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decided: October 25, 1977.


Appeal from the Order of the Board of Finance and Revenue in case of In the Matter of: Beck Electric Construction, Inc., Docket No. 26353.


Albert J. Tomalis, Jr., with him Metzger, Hafer, Keefer, Thomas and Wood, for appellant.

Paul S. Roeder, Deputy Attorney General, for appellee.

Judges Crumlish, Jr., Kramer and Blatt, sitting as a panel of three. Judge Kramer did not participate in the decision. Opinion by Judge Crumlish. Judge Kramer did not participate in the decision in this case. See Pa. R.a.p. 3102(d).

Author: Crumlish

[ 32 Pa. Commw. Page 231]

The issue before us is whether the installation of certain electrical equipment as part of a building's electrical system, pursuant to an electrical construction contract, should be classed as "use" of that equipment by the contractor in the fulfillment of its contract, or considered a sale of that equipment for the purposes of The Tax Act of 1963 for Education, Act of March 6, 1956, P.L. (1955) 1228, as amended, 72 P.S. § 3403-1 et seq. (Act).*fn1

This issue is crucial because the subject items were installed in a building which was constructed for the General Services Administration of the Commonwealth of Pennsylvania (GSA) and hence would be

[ 32 Pa. Commw. Page 232]

    excluded from taxation under Section 203 of the Act, 72 P.S. § 3403-203(i) if classified as a "sale at retail."*fn2

The tax is imposed by Section 201 of the Act, 72 P.S. § 3403-201, which taxes both but which also distinguishes between sales and uses of personal property. In its relevant part, it reads:

(a) There is hereby imposed upon each separate sale at retail as defined herein within this Commonwealth a tax of five (5) per cent of the purchase price, which tax shall be collected by the vendor from the purchaser, and shall be paid over to the Commonwealth as herein provided.

(b) There is hereby imposed upon the use, on and after the effective date of this act, within this Commonwealth of tangible personal property purchased at retail . . . .

For the purposes of the statute, "use" is defined as "[t]he 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."*fn3 (Emphasis added.) "Sale at retail" is defined as "[a]ny transfer, for a consideration, of the ownership, custody or possession of tangible personal property, including the grant of a license to use or consume whether such transfer be absolute or conditional and by whatsoever means the same shall have been effected."*fn4

[ 32 Pa. Commw. Page 233]

Beck Electric Construction, Inc. (Appellant) installed in certain buildings being constructed for GSA parts of the electrical supply system which included transformers, electric panels and switchgear, and building-wide sound and master clock systems. Much of the electrical supply equipment was large and bulky but the process of installation was not particularly difficult or complicated. The sound and clock components installed were smaller, freestanding and simple to emplace, but were part of building-wide master systems. All work was performed pursuant to building construction contracts of which one, dated February 7, 1969, has been stipulated to be typical. The contract describes Appellant as "contractor" and is for the "Electrical Construction, Construction of Recreation Therapy Building and Outdoor Ampitheater." It provided that:

"FIRST: The Bidder's Proposal, Schedule of Prices, General Conditions, Special Requirements, Specifications, Bulletins, and the Plans and Drawings referred to herein, are hereby incorporated into and made parts of the Contract to the same extent as if they were herein fully set forth.

". . . .

"THIRD: Contractor agrees to furnish and deliver materials, water, tools, equipment, light power, and transportation and secure all permits and licenses, and to do and perform all labor, superintendence, and all means of construction necessary to execute, construct and finish in an expeditious, substantial and workmanlike manner all the work necessary under this contract and more specifically shown on the Plans and set forth in specifications to which reference has heretofore been made; all of said work to be done in accordance with said Plans, Specifications, General Conditions and other terms and conditions of this contract to

[ 32 Pa. Commw. Page 234]

    the satisfaction of The Authority." (Emphasis added.)

Other provisions of the contract warranted all work performed, including the materials used. Although not dispositive of the case, the contract is, on its face, clearly for electrical construction and not for the sale of personal property.

No sales or use tax was paid on the items at issue and in June of 1971, the Bureau of Sales and Use Tax assessed a deficiency in the amount of $13,873.20. Interest and penalties were added. This amount was reduced to $1,487.27 by the payment of certain items by Appellant and the exclusion of other items from tax liability by the Board of Review of the Department of Revenue, Bureau of Taxes for Education (Board). Board's decision was based upon the definition in Regulation 150 of the Bureau of Sales and Use Taxation (Regulation). The contractor's appeal prompted an evidentiary hearing which this Court heard on December 14, 1976.

Basically, the Commonwealth argues that Appellant "used" or "consumed" these items in fulfilling its construction contract with GSA and is therefore liable under the "use" portion of the tax. Appellant, on the other hand, contends that it merely sold these items to GSA at retail and installed them.

Assuming, arguendo, that the regulations have been properly applied, Regulations 207(2) and 150 are dispositive of this matter. They provide in their relevant portions:

Section 207(2) states:

The sale to or use of tangible personal property by construction contractors in the construction, reconstruction, remodeling, repair and maintenance of real estate including but not limited to, buildings, roads, structures and

[ 32 Pa. Commw. Page 235]

    bridges, for or on behalf of the Commonwealth or its political ...

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