Nos. 80 & 84 January Term, 1978, Appeals from the Order of the Commonwealth Court of Pennsylvania at No. 557 C.D. 1973.
Albert J. Tomalis, Jr., Harrisburg, for appellant in No. 80 and appellee in No. 84.
Paul S. Roeder, Deputy Atty. Gen., Dauphin, for appellee in No. 80 and appellant in No. 84.
Eagen, C. J., and O'Brien, Roberts, Nix, Manderino and Larsen, JJ. Eagen, C. J., dissents and would affirm the order of the Commonwealth Court.
Section 201(a) of the Tax Act of 1963 for Education imposes a "sales tax" upon "each separate sale at retail," to be "collected by the vendor from the purchaser" and "paid over to the Commonwealth."*fn1 Where no sales tax is collected and paid, Section 201(b) imposes a "use tax" upon the "use" of tangible personal property "purchased at retail."*fn2
At the same time, however, "to eliminate tax 'pyramiding' otherwise caused in the typical situation of the middleman buying from the producer in order to sell to the retailer who in turn resells the product to the ultimate consumer," the Act excuses both sales and purchases for "resale." Commonwealth v. Wetzel, 435 Pa. 468, 471, 257 A.2d 538, 539 (1969). Though the Tax Act defines "sale at retail," "use," "purchase at retail," and "resale," it does not establish the tax consequences of all commercial transactions. Instead, the Legislature in Section 580(a) of the Act left to the Department of Revenue the authority "to prescribe, adopt, promulgate and enforce, rules and regulations not inconsistent with the provisions of this act." The Department, in an exercise of this authority, promulgated Regulation 150. This regulation prescribes when, under the Tax Act, a "construction contractor" is a "user" of goods subject to tax, and when the contractor is a "vendor" entitled to claim the "resale" exclusion.*fn3 Regulation 150 provides:
c. Construction Activities Distinguished From Sales Activities. -- The following tests are applicable in determining whether property is used by a contractor in the performance of construction activities or is sold by him as a vendor:
Property which does not become a permanent part of the real estate and which is normally retained by the person owning it when he removes from the premises, is deemed to be sold by the person who furnishes and installs it, even
though it may, because of its nature, be connected to utility outlets or otherwise temporarily attached to real estate. Such property does not lose its identity by reason of its installation, and is not a permanent part of the building or structure in which it is installed."
The tax liability of an "electrical construction contractor" under Regulation 150 is the ...