Court Opinion

ID: 3206931
Source: CourtListenerOpinion
Date Created: 2016-05-25 21:08:30.513599+00
Date Added: 2024-06-11T07:39:23.312768
License: Public Domain

[J-9-2016]
                   IN THE SUPREME COURT OF PENNSYLVANIA
                               MIDDLE DISTRICT

       SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, JJ.

S & H TRANSPORT, INC.,                       :   No. 17 MAP 2015
                                             :
                    Appellant                :   Appeal from the Order of the
                                             :   Commonwealth Court dated October
                                             :   15, 2014 at No. 165 CD 2014 Reversing
             v.                              :   and Remanding the Order of the York
                                             :   County Court of Common Pleas, Civil
                                             :   Division, dated January 6, 2014 at No.
CITY OF YORK,                                :   2012-SU-004143-54.
                                             :
                    Appellee                 :   ARGUED: November 17, 2015
                                                 RESUBMITTED: January 20, 2016

                                        OPINION

JUSTICE DONOHUE                                               Decided: May 25, 2016
      In this appeal, we are asked to determine whether freight brokerage services are

excepted from local business privilege taxation1 under the “public utility” exception

found in Section 301.1(f)(2) of the Local Tax Enabling Act (“LTEA”), Act of December

31, 1965, P.L. 1257, as amended, 53 P.S. § 6924.301.1(f)(2). The Commonwealth

1
    City of York’s (“City”) Business Privilege Tax is a tax on the privilege of doing
business in the City. Persons desiring to do business in the City are required to obtain
a business privilege/mercantile license and pay a tax on gross receipts. City of York
Business Privilege and Mercantile Tax Ordinance (“Ordinance”) §§ 343.01-343.99. The
business privilege tax is imposed at a rate of three and one-half mills or three dollars
and fifty cents per one thousand dollars of gross volume of business. Ordinance,
§ 343.02(a). In the underlying litigation, S & H Transport, Inc. (“S&H”) raised a number
of challenges to the City’s business privilege tax assessment, including the taxability of
S&H and the inclusion of certain amounts in gross receipts (e.g., amounts not
attributable to activities within the City and amounts that S&H did not retain but paid to
the freight carriers). In this appeal, we address only whether the City is barred from
imposing a business privilege tax under the “public utility” exception.
Court concluded that S&H was not excepted. We affirm the Commonwealth Court’s

decision because we conclude that the rates of the common motor carriers with whom

S&H does business are not fixed and regulated by the Pennsylvania Public Utility

Commission (“PUC”), and thus the entire exception is inapplicable.

      The facts are not in dispute. S&H is an intrastate, interstate and international

freight broker headquartered in the City. S&H receives freight shipment orders from

manufacturing customers and then negotiates contracts for carriage with licensed

common carriers which are public utilities2 and regulated by the PUC. According to

S&H’s controller, it is the middleman between the customer and the carriers. S&H

invoices its customers for payment. The payment includes the charges it negotiates

with the carrier for the utility service (cost of shipment) together with taxes and fees.

S&H then remits payment to the common carrier and retains the freight brokerage

commission. Because it collects the entire balance, S&H’s records include the gross

receipts from freight shipment transactions before payment is made to the carriers. As

2
   The Public Utility Code, (“PUC Code”), 66 Pa.C.S.A. § 102, defines “public utility” as
“(1) Any person or corporations now or hereafter owning or operating in this
Commonwealth equipment or facilities for: G (iii) Transporting passengers or property
as a common carrier.” In turn, “common carrier” is defined as:
             Any and all persons or corporations holding out, offering, or
             undertaking, directly or indirectly, services for compensation
             to the public for the transportation of passengers or property,
             or both, or any class of passengers or property, between
             points within this Commonwealth by, through, over, above,
             or under land, water, or air, and shall include forwarders, but
             shall not include contract carriers by motor vehicles, or
             brokers, or any bona fide cooperative association
             transporting property exclusively for the members of such
             association on a nonprofit basis.
Id. Because the definition of “common carrier” excludes brokers, S&H is not itself a
public utility.

                                     [J-9-2016] - 2
a result, the gross receipts do not include deductions for the shipment costs. See

Stipulation of Uncontested Facts, 12/10/13, ¶¶ 2, 4 6-7.

