        IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Green Acres Contracting                   :
Company, Inc.,                            :
                                          :
                   Petitioner             :
                                          :
             v.                           : No. 81 F.R. 2013
                                          : Argued: June 6, 2016
Commonwealth of Pennsylvania,             :
                                          :
                   Respondent             :


BEFORE:      HONORABLE RENÉE COHN JUBELIRER, Judge
             HONORABLE MICHAEL H. WOJCIK, Judge
             HONORABLE JAMES GARDNER COLINS, Senior Judge


OPINION NOT REPORTED

MEMORANDUM OPINION BY
SENIOR JUDGE COLINS                                  FILED: August 10, 2016

             This matter is a petition for review filed by Green Acres Contracting
Company, Inc. (Taxpayer) appealing a determination of the Board of Finance and
Revenue (BFR) that rejected Taxpayer’s challenges to an assessment of state use
taxes on certain items purchased and used by Taxpayer in its business. For the
reasons set forth below, we affirm in part and reverse in part.
             Taxpayer is a Pennsylvania corporation engaged in the business of
construction, principally installation of highway guardrail systems and road signs.
(McCort Dep. at 7; Ex. 5, Narrative Report of Audit (Audit Report) at 2.)
Taxpayer performs this work for the Pennsylvania Department of Transportation
(PennDOT) and the West Virginia, Maryland, Ohio, and Virginia state departments
of transportation. (McCort Dep. at 7-8; Audit Report at 2.) Taxpayer’s guardrail
systems are composed of guardrail panels and guardrail posts. (McCort Dep. at
21-25.) Taxpayer uses nuts, bolts and washers to attach 12.5-foot long guardrail
panels to each other to obtain the required guardrail length and to attach these
guardrails to guardrail posts that are pounded into the ground and hold the
guardrails up at the appropriate height. (Id. at 21-29.) Taxpayer installs a number
of types of guardrail systems that differ in the spacing between the guardrail posts.
(Id. at 8-9, 25-28, 61.) In some of Taxpayer’s guardrail systems, steel, plastic or
wood guardrail blocks are installed between the guardrail and each guardrail post
to increase the force that the guardrail system can withstand. (Id. at 25-26; Audit
Report at 9.)
                Section 202(a) of the Tax Reform Code of 1971 (Tax Code)1 imposes
a six-percent sales tax on the “sale at retail” of tangible personal property and
certain types of services within Pennsylvania, which is collected by the vendor
from the purchaser.       72 P.S. § 7202(a); Crawford Central School District v.
Commonwealth, 888 A.2d 616, 620 (Pa. 2005); Kinsley Construction, Inc. v.
Commonwealth, 894 A.2d 832, 833 (Pa. Cmwlth. 2006), aff’d without op., 915
A.2d 639 (Pa. 2007). Section 202(b) of the Tax Code imposes a six-percent use
tax on the use within Pennsylvania of tangible personal property and certain types
of services “purchased at retail,” unless the user has paid the sales tax imposed by
Section 202(a). 72 P.S. § 7202(b); Crawford Central School District, 888 A.2d at
620; Kinsley Construction, Inc., 894 A.2d at 833. The Tax Code defines the “use”
that is subject to this tax as including both of the following:



1
  Act of March 4, 1971, P.L. 6, as amended, 72 P.S. §§ 7101-10004. Subsections 201(o)(17) and
(pp) and Subsection 204(57) of the Tax Code, discussed herein, were added by the Act of April
23, 1998, P.L. 239, No. 45.

