The principal issue in this tax appeal is whether the trial court correctly interpreted the term "management services" in General Statutes (Rev. to 1985) § 12-407 (2) (i) (K), subsequently redesignated and referred to herein as § 12-407 (2) (i) (J), to include only management consulting services and not day-today operational management services.
The parties stipulated to the following facts. In September, 1969, 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, 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. In December, 1984, Uniroyal entered into a similar sublease with Combs Gates in which Combs Gates agreed to be the fixed base operator from January 1, 1985, through October 31, 1989, in exchange for $710 per
In this appeal, the commissioner claims that: (1) the term "management services" in § 12-407 (2) (i) (J) includes day-to-day operational management and, therefore, the trial court incorrectly sustained the plaintiffs' appeal on the ground that the term was limited to services of a consultative nature; and (2) both the management fee and the payroll reimbursement received by the plaintiffs were taxable as consideration for the rendering of management services. Although we agree with the commissioner that "management services" includes hands-on management as well as consulting, we conclude that only the management fee, and not the amount received as payroll reimbursement, was taxable under §§ 12-408 (1) and 12-407 (2) (i) (J) as consideration for the rendering of management services.
In their cross appeal,
During the tax years in question, § 12-408 (1) imposed a tax on "gross receipts ... from the rendering of any services constituting a sale in accordance with subdivision (i) of subsection (2) of section 12-407...." Among those services constituting a sale were "business analysis and management services." General Statutes § 12-407 (2) (i) (J). The commissioner maintains that the term "management services" includes operational management as well as management consulting,
"In construing any statute, we seek to ascertain and give effect to the apparent intent of the legislature." United Illuminating Co. v. Groppo, 220 Conn. 749, 755, 601 A.2d 1005 (1992). "[T]o discern that intent, we look to the words of the statute itself, 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." Texaco Refining & Marketing Co. v. Commissioner, 202 Conn. 583, 589, 522 A.2d 771 (1987). Because the statute to be interpreted concerns the imposition of a tax, and not a taxpayer's claimed right to an exemption or deduction, we must strictly construe any ambiguity in the statute against the taxing authority and in favor of the taxpayer. Schlumberger Technology Corporation v. Dubno, 202 Conn. 412, 420-23, 521 A.2d 569 (1987).
"Where a statute ... does not define a term, it is appropriate to focus upon its common understanding as expressed in the law and upon its dictionary
In construing "management services" in § 12-407 (2) (i) (J) to mean management consulting services, the trial court referred to the preceding subdivision of the same statute, which referred to "services to industrial, commercial or income-producing real property, including but not limited to, such services as management, maintenance, janitorial, electrical...." (Emphasis added.) The court determined that interpreting "management services" in subdivision (J) to include actual operation of a business would be redundant because such services had already been covered by the
The trial court's approach ignored the "familiar principle of statutory construction that where the same words are used in a statute two or more times they will ordinarily be given the same meaning in each instance." State ex rel. Hyde v. Dowe, 129 Conn. 266, 271, 28 A.2d 12 (1942). We see no redundancy in construing "management" to include day-to-day operation in both subdivisions of the statute because the preceding subdivision addresses itself to management in the real estate context, while subdivision (J) is concerned with management in the business context. In using the word management in both subdivisions, the legislature clearly intended to make the rendering of managerial services taxable in both settings. Because it decided to place two broad, service-related fields, such as real estate and business, in separate subdivisions, it logically included the word "management" within each to describe a taxable kind of service within that field. This interpretation heeds another maxim of statutory construction, that every part of a statute "`should, so far as possible, be made operative and harmonious with every other part.'" State v. Dorau, 124 Conn. 160, 168, 198 A. 573 (1938).
Our conclusion finds further support in a regulation promulgated by the commissioner, which was in effect during the tax years in question.
