This is an appeal by Stop `N Save, Inc., and Waterbury Public Markets, Inc. (taxpayers), from a decision of the Superior Court dismissing their appeal from the assessment of sales and use taxes by the department of revenue services (department) for the period June 1, 1982, through May 31, 1985. The sales and use taxes in question were assessed against the taxpayers for machinery used in the production of baked goods at their in-store bakeries.
The facts are not in dispute.
A relatively small portion of the taxpayers' store area and resources is devoted to the production and sale of bakery products. Only 2 to 2.5 percent of the taxpayers' total sales, 3.5 percent of employees' hours, 3.1 percent of the total number of employees, 4.4 percent of floor space and 2.6 percent of the taxpayers' total costs are attributable to their in-store bakery operations.
In correspondence with the taxpayers, the department stated that it refused to revise the assessment against them because "an establishment [in order to qualify for an exemption under § 12-412 (34)] must have manufacturing as its main purpose and be generally recognized to be an industrial plant." The department went on to note that the "baking of the products on the premises does not change the primary purpose of the store as a retail establishment to that of an industrial plant. The manufacturing aspect of the baking is incidental to the retail characteristics and, as a consequence, such establishment is not eligible for exemption."
The Superior Court, in dismissing the taxpayers' appeal, agreed with the department and concluded that "the baking of the products on the premises does not change the primary purpose of the store as a retail establishment to that of an industrial plant." We find no error.
General Statutes § 12-412 (34) provides an exemption from sales and use taxes for the "[s]ales of and the storage, use or other consumption of machinery used directly in a manufacturing or agricultural production process." (Emphasis added.) Further, § 12-426-11b (b) (3)
Section 12-426-11b (a) (11)
The taxpayers first argue that the department and the trial court applied a regulation repealed in 1980 in order to determine that their supermarkets were not "industrial plants" and therefore did not qualify for an exemption under § 12-412 (34). The taxpayers claim that because the repealed regulation, the former § 12-426-11 (g),
We see no reason why, in interpreting the present regulation, the trial court could not have ascribed to the term "manufacturing facility" its ordinary meaning and commonly approved usage. Connecticut Water Co. v. Barbato, 206 Conn. 337, 345, 537 A.2d 490 (1988); Kilpatrick v. Board of Education, 206 Conn. 25, 28, 535 A.2d 1311 (1988); Federal Aviation Administration v. Administrator, 196 Conn. 546, 550, 494 A.2d 564 (1985). The application of that meaning, we conclude, would have required the trial court, as it does this court, to arrive at a result contrary to that espoused by the taxpayers. Indisputably, the ordinary meaning of the term "manufacturing facility" connotes a place where manufacturing is carried on either primarily or exclusively. No disinterested observer would think of a supermarket, containing a bakery section occupying a minute portion of its premises, as a "manufacturing facility" or an "industrial plant." Further, if the taxpayers were to prevail in their contention that a "manufacturing facility" is any place where a manufacturing production process is carried on, it would render superfluous and meaningless the sentence in § 12-426-11b (a) (11), which states that a "`[manufacturing production process' shall occur solely at an industrial plant."
The taxpayers next maintain that the interpretation of the term "manufacturing facility" by the department and the trial court to exclude the taxpayers' supermarkets from an exemption constituted a "regulation" promulgated in violation of the Uniform Administrative Procedure Act and was therefore invalid. We disagree.
The ordinary meaning of the terms "manufacturing facility" and "industrial plant" as stated in the regulations renders it at least implicit, if not explicit, that those terms did not apply to supermarkets. Walker v. Commissioner, 187 Conn. 458, 460-61, 446 A.2d 822 (1982). Further, in defining those terms the department and the trial court, rather than promulgating a "regulation," reasonably interpreted the existing regulations. It is clear that they have the authority to do so. Quinnipiac Counsel, Boy Scouts of America, Inc. v. Commission on Human Rights & Opportunities, 204 Conn. 287, 293 n.5, 528 A.2d 352 (1987); Griffin Hospital v. Commission on Hospitals & Health Care, 200 Conn. 489, 497, 512 A.2d 199 (1986); Connecticut Mobile Home Assn., Inc. v. Jensen's, Inc., 178 Conn. 586, 589, 424 A.2d 285
Finally, the taxpayers contend that at trial they clearly demonstrated that the department's interpretation of the terms "industrial plant and manufacturing facility was unreasonable." This claim requires no further discussion other than to note that any statute creating a tax exemption must "be strictly construed against the party claiming an exemption"; Caldor, Inc. v. Heffernan, 183 Conn. 566, 571, 440 A.2d 767 (1981); and that the taxpayers bore the burden of proving the assessment was in error. H. B. Sanson, Inc. v. Tax Commission, 187 Conn. 581, 586, 447 A.2d 12 (1982). They failed to sustain that burden.
There is no error.
In this opinion the other justices concurred.