       Section 301.1 of the LTEA, 53 P.S. § 6924.301.1(a.1)(1), authorizes political

subdivisions to levy a tax on the privilege of doing business in the jurisdiction of the

local taxing authority. Section 301.1(f) of the LTEA, however, prohibits local authorities

from collecting or levying any taxes on certain types of goods and transactions

enumerated in sixteen subsections. The “public utility” exception, at issue here, is found

in Section 301.1(f)(2) of the LTEA:

       (f) Such local authorities shall not have authority by virtue of this act:

                                   *      *       *

              (2) To levy, assess or collect a tax on the gross receipts from
              utility services of any person or company whose rates and
              service are fixed and regulated by the Pennsylvania Public
              Utility Commission or on any public utility services rendered
              by any such person or company or on any privilege or
              transaction involving the rendering of any such public utility
              service.
53 P.S. § 6924.301.1(f)(2).3

3
  Section 204(D)(3) of the City’s Business Privilege and Mercantile Rules and
Regulations (“Regulations”) and Section 343.02(c)(3) of the City’s Ordinance also
contain a virtually identical provision excepting “utilities” from the business privilege tax.
The pertinent provision of the City’s Ordinance states:

              Utilities. No such tax shall be assessed and collected on the
              gross receipts from utility service of any person or company
              whose rates of service are fixed and regulated by the
              Pennsylvania Public Utility Commission, or on any public
              utility service rendered by any such person or company or
              on any privilege or transaction involving the rendering of any
              such public utility service.

Ordinance, § 343.02(c)(3).

                                       [J-9-2016] - 3
         For the years 2007 through 2011, S&H filed business privilege tax returns with

the City. S&H paid the annual $25 Business Privilege and Mercantile License fees.4

S&H did not report any income to the City for business privilege tax purposes for those

years, however, because it believed it fell within the “public utility” exception in Section

301.1(f)(2) of the LTEA.5

         In November 2011, the City conducted an audit of S&H’s business privilege tax

returns. The City assessed a business privilege tax on S&H’s gross receipts in the

amount of $118,346.88 for the years 2007-2011.              S&H appealed and the tax-

assessment appeal hearing officer upheld the City’s assessment following a hearing.

         S&H appealed to the trial court, arguing that pursuant to Section 301.1(f)(2) of

the LTEA, the City was not authorized to assess or collect the business privilege tax.

S&H argued, and the City agreed, that Section 301.1(f)(2) of the LTEA contains three

clauses, each of which creates a distinct exception. S&H claimed that it fell within the

third clause because it derives its gross receipts from transactions that involve the

rendering of a public utility service, namely the interstate and intrastate6 shipment of

goods by licensed common carriers regulated by the PUC.              S&H asserted that it

participates in, or is “involved” in, the “rendering” of the public utility services provided

by common carriers because it negotiates the carrier’s charges, it collects from the

shipper the carrier’s charges, it transmits the charges to the carrier, and the amount

S&H invoices its customer includes the actual charge for the services being provided by

4
    See Section 102 of the Regulations.
5
 The City’s Regulations require the filing of a business privilege tax return whether or
not tax is due. Regulations, § 202.
6
  Intrastate trucking involves the picking-up and dropping-off of shipments where both
the origin and destination are in Pennsylvania. The PUC is the Pennsylvania authority
that regulates intrastate trucking.

                                       [J-9-2016] - 4
the carrier.   S&H also emphasized that it pays taxes on freight shipments and is

regulated by the PUC through its registrations with the Federal Motor Carrier Safety

Administration (FMCSA)7 and the Unified Carrier Registration (UCR).8                The City

conversely emphasized that S&H acts only as the “middleman” between shippers and

the carriers and is neither a common carrier nor a public utility. According to the City,

the common carrier itself, rather than the freight broker, is the party directly “involved” in

the “rendering” of the public utility service.

