Argued: October 19, 2017
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE ROBERT SIMPSON, Judge HONORABLE BONNIE BRIGANCE
LEADBETTER, Senior Judge
these consolidated tax appeal cases, Carson Concrete
Corporation (Carson) appeals from an order of the Court of
Common Pleas of Philadelphia County (trial court) that affirmed
decisions of the City of Philadelphia's Tax Review Board
(Board). The Board denied Taxpayer's petitions to review
an audit assessment bill issued by the City for: (a) Business
Income and Receipts (BIR) Taxes for the years 2000-2009; and,
(b) Wage Tax for the years 2001-2009. For the reasons that
follow, we affirm in part (as to the underlying tax
liability), and vacate and remand in part (as to interest and
is a concrete construction company operating in the City of
Philadelphia (City), its regional suburbs, Atlantic City, New
Jersey and Miami, Florida. Carson has been in business for 47
years. Carson's president, Anthony J. Samango, Jr.
(President) has been with Carson since 1968. In or about
2008, Carson moved its headquarters from Conshohocken in
Montgomery County to Boothwyn in Delaware County. Carson
asserted that as a result of a flood, it lost the actual
contracts it had with subcontractors from 2000 to 2008.
Therefore, these contracts did not make it to the relocated
President testified before the Board that in 2000 Carson
began facing skyrocketing workers' compensation insurance
rates, which were three times its competitors' rates,
because of jobsite accidents. As a consequence, the business
climate and culture changed dramatically. To remain
competitive, Carson decided to place all its field workers on
subcontractors' payrolls for cost plus a fee. Therefore,
after 2000, Carson asserts it did not have any of its own
employees working in the City. Rather, for the next several
years, the bulk of Carson's unionized field workers were
employees of subcontractors. During that time, Carson
maintained a small staff of managers and administrators at
its office in Boothwyn, Pennsylvania. All of the employees
paid local municipal taxes.
decision, the Board noted, from 2000 to 2009, Carson did
business in the City but did not file any BIR Tax returns,
did not pay any BIR Tax, and did not pay any Wage Tax.
Ultimately, the City became aware of Carson's failure to
file tax returns or pay BIR or Wage Taxes.
September 2011, the City's Department of Revenue
(Department) conducted an audit assessment of Carson, which
resulted in an assessment for BIR Tax liabilities and Wage
Tax liabilities. Following the audit, the City assessed
Carson $1, 091, 787.45 in BIR Tax ($65, 709) and Wage Tax
($1, 026, 078.45) attributed to concrete construction
laborers, which Carson contended were not its employees, but
employees of subcontractors. With interest and penalties, the
City's tax bill exceeded $4, 000, 000.
the City completed the audit, Carson requested a re-audit. In
support of its request, Carson identified only one
subcontractor, CIP Frames. Carson also provided invoices,
bank statements and checks in support of its contention that
employees of subcontractors, not Carson employees, performed
the work in the City. Finding discrepancies among
Carson's documents, which also lacked detail, the
Department denied Carson's request for a re-audit.
filed two separate petitions for review with the Board
challenging the assessments for both the BIR Tax and Wage
Tax. After several continuances, the Board conducted a
hearing on both petitions. Thereafter, the Board granted a
60-day period for the parties to submit briefs and supplement
discussed above, President testified at the hearing that in
the year 2001, in response to ultra-high workers'
compensation premiums resulting from past accidents, Carson
placed its field workers on subcontractor payrolls and thus
no at 73; Reproduced Record (R.R.) at 212a. Consequently, in
2000, Carson had 100 employees employed in the City and paid
the Wage Tax for them. Id. However, the next year
there were no Carson employees working in the City.
Id. Rather, Carson paid the subcontractor cost plus
a fee. Bd. Hr'g at 25; R.R. at 213a.
the City's Auditor, Lisa Bratz (Auditor) testified that
the documents from CIP Frames, the only named subcontractor,
appeared deceitful. In particular, Auditor testified:
[E]ach invoice matched the total on a weekly basis, but all
it said was, for work done on 7/10 and then the money amount.
So there was no saying where the job was, who worked on
the job. There was no detail to any of the invoices. It just
looked like invoices were made up.