While the regulation obviously seeks to point out that services of a consultative nature fall within the definition of "business analysis and management services" and are thus taxable, the commissioner's use of the word "include" indicates that this definition of the statutory term is not exclusive, but that "other things otherwise within the meaning of the term defined" remain within the definition. Id. Operational management, as the commonly understood meaning of "management services," would not, therefore, be excluded from the definition. The trial court's conclusion, that only management consulting services were within the definition, was predicated on the mistaken belief that the "term defined" was management consulting services and that the regulation, therefore, did not exclude other types of management consulting services, but excluded anything other than consulting services. In fact, the "term defined" by the regulation was the statutory term, "management services," whose definition was not limited solely to consulting services.
The legislative history of § 12-407 (2) (i) (J) also indicates a definition of "management services" that is broader than management consulting services. Asked to define "management services" during the House debate on the bill, Representative James J. Clynes, then chairman of the finance committee stated, "I would say that that's an establishment primarily engaged in furnishing a wide variety of general or specialized management consulting services such as, business analysts [sic], business research, efficiency, industrial management, marketing research, personal [sic] management." 18 H.R. Proc., Pt. 7, 1975 Sess., p. 3097. When asked if his definition included the management of real estate properties, Clynes replied affirmatively. Id., pp. 3097-98. Like the regulation promulgated years later, Clynes' remarks surely include consulting services within the category of "management services." In light of Clynes' subsequent inclusion of realty management within the definition, however, it is plain that actual operation, along with consulting, was meant to be encompassed by the statutory term. In concluding that only consulting services were "management services," the trial court disregarded Clynes' remarks about realty
We note finally that subsequent amendments to § 12-407 (2) (i) (J) in 1989 and 1990, which we may consider in order to illuminate the legislature's intent with respect to its prior legislative action; Baker v. Norwalk, 152 Conn. 312, 317, 206 A.2d 428 (1965); lend further support to the commissioner's argument. In 1989, subdivision (J) was amended to add references to consulting and public relations services. Public Acts 1989, No. 89-251. The subdivision was amended again in 1990 to its current wording, "business analysis, management, management consulting and public relations services." Public Acts 1990, No. 90-148. The plaintiffs argue that these amendments reflect a change from the earlier version of the statute in that they made operational management services taxable when they had not been taxable previously. We disagree with this contention.
The amendments simply added "management consulting services and public relations services" to "business analysis and management services," as the subsection provided during the taxable period involved. Their apparent purpose was to resolve any question concerning management consulting services and public relations services in favor of taxability. No change was made in the scope of the term "management services." If operational management services are now taxable, as the plaintiffs implicitly concede for the purpose of this argument, it is because they were "management services" before the amendment as well as afterwards. If the members of the General Assembly
Having determined that the actual operation of a business is included within the term "management services," we must now consider whether both the management fee and the reimbursement for payroll and payroll expenses were taxable as a consideration for the rendering of management services under § 12-407 (2) (i) (J). The plaintiffs concede that, if the term "management services" includes the day-to-day operation of a business, the management fee would be taxable under the statute, but they argue that the reimbursement was not taxable because it was merely the return of out-of-pocket expenses incident to the operation of the airport and not a consideration paid to the plaintiffs for operating the airport. The commissioner maintains that the reimbursement also constituted consideration for the management services performed by the plaintiffs because, in each lease agreement, reimbursement is mentioned in the paragraph entitled "Compensation." We agree with the plaintiffs that only the management fee constituted a consideration for the
To decide whether and to what extent a sales tax is applicable, we must determine the true object of the transaction between the plaintiffs and Uniroyal. Dine Out Tonight Club, Inc. v. Department of Revenue Services, 210 Conn. 567, 571, 556 A.2d 580 (1989); American Totalisator Co. v. Dubno, 210 Conn. 401, 406, 555 A.2d 414 (1989). The lease agreements between Uniroyal and the plaintiffs disclose arrangements whereby each plaintiff 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. The agreements provide: "It is expressly understood and agreed that all revenue derived and costs and expenses incurred by AirKaman [Combs Gates] in connection with the management and operation of the fixed-base operation at the Airport shall be incurred on behalf of and solely for the benefit of Uniroyal...." Regarding expenditures, "[i]t is understood [that] AirKaman [Combs Gates] will pay directly certain costs of the fixed-base operation at the Airport such as payrolls, equipment usage fees, insurance, allocated overhead charges, etc...." In the paragraph entitled "Compensation," the agreements state: "In consideration of the performance of the management and operations functions as set forth in paragraph 1 above, Uniroyal shall pay AirKaman [Combs Gates] an operating fee of Six Hundred Fifty Dollars ($650) [Seven Hundred ten dollars ($710)] per week during the term hereof ... in addition to reimbursement for all costs incurred in connection with the fixed-base operation." (Emphasis added.)
