at the time

The AG tied the exemption to the statutory conservation plan, the state’s ultimate receipt of the goods and the transfer of title on installation.

Currency note

This opinion was issued in 1992. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Did a utility owe sales tax on lighting installed in a state facility under the program?
A: The AG said the goods were exempt because the program provided them exclusively to the state and title passed on installation.

Q: Was the utility treated like an ordinary state contractor?
A: No. The opinion distinguished contractor purchases because this program arose from duties imposed jointly by statute and resulted in state ownership of the installed goods.

Q: Did the state have to receive title to the goods?
A: That was a key fact in the AG’s analysis. He said Connecticut became owner when the equipment was installed.

Background and statutory framework

Conn. Gen. Stat. § 16a-37a established the state-facility conservation program, which the 1991 act expanded. Conn. Gen. Stat. § 12-412(i) was quoted as exempting sales to Connecticut. The opinion’s last paragraph prints a different subsection letter for the same exemption; this page follows the provision identified in its analysis.

Citations and references

Statutes: Conn. Gen. Stat. § 16a-37a; Conn. Gen. Stat. § 12-412(i).

Source

• Landing page: https://portal.ct.gov/AG/Opinions
• Opinion page: https://portal.ct.gov/ag/opinions/1992-formal-opinions/william-j-cibes-office-of-policy-and-management-1992027-formal-opinion-attorney-general-of-connectic

Original opinion text

William J. Cibes, Office of Policy and Management, 1992-027 Formal Opinion, Attorney General of Connecticut

Attorney General's Opinion

Attorney General, Richard Blumenthal

October 6, 1992

William J. Cibes

Secretary

Office of Policy and Management

80 Washington Street

Hartford, CT 06106

Honorable Allan A. Crystal

Department of Revenue Services

92 Farmington Avenue

Hartford, CT 06105

Dear Secretary Cibes and Commissioner Crystal:

I am writing in response to your request for an advisory opinion regarding the imposition of sales and use taxes on certain utility companies' purchases of goods to be installed in state facilities in performance of energy conservation measures mandated by Conn. Gen. Stat. § 16a-37a and 1991 Conn. Pub. Act No. 91-6 (June Spec. Sess.).

After reviewing this matter, it is our opinion that the costs associated with implementing the conservation measures mandated under Conn. Gen. Stat. § 16a-37a and 1991 Conn. Pub. Act No. 91-6 are exempt from sales and use taxes because the goods and services provided or procured by the public service companies are procured or provided exclusively for the State of Connecticut in fulfillment of a statutory mandate imposed on both the utility companies and the Office of Policy and Management (OPM).

In enacting Conn. Gen. Stat. § 16a-37a and 1991 Conn. Pub. Act No. 91-6, the Connecticut General Assembly enunciated a public policy consistent with the State's commitment to reducing its energy costs by improving the energy performance of state facilities. Conn. Gen. Stat. § 16a-37a and 1991 Conn. Pub. Act No. 91-6 create a unique relationship between the State and the public service companies in the implementation of conservation measures for State facilities. The utility companies are not contracting to perform services for the State; rather, they procure goods to fulfill a statutory obligation imposed on the State and the utility companies jointly.

Under both Conn. Gen. Stat. § 16a-37a and 1991 Conn. Pub. Act No. 91-6, each public service company with over 75,000 customers "in cooperation with the Office of Policy and Management" is mandated to submit "a plan for approval to the Secretary of the Office of Policy and Management" describing each company's plan to improve the energy performance of state facilities. In 1990, the year Conn. Gen. Stat. § 16a-37a was enacted, each company's plan was limited to a one-year program of re-lamping and retrofitting light fixtures that was to achieve $4 million in savings for the State. Under the 1991 Act, each company's plan encompasses a four-year program of procuring and installing equipment, and testing and managing the conservation projects. The cost of the four-year program "shall be shared equally by the State and the participating public service companies as conservation measures directly and solely related to electric savings." 1991 Conn. Pub. Act No. 91-6 § 1(b). Additionally, the State Bond Commission is authorized to issue bonds to provide funds "for the state's share of the program.,, 1991 Conn. Pub. Act No. 91-6 § 3(b).

Although the State cooperates with the public service companies to develop their energy conservation plans, the General Assembly clearly intended that the State alone be the ultimate recipient of the goods procured by the public service companies under the plans. The State of Connecticut takes title to all goods procured by the utility companies when they are installed in state facilities.

Under Conn. Gen. Stat. § 12-412(i), sales of tangible personal property or services to the State of Connecticut are exempt from sales and use taxes. Under Conn. Gen. Stat. § 12-407(2)(a), "sale" means "any transfer of title, exchange or barter conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for consideration.,' Because the participating public service companies installed and transferred title to electric light bulbs and fixtures procured for state facilities, without reimbursement or compensation in 1990, and because the state is obligated under the 1991 legislation to share the cost incurred by the utility companies in fulfilling the plan, the State is the "transferee,, of the goods procured for it by the public service companies.

While we are not unmindful that in circumstances in which entities acting as contractors purchase goods to be used by them in fulfilling contracts with the State, White Oak Corporation v. Department of Revenue Services, 198 Conn. 413 (1986), the Connecticut Supreme Court has imposed a sales and use tax obligation on such contractors only when title to the goods purchased are not transferred to the State. Under the energy conservation programs, title to the light bulbs and fixtures passes to the State upon installation: White Oak is not controlling because the public service corporations, circumstances are distinguishable.

Taxation statutes granting exemptions are strictly construed against the party claiming such exemption, Renz v. Monroe, 162 Conn. 559, 562 (1972), but taxation statutes are not read so as to undermine the policy behind the granting of the exemption. Hartford Hospital v. Hartford, 160 Conn. 370, 375 (1971). It is our opinion that the utility companies, procurement of goods for the State, pursuant to Conn. Gen. Stat. § 16a-37a and 1991 Conn. Pub. Act No. 91-6, are the equivalent of direct sales of goods to the State and are exempt from sales and use taxes under Conn. Gen. Stat. § 12-412(l) given the sui generous relationship created not by contract but by statute.

Very truly yours,

RICHARD BLUMENTHAL

ATTORNEY GENERAL

Richard K. Greenberg

Assistant Attorney General

RB/RKG/rj