Does a Connecticut DRS Ruling stop being reliable when the underlying law or regulation changes, even without notice from the Department?

Plain-English summary

This Ruling is unusual: it's about how much you can rely on a DRS Ruling after the law behind it changes.

A company that tests and balances the air and water flow in heating and air conditioning systems (mostly in commercial and industrial buildings) had earlier obtained Ruling 89-137 (issued October 10, 1989). That ruling said its charges were not taxable when the work was part of new construction or done to owner-occupied one-, two-, or three-family residential property, but were taxable when done to existing commercial, industrial, or income-producing real property — i.e., it treated the work as a service to real property under Conn. Gen. Stat. § 12-407(2)(i)(I).

Then the law changed. Effective July 1, 1991, a new regulation, Conn. Agencies Regs. § 12-407(2)(i)(I)-1(b)(2), provided that repair and maintenance of things like furnaces, boilers, burners, and central air conditioning units would be treated as taxable services to tangible personal property — under subparagraph (Q) (repair of an electrical or electronic device) or (DD) (repair or maintenance of tangible personal property) — and not as services to real property. That new regulation knocked out the very premise on which Ruling 89-137 rested.

The holding. DRS ruled that a Ruling ceases to have any force and effect after a change in a law or regulation (1) as of the effective date of the change, and (2) without further notice from the Department. DRS relied on its policy statement PS 91(6.1): a Ruling "has precedential value and may be generally relied on" only so long as the underlying laws and regulations stay the same, and a Ruling is not binding on the Department, even as to the original taxpayer, once there has been a change in the applicable law or regulations.

Two different notice rules. DRS drew a sharp line:

• When a change in the law or regulation undercuts an old Ruling, the Department is not obligated to announce it. The old Latin maxim it quoted — ignorantia juris … neminem excusat ("ignorance of the law, which every one is bound to know, excuses no one") — puts the burden on the taxpayer to track legal changes.
• But when a newly issued Ruling expressly amplifies, clarifies, distinguishes, modifies, obsoletes, revokes, supersedes, supplements, or suspends an earlier Ruling, the Department has committed itself to announce that, and to give the new Ruling prospective effect only — because no one is bound to anticipate that DRS will issue a future Ruling affecting an old one.

This Ruling is cited by Ruling 93-13.

What this means for you

A favorable old ruling can quietly expire

If you're relying on a DRS Ruling — even one issued to you — check whether the statute or regulation it was based on has since changed. Under this ruling, a change in the underlying law automatically strips the Ruling of its force on the change's effective date, and DRS does not have to send you a notice. This is exactly why this free library flags, on every page, that a ruling reflects the law in effect when it was written.

Track legal changes, not just new rulings

DRS distinguishes between the two ways a Ruling can be overtaken. A new Ruling that changes an old one is announced and applies only going forward. A change in the statute or regulation is on you to discover. Watch the law, not only the Department's ruling releases.

The HVAC example: "service to real property" vs. "service to tangible personal property"

The reclassification here mattered because Connecticut taxes some real-property services only when the property is commercial or income-producing, while it taxes repair/maintenance of tangible personal property more broadly. When the 1991 regulation moved furnace and central-AC work into the tangible-personal-property bucket, the earlier residential/commercial distinction no longer controlled.

Common questions

Q: If DRS issued me a favorable ruling, can I rely on it forever?
A: No. Under this ruling and PS 91(6.1), a Ruling stops being binding on the Department once the underlying law or regulation changes — as of the change's effective date, and even without any notice to you.

Q: Will DRS tell me when a law change wipes out my ruling?
A: Not necessarily. The Department said it is not obligated to announce that a change in the law or regulations has affected a previously issued Ruling. You are expected to know the law.

Q: What about when a new ruling changes an old one?
A: That's different. DRS has committed to announce when a newly issued Ruling expressly affects an earlier Ruling, and to apply the new Ruling prospectively only.

Q: Does this ruling itself still reflect current law?
A: It states a durable DRS policy about reliance, but the specific tax treatment it describes (and Ruling 89-137) reflects the law of the early 1990s. Always confirm the current statutes and regulations for your situation.

Citations and references

Statutes, regulations, and policy statements:

• Conn. Gen. Stat. § 12-407(2)(i)(I) (services to real property); § 12-407(2)(i)(Q) (repair of an electrical or electronic device); § 12-407(2)(i)(DD) (repair or maintenance of tangible personal property)
• Conn. Agencies Regs. § 12-407(2)(i)(I)-1(b)(2) (furnace/central-AC repair and maintenance treated as taxable services to tangible personal property, not real property; effective July 1, 1991)
• Policy Statement PS 91(6.1) (position, effect, and reliance value of DRS Rulings)

Related guidance (described in prose, not linked):

• Ruling 89-137 (the company's earlier ruling, superseded by the 1991 regulation)
• Ruling 93-13 (cites this Ruling)

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 93-4

Original ruling text

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