Stonington — The town has announced that it is receiving a $320,800 refund from the state Department of Revenue Services after the state Supreme Court found the department erred when it forced the town to collect sales tax on some types of trash collection.

In 2010, the state told the town it owed $272,500 in sales tax on the revenue it collected for trash collection from industrial, commercial or income producing properties. It also ordered the town to begin collecting sales tax, which it did. The town appealed the order.

When the town took over residential trash collection in 1993 and began charging property owners based on how much garbage they produced instead of through property taxes, the state told the town it did not have to charge residents sales tax when they purchased the yellow trash bags because it was a volume-based system.

So when the town began picking up commercial trash in 1997, it thought businesses, too, would be exempt from the sales tax because that system also is volume-based. The only difference is that businesses fill a Dumpster instead of a yellow bag. But 13 years later, the state told the town it must add 6 percent sales tax to the bills it sends to commercial entities.

Groton also had appealed a similar order and this past summer the Supreme Court decided in the Groton case that the town did not have to collect the tax. The state had agreed beforehand that the ruling in the Groton case would apply to Stonington as well.

The state will now return the $272,500 plus $48,300 for a total of $320,800.

In a press release, the town announced it is now seeking a refund of the tax for the past three years, which is the most allowed by state law. The town intends to reimburse the businesses from which it collected taxes.

j.wojtas@theday.com

@joewojtas