Appeal from the Order of the Board of Finance and Revenue in case of Commonwealth of Pennsylvania v. Equitable Gas Company, Docket R-21773. Transferred from the Court of Common Pleas of Dauphin County to the Commonwealth Court of Pennsylvania, September 1, 1970.
Ronald M. Katzman, with him James E. Reid, Jr., and Goldberg, Evans & Katzman, for appellant.
Paul S. Roeder, Assistant Attorney General, for appellee.
President Judge Bowman and Judges Crumlish, Jr., Kramer, Mencer, Rogers and Blatt. Judge Wilkinson, Jr. did not participate. Opinion by Judge Kramer.
[ 18 Pa. Commw. Page 419]
This is an appeal filed by Equitable Gas Company (Equitable) from an adjudication of the Board of Finance and Revenue (Board) dated May 12, 1966, refusing the prayer of Equitable's petition for a refund of use tax in the amount of $258.44 which had been assessed by the Department of Revenue upon paving materials, i.e., sand, gravel, cement, etc., used by Equitable in the construction, reconstruction and repairing of public road surfaces incident to work on gas lines and mains beneath the roads. This is an old case which has languished about on the dockets of the Court of Common Pleas of Dauphin County (Commonwealth Division) since June 27, 1966. It was transferred to this Court in 1970, and, after prodding of the parties by this Court, a stipulation of facts was filed with this Court on August 2, 1974, and
[ 18 Pa. Commw. Page 420]
the matter was finally set down for argument for final determination. For the purposes of this opinion we have accepted all of the stipulated facts.
Equitable is a Pennsylvania corporation and a public utility engaged in the business of providing natural gas service to the public in the Pittsburgh area. As a result of an audit of the books of a supplier of Equitable by the Pennsylvania Department of Revenue, an assessment was made against Equitable for sales or use tax under the provisions of the Tax Act of 1963 for Education (Act), Act of March 6, 1956, P.L. (1955) 1228, as amended.*fn1 The assessment was made upon Equitable's purchases and use of paving materials, all of which were used, consumed and required in the repairing, paving and repaving of public roads. The assessment was restricted to the period August 1, 1963 to November 30, 1964. All of the paving and repaving was performed directly by Equitable pursuant to its responsibilities under the Public Utility Law, Act of May 28, 1937, P.L. 1053, as amended, 66 P.S. § 1101 et seq. The public roads into which the subject paving materials were incorporated were under the ownership, maintenance and control of various governmental bodies of the Commonwealth. Although the amount of the tax assessment ($258.44) is insignificant when compared with the total cost of service of Equitable, the legal principles involved in this case have a far-reaching effect not only upon Equitable but upon all public utilities operating within the Commonwealth. Equitable paid the tax under protest and filed a petition for a refund claiming that all of the road resurfacing materials it purchased are directly used in rendering
[ 18 Pa. Commw. Page 421]
its public utility service and, therefore, excluded under section 2(n)(4)(c)(iii) of the Act, 72 P.S. § 3403-2(n)(4)(c)(iii).
In carrying out its public utility service, Equitable is required to construct and repair gas pipelines beneath public road surfaces. From time to time, this necessitates the excavation of public roads and, after the installation or repair of gas pipelines, Equitable purchases road resurfacing materials to pave or repave the roads. The issue presented to us is rather narrow. Equitable contends that such materials are directly used by it in furnishing its public utility service. The Commonwealth contends that such materials are not directly used by Equitable in rendering its public utility service. The case turns on our interpretation of the applicable statutory provisions excluding certain items from the tax imposed by the Act.
Among the "definitions" contained in section 2 of the Act, 72 P.S. § 3403-2, we find the pertinent exclusionary statutory language. The term "use" ...