Appeal from judgment of Court of Common Pleas of Dauphin County, No. 506 Commonwealth Docket, 1964, in case of Commonwealth of Pennsylvania v. High Welding Company.
Edward T. Baker, Deputy Attorney General, with him William C. Sennett, Attorney General, for Commonwealth, appellant.
Richard C. Fox, with him T. Roberts Appel, II, and Appel, Ranck, Herr & Appel, and McNees, Wallace & Nurick, for appellee.
Bell, C. J., Musmanno, Jones, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Jones. Mr. Justice Cohen took no part in the consideration or decision of this case. Dissenting Opinion by Mr. Justice O'Brien.
The Commonwealth of Pennsylvania appeals from a judgment of the Court of Common Pleas of Dauphin County which, in its effect, directed the payment of a refund of a sales tax to High Welding Company (taxpayer).
The taxpayer, primarily engaged in the fabrication of steel products with its principal office located in Lancaster, during the period from March 1, 1961 through August 31, 1962, was a subcontractor of bridge construction work for a prime contractor who was under contract with the State of Maryland to construct certain highways in Maryland. It was the taxpayer's contractual obligation to fabricate steel bridge parts according to certain specifications, to cause such parts to be transported to Maryland and to incorporate such parts into new bridge structures in Maryland.
The taxpayer ordered the necessary steel from Bethlehem Steel Company in Pennsylvania. The Commonwealth concedes that this steel, when ordered, was specifically earmarked and segregated for the taxpayer's particular bridge construction jobs in Maryland. After the steel had been so segregated and set apart by Bethlehem, it was inspected at Bethlehem's plant by a representative of the concern which acted as the authorized inspector for the State Roads Commission of Maryland (Commission).*fn1 After such inspection and approval of the steel, this steel was then transported by the taxpayer from Bethlehem to its Lancaster plant. At that time -- the time of purchase -- the taxpayer paid a sales tax of $11,630.56 on such steel.*fn2
Some time thereafter, the taxpayer sought a refund of the tax paid on this steel. After having unsuccessfully followed the procedural steps necessary to secure such refund, the taxpayer appealed to the Court of Common Pleas of Dauphin County and, after the material facts had been stipulated by the parties, that court found that the taxpayer was entitled to a refund of the tax.
In the court below the taxpayer argued its non-liability for the tax on three grounds: (1) that the transaction was a nontaxable "resale" of the steel; (2) that the transaction was excluded by reason of the "manufacturing exemption"; (3) that the transaction was excluded because the steel was in the Commonwealth only on an "interim basis".*fn3 The court below held that the transaction constituted a nontaxable "resale" and, in view of that conclusion, it did not determine (2) and (3), supra.
When the steel arrived at the taxpayer's plant it was again inspected by the Commission's authorized inspector to determine whether the steel items were the same items which had been inspected at Bethlehem's plant. When this steel arrived at the taxpayer's plant it was in rough and unfinished form. The taxpayer then cut, shaped and welded these steel items so that they formed finished component parts of the ...