         After a non-jury trial, the trial court concluded that it was “clear and

unambiguous” that S&H’s gross receipts were “tax exempt”9 under the third clause of

7
    S&H holds a freight brokerage license issued by the FMCSA.
8
  Pennsylvania, through the PUC, participates in the federal Unified Carrier Registration
Act (“UCR Act”), 49 U.S.C. § 13901. The UCR Act applies, inter alia, to freight brokers.
Section 14504a of the UCR Act requires filing with the PUC information relating to
financial responsibility and its local agent for service of process.
9
  The trial court’s use of the word “exempt” here is incorrect. As we explained in
Lynnebrook and Woodbrook Associates, L.P. v. Borough of Millersville, 963 A.2d 1261
(Pa. 2008), our jurisprudence distinguishes between the concepts of a tax exemption
and a tax exception:
               Where we determine the breadth of a taxing statute -
               whether a taxing authority is permitted by law to levy a
               particular tax - we consider whether a tax exception exists,
               and the presumption is in favor of the taxpayer. 1 Pa.C.S.A.
               §1928(b)(3). By contrast, where we determine whether a
               person or property fits under a statutory provision
               enumerating exemptions from such taxing authority, we
               consider whether a tax exemption exists, and the
               presumption is in favor of the taxation authority. 1 Pa.C.S.A.
               §1928(b)(5).
Id. at 1265.
The authority to tax, granted under Section 301.1(a) and (a.1) of the LTEA, is expressly
limited by Section 301.1(f)(2). This statutory language, which acts to restrict the power
of the taxing authority, must be construed as a tax exception — not a tax exemption.
Any reasonable doubt concerning the meaning of statutory language involving an
exception is resolved in favor of the taxpayer. Lynnebrook, 963 A.2d at 1265.

                                         [J-9-2016] - 5
Section 301.1(f)(2) of the LTEA. Trial Court Opinion, 2/27/14, at 4. According to the

trial court, S&H “collected gross receipts on transactions involving the rendering of any

such public utility service” since the property carriers S&H used to transport freight are

public utilities.10 Id.

         In a published decision authored by President Judge Pellegrini and joined by

Judge Leadbetter, the Commonwealth Court reversed the trial court’s order and

remanded for further proceedings. The majority initially noted that Section 301.1(f)(2) of

the LTEA “generally prevents local governments from taxing subjects involved in the

rendering of public utility services.” S & H Transport, Inc. v. City of York, 102 A.3d 599,

601 (Pa. Cmwlth. 2014). It found that the first clause -- “[t]o levy, assess or collect a tax

on the gross receipts from utility service of any person or company whose rates and

services are fixed and regulated by the Pennsylvania Public Utility Commission” --

prohibits a tax on the utility as measured by gross receipts. Id. at 601. The second

clause -- “on any public utility services rendered by any such person or company” --

prohibits a local government from imposing a tax on the customer, as measured by the

amount billed to the customer for the services. Id. Finally, with respect to the third

clause, -- “any privilege or transaction involving the rendering of any such public utility

service” -- the majority viewed the issue as “whether this clause applies only to prohibit

levying a business tax on the public utility for the privilege of engaging in public utility

services or whether it extends to all parties that engage in the business of buying public

utility services.” Id. at 601-02.

         Addressing that question, the majority observed that the entity “rendering” the

public utility service is the one that transmits, delivers or furnishes transportation of

10
     In light of its holding, the trial court did not consider S&H’s other issues.

                                          [J-9-2016] - 6
property, which the majority described as the “hallmark” of public utility service as a

common carrier. Id. at 602-03. S&H negotiates a price to facilitate the transportation of

the shippers’ goods to provide better rates, but does not itself transmit, deliver or furnish

transportation of any property.     Id.     As a result, affording the words “involve” and

“render” their plain and ordinary meaning, the majority concluded that S&H was not

“involved” in the “rendering” of “any public utility service.” Id. Judge Leadbetter joined

President Judge Pellegrini’s opinion, but wrote separately to explain that because the

rates of the common carriers contracted by S&H are not “fixed and regulated” by the

PUC, S&H does not qualify for an exception under the third clause of Section

301.1(f)(2), as the reference in that clause to “such public utility service” refers to the

public utility services described in the first clause of that provision.          Id. at 603

(Leadbetter, J., concurring).

       Judge Simpson dissented, indicating that “the words ‘shall not have authority’

have been construed to be a limitation on the power to tax so that doubts relating to

their construction are resolved in favor of the taxpayers.”        Id. at 604 (Simpson, J.,

dissenting) (quoting Golden Triangle Broad, Inc. v. City of Pittsburgh, 377 A.2d 839, 842

(Pa. Cmwlth. 1977) (en banc), aff’d, 397 A.2d 1147 (Pa. 1979)).             Judge Simpson

insisted that the majority’s construction of the word “involved” in the third clause was too

narrow, and that S&H, whose revenues were derived solely from freight delivery by

carriers regulated by the PUC, was thus “involved” in the “rendering” of public utility

services. Id. at 604-605. (Simpson, J., dissenting). Finally, Judge Simpson disagreed

with Judge Leadbetter’s contention that the reference to “such public utility service” in

the third clause refers to the public utility services described in the first clause. Instead,

Judge Simpson would have applied the last antecedent rule, pursuant to which “courts

should generally apply qualifying words to the words immediately preceding them, not to

                                          [J-9-2016] - 7
other words, phrases or clauses more remote.” Id. at 605 n.2 (Simpson, J., dissenting)

(quoting 1 Pa.C.S.A. § 1903(b); Commonwealth v. Packer, 798 A.2d 192 (Pa. 2002)).