Bd. Hr'g at 73; R.R. at 261a (emphasis added).
asked whether these types of invoices looked like typical
invoices, Auditor replied: "No, because they weren't
detailed at all. I've never seen such plain invoice
sheets of paper." Id.
April 2016, after orally announcing its decision to deny
Carson's review petitions, the Board issued decision
letters officially denying Carson's petitions.
decision, the Board made the following findings:
1) Following an audit by the [City] Department of Revenue,
[Carson] filed this appeal of the audit assessments of:
[BIR Tax] for the years 1998 through 2010, Principal due
of $65, 709 with interest of $78, 581.12 and penalty of $128,
751.54 as of the [Board] hearing date, for a total due of
Wage Tax for the years 2001 through 2009; Principal due
of $1, 026, 078.45, with interest of $1, 205, 487.27 and
penalty of $1, 783, 105.10 as of the [Board] hearing date,
for a total due of $4, 014, 670.82.
2) [Carson] is a concrete construction company with its
offices in Boothwyn, PA. [President] testified on behalf of
[Carson] about its business activity and labor practices
during the audit years, and his role regarding the actual
work sites and the work of his son [Anthony J. Samango, III,
3) Carson did business in the [City] and in the
surrounding suburbs before, during and after the tax years in
question. [Carson] provided [Auditor] with a project
list that confirmed work on City projects during the audit
4) [Carson] was a non-filer for [BIR Tax] and Wage Tax
for all years under audit[.]
5) Prior to 2000, [Carson] filed [BIR Tax] returns and
remitted taxes due the [City] and remitted Wage Tax for
employees residing and/or working in [the City].
6) From 2000 through 2009, [Carson] did not file [BIR
Tax] returns and did not remit [BIR Tax] or Wage Tax to the
7) In 2000, [Carson] had approximately 100 employees.
8) [President] testified to having only 4 to 10 employees
from 2001 to 2009.
9) During the audit years, Carson had between 4 and 10
management and central office employees operating in their
[sic] suburban office. These employees did not work or reside
in [the City]. Most were not working at [Carson's] job
10) [President] and [Vice-President] were intimately involved
with all work sites. They bid the job and once the contract
was awarded to [Carson], they would determine the equipment
needed, what categories of skilled and unskilled workers were
required and how many, and deal with work site issues as they
11) [President] testified that all work was done with
subcontractors paid a cost plus [markup] amount. But there
was no information to establish that any subcontractors
handled employee or work site issues.
12) For the City's audit, [Carson] only provided
documentation and records for its work projects and labor
costs for 2000. No documents or records were available
for the audit years. Records were lost during an office
13) [Carson] was able to provide copies of its federal tax
returns for the years under audit.
14) To determine the Wage Tax assessment, [Auditor] used
actual wages & labor costs reported on [Carson's]
federal tax returns from 1999-2009. [Auditor] used the 2000
year ratio of labor costs attributed to the [City] for all
audit years in absence of any records to the contrary from
15) [Carson's] federal tax returns did not itemize
deductions for gross payments to subcontractors. The returns
itemized direct labor and payroll costs designated for
employees, including union dues for its workers.
16) [President] testified that his accountant took the
labor costs from the subcontractor invoices and transferred
those expenses directly to [Carson's] tax returns
although those expenses were paid by subcontractors.
This did not include any of the [markup] that [President]
testified would have been payable to a subcontractor as
17) As to the [BIR Tax] assessment, [Auditor] accepted
[Carson's] federal tax returns as correctly documenting
its income and expenses for each year. This resulted in
a $0 assessment for the net income of the [BIR Tax]. The
assessment under appeal is the tax amount due for the gross
receipts portion of the [BIR Tax], calculated by applying the
statutory tax rate to the gross receipts offered by [Carson]
for business activity conducted in [the City]. No
changes were made to [Carson's] reported gross receipts.
18) [Carson] did not refute that during the years under
audit [Carson] performed work in [the City]. There were gross
receipts attributable to [City] business activity.
19) [President] testified that from 2001 until 2010, the
audit years, the company changed its way of business to a
model where all projects were handed to independent
subcontractors who used their own employees for all work.
[President] testified that [Carson] did not employ its own
workforce to complete its projects[.] Its only employees were
the small office ...