Appeal from the Order of the Board of Finance and Revenue in case of Commonwealth of Pennsylvania v. Ragnar Benson, Inc., No. RST-302.
Albert J. Tomalis, Jr., with him Metzger, Hafer, Keefer, Thomas and Wood, for appellant.
Paul S. Roeder, Deputy Attorney General, with him Donald J. Murphy, Deputy Attorney General, for appellee.
President Judge Bowman and Judges Crumlish, Jr., Wilkinson, Jr., Mencer and Blatt. Judges Kramer and Rogers did not participate. Opinion by Judge Crumlish, Jr. Concurring and Dissenting Opinion by Judge Blatt. Judge Mencer joins in this concurring and dissenting opinion.
[ 27 Pa. Commw. Page 228]
Ragnar Benson, Inc. (Appellant) is an engineering and construction firm which was engaged as a subcontractor to design and construct two natural draft cooling towers for the Limerick, Pennsylvania, generating station of Philadelphia Electric Company (PECO). On September 27, 1972, the Bureau of Sales and Use Tax (Bureau) assessed use tax against Appellant on tools, equipment and supplies used in connection with the Limerick construction project. On June 26, 1974, the Board of Finance and Revenue (Board) sustained that portion of the contested assessment which applied to Appellant's use of materials and tools rented and purchased after March 4, 1971.*fn1 This appeal followed.
The contested use tax was assessed on items purchased or rented by Appellant after March 4, 1971. The items include: rock bolts for connecting the cooling towers' legs to the bedrock (assessed tax is $13.91); certain equipment rented by Appellant, such as a pump, test jack and torque wrench (assessed tax is $25.29); surveying material consumed at the job site (assessed tax is $.60); covering material used at the job site to protect lumber, etc., from the weather
[ 27 Pa. Commw. Page 229]
(assessed tax is $79.72); lumber and nails used to construct temporary weather protection sheds for tools, etc. (assessed tax is $11.80); and lumber and nails used to construct the form for the concrete forming the towers (assessed tax is $289.68).
The issue is whether all or some of these items are within the "public utility" exemption from the use tax.
Section 201(o)(4)(B) of the Tax Reform Code of 1971 (Code)*fn2 exempts from the definition of "use", the use or consumption of tangible personal property in any of the operations of:
(iii) The producing, delivering, or rendering of a public utility service, or in constructing, reconstructing, remodeling, repairing, or maintaining the facilities which are directly used in such service, whether or not such facilities constitute real estate: Provided, however, 'real estate' shall not include buildings, roads, foundations, or similar facilities. (Emphasis added.)
The section goes on to provide limitations upon this general exemption:
The exclusions provided in subparagraph[s] . . . (iii) . . . shall not apply to . . . materials or supplies to be used or consumed in any construction . . . of real estate other than machinery, equipment or parts therefor that may be affixed to such real estate. The exclusions provided in subparagraph[s] . . . (iii) . . . shall not apply to tangible personal property or services to be used or consumed in managerial sales or other nonoperational activities, nor to the purchase or ...