Applying the last antecedent rule, Judge Simpson would have found that the term

“such” in the third clause refers to the phrase “any public utility service” in the second

clause, “not to remote language in the first clause.” S & H Transport, 102 A.3d at 605,

n. 2 (Simpson, J., dissenting).

       In a footnote, the majority disagreed with Judge Simpson’s focus on the word

“involved,” reasoning that if this interpretation was accepted, “all truck stops could not

be taxed because they are ‘involved’ in public utility services because they supply the

trucks with gas.” Id. at 603 n.10. The majority further reasoned that because brokers

are specifically excluded from the definition of a “common carrier” in the PUC Code,

66 Pa.C.S. § 102, S&H is, “by definition, not so involved.” S & H Transport, 102 A.3d at

603 n.10. The majority also rejected Judge Simpson’s position that the term “such” in

the third clause refers to the “services” in the second clause. Id. (“[B]ecause the PUC

no longer regulates ‘the rates and services’ of trucking companies G if [Judge

Simpson’s] interpretation is adopted, that would lead to the anomalous result that freight

brokers would not be subject to the tax but trucking companies would be.”).

       This Court granted allocatur to consider the following issues presented by S&H:

              (1) Whether the City [of York] may include, in its tax
              assessment on [S&H], gross receipts from freight-brokerage
              services provided to entities engaged in public utility services
              that are [excepted] from the City’s Business Privilege Tax
              because those entities are regulated by the Pennsylvania
              Public Utility Commission?

              (2) Whether entities whose rates were once, but are no
              longer, regulated by the Pennsylvania Public Utility
              Commission still enjoy the [exception] from Municipal
              taxation articulated in 53 P.S. § 6924.301.1(f)(2)?
S & H Transp., Inc. v. City of York, 111 A.3d 169 (Pa. 2015) (per curiam).

                                      [J-9-2016] - 8
         S&H argues that the Commonwealth Court incorrectly determined that S&H was

not “involved” in the “rendering” of “public utility” services. Initially, S&H claims that in

the intermediate court, neither party raised, argued or briefed the question of whether

S&H was “involved” in the “rendering” of “public utility” service. It contends that, to the

contrary, the parties tacitly agreed that S&H was involved in the rendering of non-rate

regulated common carrier services. S&H claims that since “public utility” is not defined

in the LTEA, the exception from local taxation in the LTEA must be read in pari materia

with the policy objectives expressed in the provisions of the PUC Code. 1 Pa.C.S.A.

§ 1932. Reading Section 301.1(f)(2) in pari materia with Section 2501(a) of the PUC

Code, S&H contends that freight brokers are unquestionably “involved” in the

“rendering” of public utility services.11

11
     Section 2501(a) of the PUC Code provides, in relevant part:
                (a) Declaration of policy.-- G It is hereby found as a fact,
                after due investigation and deliberation, that the service of
                common carriers by motor vehicle, forwarders, contract
                carriers by motor vehicle, and brokers, including the
                procurement and provision of motor vehicles and other
                facilities for the safe transportation of passengers or property
                over the highways, are so closely interwoven and
                interdependent, and so directly affect each other, that in
                order effectively to regulate such common carriers by motor
                vehicle and forwarders, and to provide a proper and safe
                highway transportation system in the public interest, it is
                necessary to regulate the service of such contract carriers by
                motor vehicle and brokers, including the procurement and
                provision of motor vehicles and other facilities for the safe
                transportation of passengers or property over the highways,
                in the manner set forth in this chapter.