                                             2
             (1) The exercise of any right or power incidental to the
             ownership, custody or possession of tangible personal
             property and shall include, but not be limited to
             transportation, storage or consumption.
                           *                 *               *
             (17) The obtaining by a construction contractor of tangible
             personal property or services provided to tangible personal
             property which will be used pursuant to a construction
             contract whether or not the tangible personal property or
             services are transferred.
72 P.S. § 7201(o)(1), (17).
             In February 2011, following an audit covering the period from
January 1, 2007 through March 31, 2010, the Department of Revenue
(Department) sent Taxpayer a Notice of Audit Assessment assessing $413,145.24
in delinquent state and local sales and use taxes, plus interest, and also assessing
$46,865.24 in penalties. (Ex. 2; Ex. 3.) This assessment consisted of $357.81 in
state sales tax, $410,091.43 in state use taxes, and $2,696.00 in Allegheny County
use taxes. (Board of Appeals Decision at 1.) The state use taxes assessed by the
Department included $129,354.81 for nuts, bolts and washers that Taxpayer used
in constructing and installing its guardrail systems, $16,116.27 for guardrail
blocks, $6,975.09 for materials used in West Virginia construction projects on
which Taxpayer paid use taxes to West Virginia, $4,408.21 with respect to torque
wrench service and traffic control invoices, and $2,911.83 for three vehicles
purchased by Taxpayer on which the Department contended that Taxpayer paid no
sales tax. (McCort Dep. at 19; Ex. 8.) Taxpayer filed a petition for reassessment
with the Department’s Board of Appeals. The Board of Appeals reduced the total
tax assessment to $410,233.41, plus interest, but denied Taxpayer’s appeal with
respect to the above items and the penalties.
             Petitioner appealed the Board of Appeals decision to the BFR. On
December 12, 2012, the BFR issued a determination abating the penalties, but
                                          3
rejecting Taxpayer’s challenges with respect to the nuts, bolts, washers and
guardrail blocks, construction materials used in West Virginia, torque wrench and
traffic control invoices, and vehicle purchases. The BFR concluded that Taxpayer
was entitled to relief with respect to several other items on which use taxes had
been assessed, and reduced the state use tax assessment to $372,922.73 and the
Allegheny County use tax assessment to $1,285.12, resulting, with the unchanged
state sales tax assessment of $357.81, in a total tax deficiency reassessment of
$374,565.66, plus interest. (BFR Determination at 8-10.) Taxpayer timely filed a
petition for review appealing the BFR’s determination to this Court.2
             Although appeals from decisions of the Board of Finance and
Revenue are under this Court’s appellate jurisdiction, the Court functions as a trial
court and hears the case de novo on the record created in this Court and the facts to
which the parties have stipulated. Southern Pines Trucking v. Commonwealth, 42
A.3d 1222, 1227 & n.5 (Pa. Cmwlth. 2012), aff’d without op., 69 A.3d 235 (Pa.
2013); Plum Borough School District v. Commonwealth, 860 A.2d 1155, 1157 n.3
(Pa. Cmwlth. 2004), aff’d, 891 A.2d 726 (Pa. 2006). Taxpayer submitted exhibits
and the deposition of its controller as the record before this Court. No stipulation
of facts was filed by the parties, but the Commonwealth does not dispute the
evidence submitted by Taxpayer.
             Taxpayer challenges $159,766.21 of the BFR’s $374,565.66
reassessment.3    Taxpayer argues: 1) that the nuts, bolts, washers and guardrail
blocks used in its guardrail construction and installation are “building machinery


2
  The Commonwealth did not appeal the abatement of the penalties or the reduction in the
assessment.
3
  Taxpayer has paid the Commonwealth the portion of the reassessment that it no longer
challenges and the interest thereon. (Ex. 17; McCort Dep. at 59.)

                                           4
and equipment” (BME) exempt from state sales and use taxes under Section
204(57) of the Tax Code, 72 P.S. § 7204(57); 2) that it is entitled to a credit for the
use taxes paid to West Virginia under of Section 206(a) of the Tax Code, 72 P.S.
§7206(a);4 3) that the torque wrench and traffic control invoices are for services
that are not subject to sales and use taxes; and 4) that it does not owe use taxes for
the three vehicles because it paid the sales tax for those vehicles. We address each
of these issues in turn.

