Appeal from judgment of Court of Common Pleas of Dauphin County, No. 244, Commonwealth Docket, 1969, in case of Commonwealth of Pennsylvania v. John W. Thompson Company.
Edward T. Baker, Deputy Attorney General, for Commonwealth, appellant.
No oral argument was made nor brief submitted for appellee.
Jones, C. J., Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Opinion by Mr. Justice Pomeroy. Mr. Justice Roberts concurs in the result.
Presented for decision by this appeal is the question whether possession of tangible personal property purchased in Pennsylvania may be taxed as a "use" when the owner has the sole purpose of transporting the property outside the Commonwealth for use elsewhere. We answer the question in the negative, finding that such possession is protected by the "interim storage" exemption of the taxing statute.
During the period 1964 through 1967, the appellee, John W. Thompson Company, a New Jersey corporation authorized to do business in Pennsylvania, purchased certain creosoted lumber and railroad ties from a supplier in Bucks County, Pennsylvania. After taking delivery of the material at the supplier's place of business, the appellee transported the lumber to job sites in New Jersey for use in its business. The tax authorities in Pennsylvania, as a result of an audit of appellee's purchase orders, assessed a use tax on the above goods, and the Board of Finance and Revenue refused to reassess. The Thompson Company then appealed to the Court of Common Pleas of Dauphin County, Commonwealth Docket, which, on the basis of a stipulation of all the facts, sustained the contentions
of the Company. Commonwealth v. John W. Thompson Company, 94 Dauph. 39 (1971). The Commonwealth has appealed.*fn1
It will be helpful to begin with a brief outline of the general operation of the sales and use tax provisions. The Tax Act of 1963 for Education, Act of May 29, 1963, P. L. 49, 72 P.S. § 3403-1 et seq.,*fn2 imposes a sales tax of 5% on "each separate sale at retail . . . within this Commonwealth . . ." 72 P.S. § 3403-201(a).*fn3 The concept of a "purchase at retail" is defined at length at 72 P.S. § 3403-2(e). At the same time, the Act imposes a tax of 5% upon "the use . . . of tangible personal property purchased at retail . . . and on those services described herein purchased at retail . . . ." 72 P.S. § 3403-201(b). Because the phrase "purchased at retail" is defined without geographical limitation, the taxation of the use of such goods would duplicate the taxation of "each . . . sale at retail . . . within this Commonwealth" were it not for the fact that 72 P.S. § 3403-201(b) also acts to exempt from the levy of that subsection the use of goods as to which the sales tax imposed by subsection (a) has already been paid.*fn4 The
term "use" is defined as "the exercise of any right or power incidental to the ownership, custody or possession of tangible personal property and shall include, but not be limited to transportation, storage or consumption." 72 P.S. § 3403-2(n). The possession and transportation in Pennsylvania of creosoted lumber and ties by the appellee Thompson Company would appear, absent more, to be a "use" taxable under the Act. The legislature, however, has carved from the broad definition of "use" an exemption, known as the "interim storage" exemption, as follows: "[T]he term 'use' shall not include -- . . . (b) The interim keeping, retaining or exercising any right or power over tangible personal property for the sole purpose of subsequently transporting it outside this Commonwealth for use outside this Commonwealth, or for the purpose of being processed, fabricated or manufactured into, attached to or incorporated into other personal property to be transported outside the Commonwealth for use solely outside this Commonwealth." 72 P.S. § 3403-2(n)(4)(b).
It is stipulated that the Thompson Company's interim keeping of the lumber and ties was the act of transporting them to New Jersey job sites; no work of any kind was done upon the material from the time of delivery by the seller until placed at the job sites. As stated at the outset, we are of the opinion that in these circumstances the possession and ...