Ruling 93-4, Sales and Use Taxes / Precedential Value of Ruling After Change in Law or Regulation

This Ruling has been cited by Ruling 93-13 

FACTS:

The Company tests and balances air and water quantities and flow in heating and air conditioning systems, mostly in commercial and industrial buildings, and sets the systems to design criteria by adjusting fan speeds, dampers and circuit setters. The Company had previously requested the issuance of a Ruling concerning the taxability of these services. On October 10, 1989, Ruling No. 89-137 was issued to the Company. The Ruling concluded that charges for these services were not subject to sales and use taxes if rendered in the course of "new construction or [to] existing one, two or three family exclusively residential, owner-occupied real property" and were subject to sales and use taxes if rendered to "existing commercial, industrial, or income-producing real property."

On April 16, 1991, the Regulation Review Committee approved Conn. Agencies Regs. § 12-407(2)(i)(I)-1, which was effective for sales occurring on and after July 1, 1991. Conn. Agencies Regs. § 12-407(2)(i)(I)-1(b)(2) provides in pertinent part that

the repair and maintenance of such property as furnaces (boilers or burners) [or] central air conditioning units ... will be considered to be services defined as a 'sale' or 'selling' under subparagraph (Q) (repair services to any electrical or electronic device) or (DD) (repair or maintenance services to any item of tangible personal property) of section 12-407(2)(i) of the general statutes, and will not be considered to be services rendered to 'real property', as used in said section 12-407(2)(i)(I) and in this regulation.

ISSUE:

Whether a Ruling ceases to have any precedential value after there is a change in a law or regulation (1) as of the effective date of the change and (2) without further notice by the Department.

DISCUSSION:

"[A] Ruling represents the position of, and is binding on, the Department with respect to (1) a particular transaction (and subsequent like transactions) involving the persons identified as interested parties in the request for issuance of the Ruling ...." PS 91(6.1), at 3. "With respect to the taxpayer to which a Ruling was originally issued or a person identified as an interested party in the request therefore, a Ruling is not binding on the Department if ... there has been a change in the applicable law or regulations ...." b

That adjusting and testing heating and air conditioning systems was a service to real property, the charge for which was subject to sales and use taxes only if industrial, commercial or income-producing real property was involved, was the premise underlying Ruling No. 89-137. That premise was vitiated by Conn. Agencies Regs. § 12-407(2)(i)(I)-1(b)(2).

Because "a Ruling interprets Connecticut tax laws and regulations and applies them to a specific set of facts," a Ruling "has precedential value and may be generally relied on" only as long as the underlying laws and regulations remain the same. PS 91(6.1), at 1. The adoption of Conn. Agencies Regs. § 12-407(2)(i)(I)-1(b)(2) was a change in the underlying regulation; from the time of its adoption, the regulation eliminated the precedential value of Ruling No. 89-137. The Department is not obliged, nor has it obligated itself, to announce whether and to what extent a previously issued Ruling has been affected by a change in the law or regulations. This policy is in accord with the principle that ignorantia juris quod quisque tenetur scire, neminem excusat (ignorance of the law, which every one is bound to know, excuses no one).

On the other hand, no one is bound to know or generally will know that the Department may issue a Ruling that will expressly affect a previously issued Ruling. Thus, the Department has obligated itself only to announce whether and to what extent a previously issued Ruling has been affected by a newly issued Ruling. PS 91(6.1) provides that it is the policy of the Department to give effect to a previously issued Ruling until "a ... Ruling is issued that expressly [amplifies, clarifies, distinguishes, modifies, obsoletes, revokes, supersedes, supplements or suspends] a previously issued ... Ruling" and "to give effect prospectively only to the newly issued ... Ruling." Id., at 4.

RULING:

A Ruling ceases to have any force and effect after there is a change in a law or regulation (1) as of the effective date of the change and (2) without further notice by the Department.

LEGAL DIVISION

May 13, 1993