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decided: November 27, 1968.


Appeal from order of Court of Common Pleas of Dauphin County, No. 145 Commonwealth Docket, 1965, in case of Commonwealth v. Merritt-Chapman & Scott Corporation.


Richard C. Fox, with him McNees, Wallace & Nurick, for appellant.

Vincent X. Yakowicz, Deputy Attorney General, with him William C. Sennett, Attorney General, for Commonwealth, appellee.

Bell, C. J., Musmanno, Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Roberts. Mr. Justice Musmanno did not participate in the decision of this case.

Author: Roberts

[ 432 Pa. Page 585]

Appellant taxpayer maintains that it is not liable for Sales or Use Tax applied to materials bought for use in constructing the Allegheny Tunnel of the Pennsylvania Turnpike. Taxpayer has appealed from an order of the Board of Finance and Revenue denying taxpayer's claim for a refund. The court below, on stipulated facts, upheld the determination of the board.

As part of the stipulation, the parties agreed that the materials in question were used by taxpayer in constructing the tunnel, pursuant to a contract with the Pennsylvania Turnpike Commission which is charged with operating the Pennsylvania Turnpike. Taxpayer claims that this entitles it to the tax exclusion of Act of March 6, 1956, P. L. (1955) 1228, § 2, as amended, 72 P.S. § 3403-2(j)(7), which provides that: "(7) . . . The term 'sale at retail' shall not include . . . the transfer of tangible personal property . . . to be used or consumed directly in any of the operations of -- (c) The producing, delivering or rendering of a public utility service, or in constructing, reconstructing, remodeling, repairing or maintaining the facilities used in such service . . . ."*fn1 Taxpayer's argument thus hinges on the contention that the Pennsylvania Turnpike Commission is "rendering a public utility

[ 432 Pa. Page 586]

    service" within the meaning of the exemptive provision.*fn2

With a possible exception to be discussed later, we held in Commonwealth v. Lafferty, 426 Pa. 541, 547, 233 A.2d 256, 259 (1967), "that the statutory exclusion in question was meant by the Legislature to apply only to Public Utility Code 'public utilities' when they render Public Utility Code 'services.'" Public Utility Code, Act of May 28, 1937, P. L. 1053, § 1, as amended, 66 P.S. § 1102(17) provides that: "'Public Utility' means persons or corporations now or hereafter owning or operating in this Commonwealth equipment, or facilities for: . . . (d) Use as a canal, turnpike, tunnel, bridge, wharf, and the like for the public for compensation . . . ." Thus, although it would appear that the operation of a turnpike qualifies as a public utility service, the Turnpike Commission can only be classified as a public utility if it is a "person or corporation." The Commonwealth, however, correctly maintains that if the Turnpike Commission is an agency of the state, it is not a "person or corporation" within the Public Utility Code. It is clearly not a corporation,*fn3 and Public Utility Code § 1102(16) defines "person" as "individuals, partnerships, or associations other than corporations. . . . " This definition does not include an instrumentality of the state.*fn4

[ 432 Pa. Page 587]

The Turnpike Commission was expressly created as "an instrumentality of the Commonwealth," the exercise of whose powers "shall be deemed and held to be an essential governmental function of the Commonwealth." Act of May 21, 1937, P. L. 774, § 4, 36 P.S. § 652d. We applied this characterization in Rader v. Pennsylvania Turnpike Commission, 407 Pa. 609, 617-18, 620, 182 A.2d 199, 204-05 (1962), to give the Turnpike Commission the same basic sovereign immunity protection as that enjoyed by the Commonwealth itself. Thus it has been the position of the Legislature and the view of this Court that the Turnpike Commission is to be regarded essentially as an agency of the Commonwealth. As such, it cannot be a public utility within the Public Utility Code.

Under the basic holding in Lafferty, supra, taxpayer is thus barred from claiming the public utility tax exclusion. Lafferty suggests a possible exception to this rule, however, "in the case of an entity long considered by the courts to be a public utility rendering what have been judicially declared to be public utility services though such entity does not come within the Public Utility Code." 426 Pa. at 548 n.9, 233 A.2d at 259 n.9 (Emphasis in original.); cf. Commonwealth v. Equitable Gas Company, 415 Pa. 113, 116-17, 202 A.2d 11, 14 (1964). Taxpayer seizes upon this language to argue that (1) The Turnpike Commission is within the definition of a Municipal Corporation; (2) Municipal Corporations have been ...

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