Submitted: March 8, 2017
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge,
HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE
ROBERT SIMPSON, Judge, HONORABLE P. KEVIN BROBSON, Judge,
HONORABLE ANNE E. COVEY, Judge, HONORABLE JULIA K. HEARTHWAY,
Judge, HONORABLE JOSEPH M. COSGROVE, Judge.
RENÉE COHN JUBELIRER, Judge.
the Court en banc are the Exceptions of Green Acres
Contracting Company, Inc. (Green Acres) to this Court's
August 10, 2016 Opinion and Order affirming in part and
reversing in part the Order of the Board of Finance and
Revenue (Board) that granted in part and denied in part Green
Acres' Petition for Reassessment of sales and use tax.
Green Acres Contracting Co., Inc. v. Commonwealth
(Pa. Cmwlth., No. 81 F.R. 2013, filed August 10, 2016)
(Green Acres I). At issue is the scope of the term
"guardrails" as used in the definition of tax
exempt "Building Machinery and Equipment" (BME).
Green Acres argues that the term "guardrails"
refers to the entire guardrail system, with the exception of
guardrail posts, which are specifically excluded, and, as
such, nuts, bolts, washers, and guardrail blocks, which are
necessary for the construction of the guardrails, constitute
tax exempt BME as that term is defined under Section 201(pp)
of the Tax Reform Code of 1971 (Tax Code),  72 P.S. §
underlying facts are not in dispute and may be summarized
briefly as follows. Green Acres is a construction contractor
engaged primarily in the installation of highway guardrail
systems, consisting of guardrail panels and guardrail posts,
and road signs for the Pennsylvania Department of
Transportation (PennDOT) and other state departments of
transportation. Green Acres I, slip op. at 1-2.
Green Acres "uses nuts, bolts and washers to attach
12.5-foot long guardrail panels to each other to obtain the
required guardrail length and to attach these guardrails to
guardrail posts . . . ." Id., slip op. at 2.
Guardrail blocks, composed of steel, plastic, or wood,
"are installed between the guardrail and each guardrail
post to increase the force that the guardrail system can
withstand." Id. Green Acres purchased the nuts,
bolts, washers, and guardrail blocks without paying any sales
tax on those items. There is no dispute that Green Acres used
nuts, bolts, washers, and guardrail blocks in the
construction and installation of guardrail systems for
PennDOT and other entities.
202(b) of the Tax Code, 72 P.S. § 7202(b), imposes a six
percent use tax on the use within the Commonwealth of
tangible personal property "purchased at retail."
Tangible personal property "used pursuant to a
construction contract" constitutes a "use"
subject to this tax. 72 P.S. § 7201(o)(1) and (17).
However, tangible personal property used in a construction
contract that is transferred to the Commonwealth is exempt
from state sales and use taxes if it is BME pursuant to
Section 204(57) of the Tax Code, 72 P.S. § 7204(57).
BME, as defined, includes generally "control system[s]
limited to energy management, traffic and parking lot and
building access" and specifically includes
"guardrails" but does "not include guardrail
posts, " as follows:
The term shall include boilers, chillers, air cleaners,
humidifiers, fans, switchgear, pumps, telephones, speakers,
horns, motion detectors, dampers, actuators, grills,
registers, traffic signals, sensors, card access devices,
guardrails, medial devices, floor troughs and grates and
laundry equipment, together with integral coverings and
enclosures, whether or not the item constitutes a fixture or
is otherwise affixed to the real estate, whether or not
damage would be done to the item or its surroundings upon
removal or whether or not the item is physically located
within a real estate structure. The term "building
machinery and equipment" shall not include guardrail
posts, pipes, fittings, pipe supports and hangers, valves,
underground tanks, wire, conduit, receptacle and junction
boxes, insulation, ductwork and coverings thereof.
72 P.S. § 7201(pp) (emphasis added). Thus, the statute
distinguishes between "guardrails, " which are tax
exempt BME, and "guardrail posts, " which are not
tax exempt BME. However, the statute does not specify the tax
status of the nuts, bolts, washers, and guardrail blocks, all
of which are necessary for guardrail system construction.
Department of Revenue (Department) performed a sales and use
tax audit on Green Acres for the period from January 1, 2007
through March 31, 2010. Based on the audit, the Department
issued an assessment to Green Acres totaling $413, 145.24,
plus interest, of which $357.81 was unpaid sales tax, $410,
091.43 was unpaid use tax, and $2, 696.00 was unpaid
Allegheny County use taxes; there was also $46, 865.24 in
penalties. Pertinent here, Green Acres filed a Petition for
Reassessment with the Department's Board of Appeals,
seeking relief from $129, 354.81 of the use tax assessed on
nuts, bolts, and washers that it used in constructing and
installing its guardrail systems and $16, 116.27 for
guardrail blocks contending they were excluded as BME. While
the Board of Appeals reduced the total assessment to $410,
233.41, plus interest, it denied Green Acres any tax or
penalty relief. Green Acres appealed to the Board, which
abated the penalties, but rejected Green Acres' requested
relief regarding, among other things, the nuts, bolts,
washers, and guardrail blocks. Green Acres then appealed to this
Court for review of the Board's Order.