66 Pa.C.S. § 2501(a).

                                            [J-9-2016] - 9
       Next, S&H urges that the “public utility” exception in Section 301.1(f)(2) is not

limited to rate-regulated public utilities.12 Embracing Judge Simpson’s application of the

last antecedent rule, S&H submits that the term “such” in the third clause refers to the

phrase “any public utility service” in the second clause. Accordingly, S&H’s preferred

interpretation of Section 301.1(f)(2) would provide an exception from local taxation in

three circumstances: where gross receipts are derived from a utility service whose rates

of service are fixed and regulated by the PUC; where gross receipts are derived from

any public utility service rendered; or where gross receipts are derived from any

privilege or transaction involving the rendering of any public utility service.

       In response, the City supports the Commonwealth Court’s focus on the words

“involved,” “render” and “public utility” as restricting the scope of the exception in the

third clause of Section 301.1(f)(2). The City asserts that the Commonwealth Court

correctly concluded that the entity that renders the public utility service is the one that

transports the goods, and that because S&H does not participate in the actual

transportation of goods, it is not involved in the rendering of public utility service.

Finally, the City insists that even if S&H is involved in the rendering of a public utility

service, S&H still does not qualify for the “public utility” exception under the second or

third clauses because the rates it negotiates and charges its customers are not fixed

and regulated by the PUC. Under the City’s preferred interpretation of the Section

12
   S&H points to Ernest Renda Contracting, Co., Inc. v. Commonwealth, 532 A.2d 416
(Pa. 1987), a case in which this Court held that the “public utility” exception to the
Commonwealth’s “use tax” under 72 P.S. § 7201(o)(4) extended to municipal utilities
even though such entities are not, in a strict sense, a public utility regulated by the PUC.
S&H suggests that Section 301.1(f)(2) of the LTEA follows this line of thought when it
uses the phrase “any public utility service.” S&H contends that the word “any” in the
second clause covers a separate legislatively defined class of services held out to the
public without necessarily being the subject of PUC rate regulation.

                                       [J-9-2016] - 10
301.1(f)(2) exception, an entity must be a public utility whose rates are fixed and

regulated by the PUC.

       As this case presents issues of statutory interpretation, they are questions of law

over which our review is plenary and de novo. Fish v. Township of Lower Merion, 128
A.3d 764, 769 (Pa. 2015). The Statutory Construction Act, 1 Pa.C.S.A. §§ 1501-1991,

makes clear that the “polestar” of construction is determining the intent of the

legislature. Griffiths v. WCAB (Seven Stars Farm, Inc.), 943 A.2d 242, 254 (Pa. 2008);

1 Pa.C.S.A. § 1921(a). When the language of the statute is clear, that language is

dispositive of legislative intent and thus vitiates the need for further interpretation. See

1 Pa.C.S.A. § 1921(b). Statutes or parts of statutes are in pari materia when they relate

to the same persons or things or to the same class of persons or things. 1 Pa.C.S.A.

§ 1932(a). In construing the language within a statute, we must give effect to every

word of the statute. 1 Pa.C.S.A. § 1922(2); American Airlines, Inc. v. Commonwealth,

Board of Finance and Review, 665 A.2d 417 (Pa. 1995); see generally Commonwealth

v. Ostrosky, 909 A.2d 1224, 1232 (Pa. 2006) (citing Holland v. Marcy, 883 A.2d 449,

456 (Pa. 2005) (plurality) (“[W]e cannot assume that the legislature intended any words

to be mere surplusage.”)).

       This case involves the interpretation of a statutory exception from local taxation

for public utilities found in Section 301.1(f)(2) of the LTEA which, as noted above,

provides as follows:

       (f) Such local authorities shall not have authority by virtue of this Act:

                                   *      *       *

              (2) To levy, assess or collect a tax on the gross receipts from
              utility services of any person or company whose rates and
              service are fixed and regulated by the Pennsylvania Public
              Utility Commission or on any public utility services rendered
              by any such person or company or on any privilege or

                                       [J-9-2016] - 11
             transaction involving the rendering of any such public utility
             service.

53 P.S. § 6924.301.1(f)(2).
      As developed, S&H is claiming the exception as a freight broker that negotiates

contracts for carriage with licensed common carriers. These carriers are regulated by

the PUC and defined as public utilities under the PUC Code. Common carriers are

regulated under the PUC Code in varying degrees. Broadly speaking for the purpose of

our analysis, there are two categories of common carriers: those whose rates are

regulated by the PUC and those whose rates are not regulated by the PUC.

