Opinion ID: 2345808
Heading Depth: 1
Heading Rank: 4

Heading: Issue (2): Do the Disputed Charges meet the exception set forth in Section 54.1 of the Pennsylvania Administrative Code?

Text: Spectrum argues that the Commonwealth Court failed to apply the plain language of Section 54.1(c) of the Pennsylvania Administrative Code, which dictates that charges for delivery are non-taxable when made or billed by a party other than the producer. 61 Pa.Code § 54.1. Spectrum argues that it is entitled to a refund because it purchased electricity from producer Exelon and delivery was made by PECO, a different entity. In response, the Commonwealth argues that the Disputed Charges are not covered by this section of the Tax Code. The Commonwealth Court correctly determined that the tax exemption in Section 54.1(c) of the Pennsylvania Administrative Code was inapplicable to the Disputed Charges. Section 54.1(c) addresses a situation where a finished consumer good is delivered by a carrier who had no involvement in the production of the good but merely conveys the good from the producer to the consumer. Contrary to Spectrum's argument, PECO is not a mere delivery carrier. Indeed, PECO and Exelon together are the vendor. PECO not only delivers electricity to Spectrum but would be required to generate and produce any electricity that Exelon cannot provide. 66 Pa.C.S. § 2807(e)(3). Exelon's electricity cannot be provided to a consumer if PECO does not deliver it, and a consumer, even under the Competition Act, is unable to select any entity other than its local utility as the delivering entity. There is no truly independent electricity delivery company, as is contemplated in Section 54.1 of the Pennsylvania Administrative Code. As such the Disputed Charges are subsumed within the total purchase price of the electricity which is subject to sales tax. 61 Pa.Code § 60.23(d).