August 10, 2016, this Court issued an Order affirming the
Board's use tax assessment on the nuts, bolts, washers,
and guardrail blocks used in the construction and
installation of guardrail systems and reversed on other
grounds not pertinent to these Exceptions. Specifically,
after review of the statutory provisions, this Court
concluded that, because the Tax Code did not list
"guardrail systems" as BME, but only
"guardrails, " and because "guardrail posts,
" which are an essential part of a guardrail system, are
excluded as BME, it was the Legislature's intent to
exempt as BME only the horizontal rails of
guardrails. Green Acres I, slip op. at 7. Based on
this conclusion, the Court found that the term
"guardrails" only encompasses the nuts, bolts, and
washers, which are "internal components" used to
connect horizontal guardrail panels, while guardrail blocks
and the nuts, bolts, and washers used to connect guardrail
panels to guardrail posts are not tax exempt BME under
Section 204(57) of the Tax Code. Id., slip op. at 8.
However, because Green Acres could not quantify the amount or
percentage of nuts, bolts, and washers used only for
attachment of horizontal guardrail panels, it did not prove
the amount of the $129, 354.81 assessment attributable to the
exempt nuts, bolts, and washers. Id., slip op. at 9.
Exceptions, Green Acres argues that it was error to conclude
that nuts, bolts, and washers are tax exempt only insofar as
they are used to connect horizontal guardrail panels because
the term "guardrails" refers to the entire
guardrail system, not just the horizontal elements of
guardrails. Examining the structure of the BME definition,
Green Acres argues that "guardrails" are included
as a "control system, " with the "guardrail
posts" carved out from that category, just as
"insulation and ductwork" are carved out of the
category of "air conditioning." (Green Acres'
Br. at 9.) Because "guardrail posts" are a
carve-out from the broader category of "guardrails,
" Green Acres contends that everything else that is part
of the "guardrails, " other than the posts, remain
exempt, including the horizontal elements (guardrail panels),
guardrail blocks, and connecting materials (nuts,
bolts, and washers).
cases requiring the interpretation of statutes, we are guided
by the Statutory Construction Act of 1972,  which directs
that "[t]he object of all interpretation and
construction of statutes is to ascertain and effectuate the
intention of the General Assembly." 1 Pa. C.S. §
1921(a). "The clearest indication of legislative intent
is generally the plain language of a statute."
Walker v. Eleby, 842 A.2d 389, 400 (Pa. 2004).
"When the words of a statute are clear and free from all
ambiguity, the letter of it is not to be disregarded under
the pretext of pursuing its spirit." 1 Pa. C.S. §
1921(b). However, we employ statutory construction
"[w]hen the words of the statute are not explicit."
1 Pa. C.S. § 1921(c). In doing so, the general rule is
that "[w]ords and phrases [are to] be construed . . .
according to their common and approved usage[, ]" and
"[e]very statute [is to] be construed, if possible, to
give effect to all its provisions" to assure "that
no provision is reduced to mere surplusage." 1 Pa. C.S.
§§ 1903(a), 1921(a); Walker, 842 A.2d at
plain language of the statute provides that
"guardrails" are considered tax exempt BME, while
"guardrail posts" are not. The term
"guardrails" is not defined in the Tax Code;
however, "guardrail" is defined in the dictionary
as "a railing for guarding against danger or trespass,
" Webster's Third New International Dictionary 1007
(2002), or "a barrier . . . placed along the edge of a
highway at dangerous points, " Merriam-Webster's
Collegiate Dictionary 554 (11th ed. 2003).
"Barrier" is defined as "something material
that blocks or is intended to block passage, "
Merriam-Webster's Collegiate Dictionary 100 (11th ed.
2003), and "railing" is defined as "a barrier
consisting of a rail and supports, " id. at
1027 (emphasis added); Webster's Third New International
Dictionary 1875 (2002) ("a barrier (as a fence or
balustrade) consisting of a rail and supports"). A
barrier or railing is, thus, composed of both
horizontal and vertical elements, which, when constructed,
function as a system. Green Acres observes that
"[g]uardrail construction and installation is subject to
strict federal and state Department of Transportation
engineering specifications." (Green Acres' Reply Br.
at 5 n.2.) We note that both federal and state publications
describe guardrails as a "system." See,
e.g., Guardrail 101, Federal Highway Admin. (U.S.
Dep't of Transp., Dec. 10, 2014),
(last visited June 12, 2017) (stating that "[g]uardrails
function as a system, which includes the guardrail itself,
the posts, the soil that the posts are driven in, the
connection of the guardrail to the posts, the end terminal,
and the anchoring system at the end terminal. All these
elements have a bearing in how the guardrail will function
upon impact."); Roadside Safety Pocket Guide, Pub. 652
(12-10), at 8 (Pa. Dep't of Transp., 2010 ed.),
ub%20652.pdf (last visited June 12, 2017) (listing the
different types of guardrail systems, including flexible
guardrail systems and semi-rigid guardrail systems). Without
the entire guardrail system in place, including the
horizontal panels, nuts, bolts, washers, guardrail blocks,
and vertical posts, a guardrail would not function or serve
the purpose for which the system was designed: as a railing
or barrier to prevent against danger on roadways.
definitions and common usage of the term "guardrails,
" thus refers to more than the horizontal elements and
includes the entire guardrail system as it is
constructed and installed along a road and/or highway. This
understanding of "guardrails" fits well within the
structure of the BME definitional section, which establishes
a tax exemption for "guardrails" and excludes (thus
making taxable), simply "guardrail posts." That
only the "guardrail posts" are carved out as
taxable explains the Legislature's decision not to
specify the taxable status of the ...