      Passenger carriers (with a seating capacity of fifteen or more) and carriers of

household goods in use (moving companies), both of which deal directly with the

consuming public, are regulated regarding rates, geographical area, customer service,

safety and insurance. Passenger carriers and household goods carriers must file a tariff

specifying their applicable rates and charges, and must seek PUC approval for any

change in rates. 52 Pa. Code § 3.381(e). On the other hand, common carriers of

property (trucking companies) are regulated for safety and insurance requirements only.

Property carriers are not required to file a tariff and thus, their rates are not fixed and

regulated by the PUC.13 See 52 Pa. Code § 23.1(b) (“This Chapter [relating to Tariffs of

Common Carriers] applies to motor carriers except common carriers of property.”).

      The parties to this action agree that the common motor carriers for which S&H

provides freight brokerage services are property carriers, i.e., shippers of manufactured

13
  The rates of property carriers were once, but are no longer, fixed and regulated by the
PUC. Cf. Andrew Downer Crain, Ford, Carter, and Deregulation in the 1970s, 5 J.
Telecomm. & High Tech. L. 413, 415-37 (2007) (providing a comprehensive overview of
the efforts of Presidents Ford and Carter to deregulate the transportation industry, and
noting the growing consensus at the time that both the industry and consumers would
benefit from deregulation).

                                     [J-9-2016] - 12
goods and property other than household goods. As such, they are common carriers

that are non-rate regulated public utilities. While their service is regulated by the PUC,

their rates are not fixed and regulated.

       Turning to interpretation of the statute, we find that Section 301.1(f)(2) is clear

and unambiguous.      Excepted from local taxation under the first clause are: “gross

receipts from utility service of any person or company whose rates and services are

fixed and regulated by the Pennsylvania Public Utility Commission.”                53 P.S.

§ 6924.301.1(f)(2). To fall within the ambit of the first clause of Section 301.1(f)(2), the

person or company’s rates and services must be fixed and regulated by the PUC. The

common motor carriers with whom S&H does business (property carriers) do not fall

within the scope of the first clause of Section 301.1.(f)(2) because their rates are not

fixed and regulated by the PUC. The City is not barred from imposing local business

privilege taxes on them.

       The second clause provides an exception from local taxation on “services

rendered by any such person or company.” Id. (emphasis added). It is clear to this

Court that the phrase “any such person or company” refers back to the person or

company “whose rates and services are fixed and regulated” by the PUC in the first

clause. The use of the word “such” in the second clause requires the reference back to

the first clause, where “such person or company” is described.                  See, e.g.,

Commonwealth v. McClintic, 909 A.2d 1241, 1250 (Pa. 2006) (the word “such,’ a

demonstrative adjective, “refers to an antecedent, or a category of things previously

mentioned.”).14 Thus, under the second clause, the City is prohibited from taxing any

14
   In In re Brock, 166 A. 785 (Pa. 1933), this Court examined the adjective “such” in a
statute that began: “In case of the insolvency of any such individual, partnership, or
unincorporated association, acting as a private bankerG .” Id. at 787. Appellants in
that case argued that this phrase referred to any individual or partnership. This Court
(continuedG)

                                      [J-9-2016] - 13
services rendered by a person or company whose rates and service are fixed and

regulated by the PUC. If, as S&H argues, the second clause was intended to apply to

any public utility service (whether rate-regulated or not), the word “such” would

constitute mere surplusage.

       The third clause, principally at issue here, prohibits local taxation of “any privilege

or transaction involving the rendering of any such public utility service.” 53 P.S.

§ 6924.301.1(f)(2) (emphasis added). Again it is clear that word “such” in the phrase

“any such public utility service” refers to the “services” described in the second clause --

which, in turn, refers to the persons or companies identified in the first clause, i.e., those

whose rates and service are fixed and regulated by the PUC. As a result, the third

clause provides an exception from local taxation for any transaction or privilege

involving the rendering of public utility services that are provided by a person or

company whose service and rates are fixed and regulated by the PUC. Because the

rates of the freight carriers with which S&H contracts are not fixed and regulated by the

PUC, S&H may not benefit from the exception in the third clause regardless of whether

(Gcontinued)
disagreed, stating that to ignore the word “such” was “to affront both grammar and
public policy.” Id. at 788. The Court explained further:

       ‘Such' i.e., ‘that kind’ of individual, partnership, etc., as used in that
       sentence can mean only the individual, etc., who has been duly licensed
       as a private banker. If the word ‘such’ does not mean that, it has no place
       or purpose whatever in the act. If the sentence quoted means what
       appellants contend it means, the word ‘such’ is entirely superfluous and
       should be deleted so that the sentence would read: ‘In case of the
       insolvency of any individual,’ etc., ‘acting as a private banker,’ etc. For us
       to delete a word from an act so as to give it a different meaning is for us to
       engage in legislation.