Nuts, Bolts, Washers And Guardrail Blocks

               Nuts, bolts, washers and guardrail blocks are tangible personal
property purchased by Taxpayer at retail for use in its construction contracts and
are therefore subject to use taxes under Section 202(b) of the Tax Code, unless
Taxpayer paid sales taxes on these items. 72 P.S. § 7202(b). Taxpayer did not pay
sales taxes on the purchases of nuts, bolts, washers and guardrail blocks at issue
here. (Ex. 6.)
               The only sales and use tax exemption applicable to construction
contractors is the BME exemption provided by Section 204(57) of the Tax Code.



4
  Taxpayer argued in its brief that it is also entitled to a credit for taxes paid to the state of
Virginia. The record, however, shows that Taxpayer withdrew that claim. (McCort Dep. at 20;
Ex. 8 at 7.). In addition, Taxpayer’s brief asserts an argument that the West Virginia and
Virginia materials are exempt from taxation as resale of traffic signs to a tax exempt purchaser.
(Petitioner’s Br. at 26-27.) This issue is not raised or encompassed in Taxpayer’s Statement of
the Questions presented, which raised only credit for taxes paid to other states with respect to
those items and makes no reference to traffic signs or resale to exempt entities. (Petitioner’s Br.
at 3-4.) This argument is therefore waived. Pa. R.A.P. 2116(a) (“No question will be considered
unless it is stated in the statement of questions involved or is fairly suggested thereby”); Mooney
v. Greater New Castle Development Corp., 510 A.2d 344, 348 n.4 (Pa. 1986); Dunn v. Board of
Property Assessment, Appeals and Review of Allegheny County, 877 A.2d 504, 510 n.13 (Pa.
Cmwlth. 2005), aff’d without op., 936 A.2d 487 (Pa. 2007).

                                                5
Crawford Central School District, 888 A.2d at 622-23; Plum Borough School
District, 860 A.2d at 1159-60. Section 204(57) exempts from sales and use taxes

            [t]he sale at retail to or use by a construction contractor of
            building machinery and equipment and services thereto that
            are:
            (i) transferred pursuant to a construction contract for any
            charitable organization, volunteer firemen’s organization,
            volunteer firefighters’ relief association, nonprofit educational
            institution or religious organization for religious purposes,
            provided that the building machinery and equipment and
            services thereto are not used in any unrelated trade or
            business; or
            (ii) transferred to the United States or the Commonwealth or
            its instrumentalities or political subdivisions.
72 P.S. § 7204(57) (emphasis added). Although Section 204 is titled “Exclusions
from tax,” because it excuses from taxation items that are otherwise taxable under
Section 202, Section 204(57) is a tax exemption, not an exclusion from taxation,
and is strictly construed against Taxpayer. Crawford Central School District, 888
A.2d at 621; Plum Borough School District, 860 A.2d at 1157-58 n.4.
            The Commonwealth does not dispute that the nuts, bolts, washers and
guardrail blocks at issue here were used by Taxpayer in constructing and installing
guardrail systems for PennDOT or other entities to which the BME exemption
applies. The question before us is whether these items fall within the definition of
BME.
            Section 201(pp) of the Tax Code defines BME as “[g]eneration
equipment, storage equipment, conditioning equipment, distribution equipment and
termination equipment” of ten specified types, including “control system limited to
energy management, traffic and parking lot and building access.”          72 P.S. §
7201(pp). This definition of BME also specifically provides:


