Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.
A Lemon of a Law: Connecticut Denies Reimbursement of Sales Tax Refunded to Customers Under the State’s Lemon Law
Megan V. Morley
In DaimlerChrysler Corp. v. Law, the Supreme Court of Connecticut addressed the issue of whether an automobile manufacturer could appeal a denial of reimbursement for sales tax refunded to consumers pursuant to the state’s lemon law. The court, by strictly construing two tax statutes and the lemon law, held that sovereign immunity barred DaimlerChrysler from the right to appeal the denial of a sales tax reimbursement by Pamela Law, the Connecticut Commissioner of Revenue Services (the “Commissioner”). The court reasoned that, because DaimlerChrysler was not a taxpayer entitled to seek a refund under section 12-425 (the “Overpayments and Refunds Provision”), the corporation was not an aggrieved taxpayer pursuant to the appeal statute, section 12-422 (the “Appeal Provision”). The court thus lacked subject matter jurisdiction over the appeal. Moreover, the court ruled that the state legislature did not intend for the lemon law to waive sovereign immunity and require the state to reimburse the sales tax to manufacturers.
This decision demonstrates that courts do not have an obligation to consider the policy implications of their decisions interpreting tax statutes. Certainly, the policy goals of legislation are taken into account under the rules of statutory construction, but the legislature, not the courts, is charged with making policy decisions. Part I of this Note explains the decisions of the Commissioner, the trial court, and the Supreme Court of Connecticut. Part II examines Connecticut’s Lemon Law, General Statute section 42-179(d) (“Connecticut Lemon Law”), which fails to provide the necessary waiver of sovereign immunity that would have authorized DaimlerChrysler’s sales tax reimbursement claim. Part II also compares and contrasts this provision with other state statutes that provide for reimbursement of the sales tax refunded to the consumer. Part III discusses cases from other jurisdictions where the courts similarly refused to find in favor of DaimlerChrysler, notwithstanding the windfall states received as a result of the transaction. As this Note demonstrates, the concepts of unjust enrichment and windfall do not play a significant role in resolving tax disputes. Part IV advances arguments that car manufacturers, like DaimlerChrysler, should make to state legislatures to eliminate the punitive effect of statutes that do not provide reimbursement for car manufacturers that comply with their lemon law obligations. Part IV also advises legislatures as to the type of statute that should be enacted to best address this issue as well as the issue of the state’s receipt of a windfall. Overall, although the court correctly interpreted Connecticut’s Lemon Law, the statute should be amended by the state legislature because it imposes punitive damages upon car manufacturers while unjustly enriching the state.