Luther P. Miller, Inc., Petitioner
Commonwealth of Pennsylvania, Respondent
Argued November 12, 2013.
Appealed from No. 0904475. State Agency: Board of Finance and Revenue.
Robert Isaiah Boose, II, Somerset, for petitioner.
Clinton G. Smith, Jr., Senior Deputy Attorney General, Harrisburg, for respondent.
BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge (P), HONORABLE JAMES GARDNER COLINS, Senior Judge. OPINION BY SENIOR JUDGE COLINS.
JAMES GARDNER COLINS, Senior Judge.
Luther P. Miller, Inc. (Petitioner) petitions for review of an order of the Board of Finance and Revenue denying Petitioner's appeal contesting the assessment of deficiency of taxes paid by Petitioner under the Liquid Fuels and Fuels Tax Act (Act). Finding no error, we affirm.
Petitioner is a distributor whose business operations include wholesale and retail sale of petroleum products, including heating oil, dyed kerosene, clear diesel fuel, clear kerosene, propane and special lubricants. (June 11, 2013 Stipulation of Facts (S.F.) Ex. A, Audit Narrative (Narr.) at 1.) Petitioner is headquartered in Somerset, Pennsylvania and was incorporated as a Pennsylvania Corporation in 1961, although it operated prior to that date as a sole proprietorship. (S.F. ¶ 1, Ex. A, Narr. at 1-2.) Following the passage of the Act, Petitioner registered as a Class 1 distributor in 1997. (S. F. Ex. A, Narr. at 1.)
Petitioner operates various facilities in the Commonwealth, including four bulk plant facilities, six cardlock facilities and two facilities on-site at Petitioner's trucking company customers. ( Id. at 2.) The cardlock facilities are located at sites owned by another company, Pacific Pride, which reports the sales made from these locations to Petitioner. ( Id. at 4-6.) Petitioner has, in total, ten locations (the four bulk plants and the six cardlock facilities) at which it inventories on-road diesel fuel and eight locations (two of the bulk plants and the six cardlock facilities) at which it inventories gasoline. (S.F. ¶ 11.) The on-road diesel and gasoline tanks at the bulk plants are above-ground while the on-road diesel and gasoline tanks at the cardlock facilities are below ground. ( Id.)
Petitioner was audited by the Department of Revenue's (Department) Bureau of Audits for the period of January 1, 2006 through July 31, 2008. The audit, including a narrative report of the auditor's findings, was presented to Petitioner at a post-audit conference on December 5, 2008, and the Department's Bureau of Motor Fuel Taxes thereafter issued to Petitioner a Notice of Determination and Request for Payment in the amount of $34,622.266. (S.F. Ex. A, Dec. 15, 2008 Notice of Determination and Request for Payment.) The assessed amount included $33,017.71 in tax due, $840.30 in penalty assessed and $764.25 in interest due. ( Id.)
The audit identified three principal issues which formed the majority of the assessment of deficiency against Petitioner and which are challenged by Petitioner in this appeal. The first issue concerns diesel fuel sales recorded as nontaxable sales to Uniontown School District (School District) at cardlock locations. While sales made to a school district normally qualify as exempt sales to a political subdivision, 1 Pa. C.S. § 1991; 75 Pa. C.S. § 9004(e), the auditor disallowed the claimed exemption on diesel sales to the School District here because the sales were not actually received by or billed to the School District. (S.F. Ex. A, Narr. at 11-12.) Instead, upon review of the fuel delivery tickets, the auditor discovered that some of the tickets documented that the sales were made to bus operator companies that contracted with the School District to provide busing for its students. ( Id. at 12.) Of the remaining fuel delivery tickets reviewed by the auditor that were claimed by Petitioner as exempt sales to the School
District, some did not indicate what entity was billed and others indicated that both the School District and bus operators were the billed entity. ( Id.) Because the bus operators were neither political subdivisions nor registered distributors, the auditor disallowed the 15,224 gallons of diesel ...