                                         6
             The term shall include boilers, chillers, air cleaners,
             humidifiers, fans, switchgear, pumps, telephones, speakers,
             horns, motion detectors, dampers, actuators, grills, registers,
             traffic signals, sensors, card access devices, guardrails, medial
             devices, floor troughs and grates and laundry equipment,
             together with integral coverings and enclosures, whether or
             not the item constitutes a fixture or is otherwise affixed to the
             real estate, whether or not damage would be done to the item
             or its surroundings upon removal or whether or not the item is
             physically located within a real estate structure. The term
             “building machinery and equipment” shall not include
             guardrail posts, pipes, fittings, pipe supports and hangers,
             valves, underground tanks, wire, conduit, receptacle and
             junction boxes, insulation, ductwork and coverings thereof.
Id. (emphasis added).       Nuts, bolts, washers, and guardrail blocks are not
themselves within any of the ten types of generation equipment, storage
equipment, conditioning equipment, distribution equipment and termination
equipment defined as BME, nor are they items specifically listed as BME.
Taxpayer argues that all of the nuts, bolts, and washers at issue and guardrail
blocks are exempt BME because they are part of its guardrail systems.
              The Tax Code, however, does not provide a sales and use tax
exemption for entire guardrail systems. Section 201(pp) does not list “guardrail
systems” as BME; instead, it provides only that “guardrails” are BME and
specifically excludes essential parts of guardrail systems, guardrail posts, from the
BME exemption. 72 P.S. § 7201(pp). Given the statute’s treatment of “guardrails”
as distinct from the complete guardrail system, the fact that items are part of a
guardrail system is not sufficient to bring them within the definition of BME.
Rather, it appears that the legislature’s intent was to exempt only the horizontal rail
itself. Guardrail blocks, which are placed between the guardrail and the guardrail
post, and the nuts, bolts, and washers connecting the guardrail to guardrail posts
are items separate from the guardrail that are used in its installation, and are no

                                          7
more part of the guardrail than they are part of the guardrail posts to which they are
also attached.       Guardrail blocks and the nuts, bolts, and washers connecting
guardrail panels to guardrail posts therefore do not fall within the definition of
BME and are not exempt from taxation under Section 204(57) of the Tax Code.5
               Taxpayer is correct that BME includes the nuts, bolts, and washers
that it used to connect one guardrail panel to another in constructing a horizontal
guardrail.    The Tax Code defines as BME “guardrails,” not merely guardrail
panels.    Nuts, bolts, and washers connecting guardrail panels are part of the
horizontal guardrail and are therefore within the BME exemption as an internal
part of the exempt guardrail.         The exclusion of “fittings” from the definition of
BME does not change this. The evident purpose of the exclusion of the listed
items, “guardrail posts, pipes, fittings, pipe supports and hangers, valves,
underground tanks, wire, conduit, receptacle and junction boxes, insulation,
ductwork,” is to make clear that those items are not themselves BME, and do not
become exempt simply because they are used in installing equipment defined as
BME or are used in conjunction with BME.                    The fact that Section 201(pp)
excludes these items does not show a legislative intent to break down the internal
components of equipment expressly defined as BME and designate some of those
internal components as taxable. The exclusion of “fittings” therefore cannot make




5
 Indeed, it appears that Taxpayer agreed with this analysis at the time of audit at issue here. The
Audit Report states that in a conference on this issue, Taxpayer’s accountants “did not disagree
with the Department’s position that the nuts and bolts that attached the guiderail panels to the
guardrail posts are taxable” and that Taxpayer’s contention with respect to nuts, bolts, and
washers was “that the nuts and bolts that attach one length of guiderail panel to another length of
guiderail panel simply become part of one continuous length of guiderail and therefore the nuts
and bolts are exempt as part of the guiderail.” (Audit Report at 9.)
                                                8
nuts, bolts and washers internal to an exempt guardrail taxable, any more than
wires or valves inside other exempt BME are separately taxable.6
              Taxpayer, however, has not shown the amount of the $129,354.81
assessment on nuts, bolts and washers that is attributable to nuts, bolts and washers
that are exempt under Section 204(57). Taxpayer has admitted that it cannot
quantify the amount or percentage of nuts, bolts and washers it used to connect
guardrail panels.      (McCort Dep. at 63.)           Although Taxpayer has submitted
evidence of the number of nuts, bolts and washers used for each attachment of one
guardrail panel to another and for each attachment of a guardrail panel to a
guardrail post (id. at 25-29), this evidence is insufficient to permit the Court to
make any determination. Taxpayer provided evidence only as to the spacing of
guardrail posts on two of its systems and admitted that it installs other systems
with different, unidentified spacing of guardrail posts. (Id. at 61.) There is also no
evidence as to the average length of the guardrails or even a minimum length, and
the ratio between guardrail posts connections and guardrail panel connections will
vary with the length of the guardrail, since posts would normally be required on
both ends of each guardrail and one less panel connection will be necessary than
the number of panels used in a guardrail.
              It is Taxpayer’s burden to show that an exemption from taxation
applies and that the taxes that it challenges were improperly assessed. Section 236

