Ruling 94-5
Sales and Use Taxes
Environmental Assessment Services
Services to Commercial, Industrial or Income-Producing Real Property Contractors
This Ruling is superseded in part by SN 95-17
FACTS:
An environmental services company ("the Company") renders what it calls "environmental assessment and remediation services." These services include testing for the existence and degree of soil, air, surface water and ground water pollution, providing for the abatement of such pollution, and evaluating the effectiveness of such pollution abatement measures. Among the services the Company provides is the testing of underground storage tanks at motor fuel service stations, in which materials such as gasoline, diesel fuel, waste oil, and on-site heating oil are generally stored. Because state and federal law require that such underground storage tanks be tested for leaks, service station owners and operators routinely contract with environmental services companies to ensure that the service stations comply with these and other environmental laws.
The Company tests an underground tank either by installing a monitoring well next to the tank and testing the well's contents for contaminants, or by filling the tank and inspecting it for volume reductions. The Company also excavates "test pits" as part of its environmental assessment services. In some cases the Company subcontracts with other firms to install the test pits and monitoring wells.
ISSUES:
Whether testing underground storage tanks to ensure compliance with state and federal environmental laws is a service rendered for the voluntary containing or removing of hazardous waste and therefore not a taxable service to industrial, commercial or income-producing real property, as defined in Conn. Gen. Stat. §12-407(2)(i)(I) and Conn. Agencies Regs. §12-407(2)(i)(I)-1.
Whether testing underground storage tanks is a taxable repair or maintenance service to tangible personal property under Conn. Gen. Stat. §12-407(2)(i)(GG).
DISCUSSION:
Conn. Gen. Stat. §12-407(2)(i)(I) imposes sales and use taxes on "services to industrial, commercial or income-producing real property, including but not limited to, such services as management, electrical, plumbing, painting and carpentry and excluding any such services rendered for the voluntary containing or removing of hazardous waste ... " (Emphasis added.) The first issue presented turns on the interpretation of this exclusion.
The Connecticut Supreme Court has noted that
a cardinal rule of statutory construction is that statutes are to be construed to give effect to the apparent intention of the lawmaking body ... If the language of the statute is clear, it is assumed that the intention is expressed by the words themselves and therefore there is no need to construe the statute ... for where the wording is plain, courts will not speculate as to any supposed intention because the question before a court then is not what the legislature actually intended but what intention it expressed by the words that it used ...
Robinson v. Unemployment Security Board of Review, 181 Conn. 1, 6, 434 A.2d 293 (1980) (citations omitted).
The Department consistently has construed "voluntary" according to its commonly approved usage and concluded that "[t]he removal or containment of hazardous waste is not 'voluntary' when performed following an order or mandate issued by a federal or state agency or ... court order." Ruling No. 92-15 at 3 (citing Ruling No. 91-5). Agency orders and mandates, along with court orders, are distinguishable from statutes and regulations. Whereas agency orders and mandates and court orders apply to a specific party, statutes and regulations are generally applicable. And whereas containing or removing hazardous waste to comply with an agency mandate or court order is involuntary, containing or removing hazardous waste to comply with a statute or regulation is voluntary.
Testing the integrity of an underground storage tank to determine whether it is the origin of hazardous waste is a means of assessing a site for hazardous wastes. The Department has concluded that services rendered to assess a site for the presence of hazardous waste and in connection with removing and monitoring such waste are services rendered for the "voluntary containing or removing of hazardous waste." See Ruling Nos. 89-240, 90-33, and 90-47. As such, they are excluded from the sales and use tax on services to existing industrial, commercial and income-producing property under Conn. Gen. Stat. §12-407(2)(i)(I).
Moreover, the testing of underground storage tanks is not a taxable repair or maintenance service to tangible personal property. The true object of testing underground storage tanks is not merely to inspect the tanks, but to ascertain the presence or absence of hazardous wastes in real property and to ensure compliance with state and federal environmental laws and regulations. Inspecting the integrity of the tank is merely a means to these ends and is not a taxable service to tangible personal property.
RULING:
Whether performed by the Company or by the Company's subcontractor, the testing of underground storage tanks to comply with state and federal environmental laws is a service rendered for the voluntary containing or removing of hazardous waste and therefore not a taxable service to industrial, commercial or income-producing real property, as defined in Conn. Gen. Stat. §12-407(2)(i)(I) and Conn. Agencies Regs. §12-407(2)(i)(I)-1.
The testing of underground storage tanks is not a taxable repair or maintenance service to tangible personal property under Conn. Gen. Stat. §12-407(2)(i)(I). The true object of the transaction is more than merely inspecting the tank's integrity; it is to ensure that the real property is free from hazardous waste.
This Ruling supersedes Ruling No. 90-33.
LEGAL DIVISION
February 17, 1994