Opinion ID: 2365080
Heading Depth: 1
Heading Rank: 5

Heading: Public Constructors

Text: Were it not for our holding in Commonwealth v. Public Constructors, 432 Pa. 589, 248 A.2d 29 (1968), we might have limited Erie Excavating to its facts. However, in Public Constructors, decided the same day as Erie Excavating, we expressly held that for the exclusion to apply, the public utility use had to be exclusive. That holding was in error. The facts of Public Constructors are virtually identical to the facts in this case. In Public Constructors, the Commonwealth assessed use taxes upon the materials Public Constructors used to build the runways at the Philadelphia Airport and the Allentown-Bethlehem-Easton Airport. Public Constructors argued that it was not subject to the tax because of the public utility exclusion. The trial court held that the exclusion did not apply because Public Constructors performed work for the Airports and not the public utility airlines. That court also pointed to the fact that the airlines did not have the exclusive right to use the runways as another reason why the exclusion did not apply. On appeal to this Court, the City referred to the express words of the exclusion that use does not include materials involved in constructing the facilities used in public utility service and argued that the express words of the statute required the exclusion of tax liability. Id. at 31 (internal quotations omitted). We then implicitly recognized that the words of the statute authorized the exclusion. However, we determined that the General Assembly could not mean what it said because application of the exclusion to all situations in which a public utility benefited from construction might leave the Commonwealth without income from other sources, specifically from sales and use taxes relating to highway and bridge construction, which we deemed an absurd result. We also explained that the purpose of the exclusion was to save the public the expense of a tax, which in all likelihood would be passed entirely on to it. If the exclusion were to be allowed to apply in situations in which a public utility was not the exclusive beneficiary of the facility, we reasoned that the state would lose tax money and the public would not get the full benefit of the exclusion.