Id. at 787-88.

                                       [J-9-2016] - 14
it is “involved in the rendering” of such service. As a result, we need not decipher the

meaning of that statutory phrase.

         With respect to common motor carriers, the various exceptions from local

taxation in all three clauses of Section 301.1(f)(2) apply only if a common motor carrier’s

rates and services are fixed and regulated by the PUC. In our view, this interpretation is

both the product of a straightforward application of the rules of statutory interpretation

and, importantly, consistent with the primacy of the PUC’s rate-making authority.

Balancing the needs of consumers and utilities, the PUC Code authorizes the PUC to fix

the rates and charges for every public utility and requires that those rates and charges

be “just and reasonable.” 66 Pa.C.S.A. § 1301. To that end, Section 1303 of the Public

Utility Code provides that no public utility shall, “directly or indirectly,” receive “a greater

or less rate for any service rendered or to be rendered by such public utility than that

specified in the tariffs of such public utility applicable thereto.” 66 Pa.C.S.A. § 1303

(emphasis added).15      If local taxing authorities were permitted to tax rate-regulated

services, the providers of those services would effectively receive rates lower than

those specified in their filed tariffs. While one obvious purpose of the LTEA is to permit

15
     Section 1303 provides:
               No public utility shall, directly or indirectly, by any device
               whatsoever, or in anywise, demand or receive from any
               person, corporation, or municipal corporation a greater or
               less rate for any service rendered or to be rendered by such
               public utility than that specified in the tariffs of such public
               utility applicable thereto. The rates specified in such tariffs
               shall be the lawful rates of such public utility until changed,
               as provided in this part. Any public utility, having more than
               one rate applicable to service rendered to a patron, shall,
               after notice of service conditions, compute bills under the
               rate most advantageous to the patron.

66 Pa. C.S.A. § 1303.

                                       [J-9-2016] - 15
local taxing authorities to impose business privilege taxes, the exceptions in Section

301.1(f)(2) are intended to provide an appropriate limitation to eliminate any interference

with the PUC’s rate-making authority.

       In its second issue, S&H contends that the Commonwealth Court’s holding,

which resulted in the application of the exception to only rate-regulated common

carriers, contains an implicit assertion that the “public utility” exception of the LTEA has

been repealed as the result of rate deregulation. S&H states:

              When the Pennsylvania Legislature wrote the LTEA, there is
              perhaps no way they could have foreseen the changes that
              have taken place in the industries considered public utilities
              over the past four decades. However, the Legislature has
              treated these ancillary entities as though they are exempt
              from taxation ever since deregulation began to make
              headlines in the 1970s. The Legislature has had ample
              opportunity to change Section 301.1(f)(2) of the LTEA if they
              believed that a change was necessary, and have not done
              so. Accordingly, the holding of the Commonwealth Court
              contains an implied assertion that the Public Utility
              Exemption [sic] provision in the LTEA has been impliedly
              repealed as the result of rate deregulation. Specifically, the
              provisions of the Public Utility Code, 66 Pa.C.S. § 102, which
              define public utility services broadly, and Section
              301.1(f)(2)[,] which prohibits the local taxation of receipts
              derived from the rendering of public utility services[,] would
              be significantly altered based solely on the change in
              circumstances surrounding the nature of public utility
              regulation.
Brief of S&H at 22-23.

       S&H’s argument lacks merit. Nothing in the LTEA suggests that a person or

company whose rates were once regulated by the PUC is forever shielded from local

taxation. As discussed, the language of the public utility exception of the LTEA is clear.

Only persons or companies whose rates are fixed and regulated by the PUC are

excepted from local taxation, along with the services of such public utility and the

transactions and privileges involving such public utility services. If, for whatever reason,

                                      [J-9-2016] - 16
such as deregulation, the PUC no longer fixes and regulates that person or company’s

rates, then that person or company is not entitled to the benefit of the exception from

local taxation.

       The order of the Commonwealth Court is affirmed.

                                    [J-9-2016] - 17