Opinion ID: 2365080
Heading Depth: 1
Heading Rank: 7

Heading: Revisiting Public Constructors

Text: It is also appropriate for us to address the two reasons we cited in Public Constructors in support of the exclusive use standard. In Public Constructors, we explained that there should be an exclusivity requirement because: (1) application of any other rule would yield an absurd result; and (2) the purpose of the exclusionto make sure that the proceeds of the exclusion are passed on to the public at largewould not be served by any other rule. We address these reasons in turn. First, we do not believe that application of the predominant purpose test would yield an absurd result. The Court in Public Constructors was concerned that application of any test other than one of exclusive use would prevent the Commonwealth from collecting sales and use taxes attributable to sales of materials used for highway and bridge construction. However, there is no evidence that the predominant user of highways and bridges are public utilities. In fact, the Commonwealth admits that the opposite is true. The Commonwealth stipulated that eighty-seven percent of the traffic on the Pennsylvania Turnpike is composed of passenger car traffic and that less than thirteen percent is by public utilities. Stipulation ¶¶ 20-21. The Commonwealth also admitted that, substantially less than thirty percent of traffic on Pennsylvania highways consists of vehicles operated by public utilities. Stipulation ¶ 22 (citing Pennsylvania Department of Transportation, Bureau of Planning and Research, Pennsylvania Highway Statistics (1999 and 2000)). Accordingly, if we apply the statute by its terms, the Commonwealth does not appear to be at risk to lose sales and use taxes relating to public utility use of highways. Finding the existence of the predominant purpose standard is also not inconsistent with the holding of Erie Excavating. In Erie Excavating, we assumed that all use of the railroad was by a public utility. This assumption is understandable given that the railroad company owned the tracks and the railroad bed that Erie Excavating constructed. However, when we consider the use of a railroad, we note that not every car that rides the railroad is operated by a public utility. Amtrak permits its trains to be chartered (http://www. amtrak.com/services/charter.html) and the website for the American Association of Private Railroad Car Owners lists fifty different private rail cars, which it claims are available for use most places that Amtrak trains go. (http://www.aaprco. com/car/car_index_intro.html (last visited May 2002)). Accordingly, although this Court assumed that the railroad bed that Erie Excavating built was constructed solely for use in a public utility service[,] the facts may have been otherwise. Erie Excavating, 248 A.2d at 193. Therefore, the result in Erie Excavating was the correct one but not because of an exclusivity test. By the express terms of the statute, the public utility exclusion applies whether the railroad bed was used exclusively by a public utility or predominantly by a public utility. Such a result makes sense, is not absurd and, most importantly, is consistent with the applicable statutes. The second reason the Public Constructors Court cited in favor of the exclusivity requirement was that the purpose of the exclusion, which was obviously to pass the proceeds of the exclusion on to the public at large, would not be served by any other rule. Public Constructors, 248 A.2d at 31. Although this policy is a reasonable explanation for the public policy exclusion, the Court did not state how it identified this purpose nor did it cite any authority for it. Additionally, as the dissent in Erie Excavating pointed out, the policy of passing all of the proceeds of the exclusion on to the public was not served in that case. Indeed, because the Corps paid Erie to perform the work, any money that Erie saved through the exclusion was not passed on to the riders of the railroad. Erie Excavating, 248 A.2d at 193-194. We agree with this criticism of the Court's policy identification. In this case, as in Public Constructors, there is no need to go beyond the words of the statutes, which we now track. The Commonwealth of Pennsylvania imposed a tax upon each separate sale at retail of tangible personal property or services... within this Commonwealth. 72 P.S. § 7202. The public utility exemption provides that a sale at retail is excluded from taxation if it is used in: The producing, delivering or rendering of a public utility service, or in constructing, reconstructing, remodeling, repairing or maintaining the facilities which are directly used in producing, delivering or rendering such service. 72 P.S. § 7201(k)(8)(C) (emphasis added). Even if the property is used in a public utility service it is presumed to be taxable 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 )(5) provides that a use is taxable 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). The statutes are clear. If a sale or use is for the predominant purpose of public utility service, it is not taxable. There is no requirement in the statutes that the sale or use must be exclusively for the purpose of public utility service. Accordingly, we reverse the determination of the Commonwealth Courtrecognizing that, based on our prior opinions, its ruling was proper.