Opinion ID: 2365080
Heading Depth: 1
Heading Rank: 6

Heading: The Statutory Exclusion and the Predominant Purpose Standard

Text: Before we explain why we now reject the exclusive use test, we turn to an analysis of the statutory exclusion. As we have often observed, when statutes have a bearing on the outcome of a case, we begin by analyzing the express words of the statutes. Kmonk-Sullivan v. State Farm Mutual Auto. Ins. Co., 567 Pa. 514, 788 A.2d 955, 959 (2001). In support of the City's contention that the public utility use need not be exclusive for the exclusion to apply, the City refers us to 72 P.S. § 7201(k)(9) and § 7201( o )(1),(5). Subsection (k)(9) contains a presumption, essentially an internal-statutory rule of construction. It directs us to presume that a sale at retail is subject to the tax unless the taxpayer can prove that the predominant purpose of the use is not a sale at retail. The Subsection provides: Where tangible personal property or services are utilized for purposes constituting a sale at retail and for purposes excluded from the definition of sale at retail, it shall be presumed that such tangible personal property or services are utilized for purposes constituting a sale at retail and subject to tax unless the user thereof proves to the department that the predominant purposes for which such tangible personal property or services are utilized do not constitute a sale at retail. 72 P.S. § 7201(k)(9) (emphasis added). Similarly, subsection ( o ) restates the presumption in the context of the definition of use. It provides that where the particular use to which tangible personal property is put is subject to an exclusion, the property is to be deemed taxable unless the taxpayer proves that the predominant purpose of the use is an excluded use. Subsection ( o )(5) provides: Where tangible personal property or services are utilized for purposes constituting a use, as herein defined, and for purposes excluded from the definition of use, it shall be presumed that such property or services are utilized for purposes constituting a sale at retail and subject to tax unless the user thereof proves to the department that the predominant purposes for which such property or services are utilized do not constitute a sale at retail. 72 P.S. § 7201( o )(5) (emphasis added). No party in Public Constructors or Erie Excavating cited the foregoing provisions to this Court and we did not discuss them in either Opinion. See Appellant's Br., pp. 18-19. However, the predominant purpose standard was in existence in 1968, when we decided Public Constructors and Erie Excavating. See 72 P.S. § 3403-2(j)(7)(d) (now repealed). In 1968, 72 P.S. § 3403-2(j)(7)(d) provided: Where tangible personal property or services are utilized for purposes constituting a sale at retail as herein defined, and for purposes excluded from the definition of sale at retail, the predominant purpose shall determine whether such purposes constitute a sale at retail as herein defined. 72 P.S. § 3403-2(j)(7)(d) (emphasis added). Similarly, the use definitions also contained the predominant purpose standard (72 P.S. § 3403-2(n)(4)(c)(iv) (now repealed)). 72 P.S. § 3403-2(n)(4)(c)(iv) provided: Where tangible personal property or services are utilized for purposes constituting a use, as herein defined, and for purposes excluded from the definition of use, the predominant purpose shall determine whether such purposes constitute a use, as herein defined. 72 P.S. 3403-2(n)(4)(c)(iv). After consideration of the position of the Commonwealth and our holding in Public Constructors, we believe it was error to have engrafted provisions onto the sales and use tax statute. Doing so permitted the Commonwealth to collect a tax in a manner in which the General Assembly expressly prohibited. When interpreting statutes, if their words are clear, we need go no further to discern the intent of the legislature. 1 Pa.C.S. § 1921(b). The statutes at issue here are clear; a sale or use of tangible personal property is taxable unless the taxpayer demonstrates that the predominant purpose of the sale or use is excluded. The General Assembly could have set forth an exclusive purpose test, but it did not do so. Here the predominant users and beneficiaries of the facilities built by the contractors are public utilities and the predominant purpose of those facilities is to serve public utilities. Therefore, the exclusion should apply.