General Statutes § 12-408 (1) levies a tax on "any sales as defined in subsection (2) of section 12-407, at
We note also that the commissioner has conceded that the reimbursement received for expenses other
We now consider the plaintiffs' argument that a new trial should be ordered because the trial court improperly denied their request to amend their complaint.
"While our courts have been liberal in permitting amendments; Johnson v. Toscano, 144 Conn. 582, 587, 136 A.2d 341 (1987); this liberality has limitations. Amendments should be made seasonably. Factors to be considered in passing on a motion to amend are the length of the delay, fairness to the opposing parties and the negligence, if any, of the party offering the amendment. Cummings v. General Motors Corporation, 146 Conn. 443, 449-50, 151 A.2d 884 (1959). The motion to amend is addressed to the trial court's discretion which may be exercised to restrain the amendment of pleadings so far as necessary to prevent unreasonable delay of the trial. Freccia v. Martin, 163 Conn. 160, 164, 302 A.2d 280 (1972)." Beckman v. Jalich Homes, Inc., 190 Conn. 299, 302-303, 460 A.2d 488 (1983). "Whether to allow an amendment is a matter left to the sound discretion of the trial court. This court will not disturb a trial court's ruling on a proposed amendment unless there has been a clear abuse of that discretion." Falby v. Zarembski, 221 Conn. 14, 24, 602 A.2d 1 (1992). "It is the [plaintiffs'] burden in this
The plaintiffs claim that allowing the amendment would not have unfairly surprised the commissioner because the issues raised in the proposed amendment had previously been raised in the plaintiffs' administrative protest of the assessments. The plaintiffs maintain, moreover, that the amendment would not have occasioned any delay in the trial because all the facts necessary for analyzing the new issues were contained within the stipulation of facts that had already been filed. The commissioner maintains that the request to amend was untimely since it was filed after the commissioner had submitted his trial brief and the proposed amendment would have injected an entirely new issue into the case, which would have necessitated further factual investigation, such as the deposing of Uniroyal personnel, in order for the court to decide the "sale for resale" issue. We conclude that the plaintiffs have not demonstrated that the trial court clearly abused its discretion by forbidding the amendment.
Although it appears that the plaintiffs did raise the "sale for resale" issue when they contested the assessments at the administrative level, their original complaint in the trial court contained no such allegations. The plaintiffs waited until after the pleadings had been closed and after the commissioner had submitted his trial brief to seek permission to amend their complaint. The trial court could reasonably have concluded that additional discovery would have been necessary to adjudicate the "sale for resale" claim raised in the proposed amendment and that undue delay would have been caused thereby. This is especially true in light of the fact that the proposed amendment alleged a statutory right of exemption, unlike the claims already pleaded, which involved the propriety of imposing a tax in the
The judgment is affirmed with respect to the tax assessment on the reimbursement of payroll expenses received by the plaintiffs and is reversed and remanded with direction to deny the plaintiffs' appeal with respect to the tax assessment on the management fee.
In this opinion the other justices concurred.
From 1981 to 1985, the tax years in question, the pertinent subdivision was lettered "(K)." It was, however, changed to "(J)" in 1986 by an amendment that deleted a previous subdivision, requiring the relettering of all subsequent paragraphs. See Public Acts 1986, No. 86-397, § 7.