Opinion ID: 6260257
Heading Depth: 1
Heading Rank: 2

Heading: Statutory Method of Assessment

Text: Although Section 201 of the Act, 72 P.S. §3403-201, imposes a single flat percentage rate of taxation upon “each separate sale at retail”, Section 202, 72 P.S. §3403-202, sets forth a bracket schedule whereby “[t]he amount of tax imposed by section 201 . . . shall be computed”. Thus in the last audit year, 1965, Section 201 imposed a flat rate of 5% and Section 202 provided as follows: “. . . (a) If the purchase price is ten cents (10$) or less, no ta,x shall be collected, (b) If the purchase price is eleven cents (11$) or more but less than twenty-one cents (21$), one cent (1$) shall be collected, (c) If the purchase price is twenty-one cents (21$) or more but less than forty-one cents (41$), two cents (2$) shall be collected, (d) If the purchase price is forty-one cents (41$) or more but less than sixty-one cents (61$), three cents (3$) shall be collected, (e) If the purchase price is sixty-one cents (61$) or more but less than eighty-one cents (81$), four cents (4$) shall be collected, (e.l) If the purchase price is eightv-one cents (81$) or more but less than one dollar and one cent ($1.01) five cents (5$) shall be collected, (f) If the purchase price is more than one dollar ($1.00), five (5) per centum of each dollar of purchase price plus the above bracket charges upon, any fractional part of a dollar in excess of even dollars shall be collected.” It is readily apparent from an examination of this bracket schedule that the effective rate of payment on sales at retail of less than a dollar is higher than the actual basic rate imposed by Section 201. This discrepancy is made necessary by virtue of the fact that there is no way for the Commonwealth to collect a fraction of a cent. Thus, for example, in 1965 the basic tax rate was 5%. Five percent of a 25$ sale is 1.25$. The only practical way for the Commonwealth to receive 5% of a 25$ sale is to adopt a bracket schedule that requires the payment of 2$ on a sale for such an amount. During the audit period appellant effectively ignored the bracket schedule. For each tax reporting period during the three years in question and depending upon the then prevailing basic tax rate contained in Section 201, appellant remitted to the Commonwealth 4% or 5% of the gross receipts derived from the washing machines at each of his laundromats. This was clearly wrong. The Act imposes a tax upon each “separate” sale at retail, and appellant’s computations necessarily assume, contrary to fact, that the entire gross receipts from one laundromat reflect a single sale at retail or, alternatively, that all separate sales at each location in each tax reporting period were in even dollar amounts. Thus faced with the task of reconstructing the total amount that appellant should have remitted, the Department of Revenue auditor began with the basic assumption that each single use of one washing machine constituted one separate sale at retail. Thereafter, it was necessary for him to determine the frequency of use of each of appellant’s washing machines in each location. For example, during the portion of the audit period when the basic tax rate was 5%, the auditor determined that one of appellant’s laundromats contained washing machines with coin boxes in denominations of 25^, 35(5 50(5, and $1.00. Under the bracket schedule then in effect designed to ensure the Commonwealth 5% of the purchase prices of all separate sales at retail, a 25(5 machine required the collection and remittance of 2(5 or 8%; a 35(5 machine, 2(5 or 5.714%; a 50(5 machine, 3(5 or 6%; and a $1.00 machine, 5(5 or 5%. By calculating the frequency of use of each machine, the auditor was able to compute the total amount due from that particular laundromat. This procedure was repeated at each of the appellant’s laundromats. The total of the sums so computed represents the total amount that appellant should have collected and remitted during the audit period, and the balance remaining after deducting the amount actually remitted by appellant represents the sales tax assessment here at issue. In contending that the assessment levied by the Department of Revenue did not comply with the provisions of the Act, appellant does not dispute the accuracy of the auditor’s data or mathematical calculations. His sole complaint is rather that the auditor erred in concluding that each single use of one washing machine constituted one separate sale at retail within the meaning of the Act. In appellant’s view, a customer’s purchase in a single visit of three 25(5 washing cycles represents one separate sale for a purchase price of 75(5. This becomes significant due to the fact that the total tax due on one 75(5 sale is less than that due on three 25(5 sales. However, we do not believe that the auditor acted unreasonably in equating a single use of one washing machine with one single sale. The depositing of money in the coin box of a washing machine seems persuasively analogous to the ringing up of one sale on a cash register. Furthermore, as appellant’s chosen method of operation precluded his recording the number of washing cycles purchased by each of his customers in a single visit, he should not be heard to complain of the auditor’s single use theory. Moreover, even assuming that appellant’s multiple use theory is correct, it would not follow that the assessment is erroneous. A taxpayer seeking review of an assessment has the burden of proving the assessment to be incorrect. Tax Act of 1963 for Education, Act of March 6, 1956, P. L. (1955) 1228, §545, as amended, 72 P.S. §3403-545. Appellant has not met this burden. Under the auditor’s theory, no tax was imposed upon the revenues obtained from appellant’s coin-operated dryers or soap dispensing machines because the charge for those machines did not exceed 10(5 and the bracket schedule then in effect exempted from taxation all sales of 100 or less. Appellant’s theory by contrast suggests that all purchases made at a single visit represent one inseparable sale at retail. That being so, the cost of using the dryers and soap dispensing machines would be included in the total purchase price of each separate sale. The present record is devoid of any evidence that the total tax due under a single visit theory including the dryer and soap revenues would be any less than that found due under the auditor’s single use theory which excluded those revenues.