6
  Taxpayer also argues that its nuts, bolts and washers are not subject to the exclusion because
the term “fittings” applies only to plumbing and pipe connections. We do not base our ruling on
this argument. Neither the Tax Code nor the Department’s regulations defines the term “fittings”
and there is no case law interpreting that term as it used in the Tax Code. The dictionary
definitions of the noun “fitting” are not limited to plumbing and pipes and include “accessory,
adjunct, attachment” and “a small often standardized part (as a coupling, valve, gauge) entering
into the construction of a boiler, steam, water or gas supply installation or other apparatus.”
Webster’s Third New International Dictionary Unabridged 860 (2002). In light of our
conclusion that the exclusion does not apply to internal components of BME, we need not and do
not decide the precise scope of the term “fitting” in Section 201(pp).
                                               9
of the Tax Code, 72 P.S. § 7236; Senex Explosives, Inc. v. Commonwealth, 58
A.3d 131, 137, 139 (Pa. Cmwlth. 2012), aff'd without op., 91 A.3d 101 (Pa. 2014);
Southern Pines Trucking, 42 A.3d at 1229; Fiore v. Commonwealth, 668 A.2d
1210, 1215 (Pa. Cmwlth. 1995), aff'd without op., 690 A.2d 234 (Pa. 1997).
Because Taxpayer has not introduced evidence sufficient to make any
determination of the amount of nuts, bolts and washers that are exempt or of the
amount of the assessment on those items that is incorrect, we are constrained to
affirm the $129,354.81 assessment of use taxes on nuts, bolts and washers, in
addition to the assessment of use taxes on the non-exempt guardrail blocks.

Taxes Paid To West Virginia

            Section 206(a) of the Tax Code provides:

            A credit against the tax imposed by section 202 shall be
            granted with respect to tangible personal property or services
            purchased for use outside the Commonwealth equal to the tax
            paid to another state by reason of the imposition by such other
            state of a tax similar to the tax imposed by this article:
            Provided, however, That no such credit shall be granted
            unless such other state grants substantially similar tax relief
            by reason of the payment of tax under this article or under the
            Tax Act of 1963 for Education.
72 P.S. § 7206(a) (emphasis added). West Virginia grants a credit against sales
and use taxes imposed by other states. W. Va. Code § 11-15A-10a.
            Taxpayer paid $6,975.09 in use taxes to West Virginia for
construction materials that it purchased under West Virginia specifications for use
on West Virginia projects. (McCort Dep. at 29-42; Ex. 8 at 7; Ex. 15; Ex. 16.)
One of the 16 transactions that are the subject of this claim was for plants for
landscaping purchased by Taxpayer in Pennsylvania from a Pennsylvania seller for
use on a West Virginia project. (McCort Dep. at 72-73; Ex. 16 at 2.) The other 15
                                        10
transactions were purchases from Ohio sellers and a West Virginia seller. (Ex. 16
at 3-17.) Fourteen of those invoices indicate that the materials were delivered to
Taxpayer in Pennsylvania before their use in West Virginia; the remaining invoice
on which Taxpayer paid taxes to West Virginia indicates that the items, purchased
from an Ohio seller, were to be delivered directly to West Virginia. (McCort Dep.
at 74-79; Ex. 16 at 3-17.)
             The Commonwealth does not dispute that Taxpayer paid $6,975.09 in
use taxes to West Virginia on these transactions and that materials were all
purchased for West Virginia highway projects and used in West Virginia. The
Commonwealth also has not contested that the West Virginia statute satisfies the
reciprocity requirement of Section 206(a) and that it assessed Pennsylvania use tax
on those same materials without a credit for those tax payments. These undisputed
facts satisfy all of the requirements that Section 206(a) sets forth for a credit for
taxes paid to another state.
             The Commonwealth contends that Taxpayer is not entitled to any
credit for the taxes it paid to West Virginia because the credit under Section 206(a)
is limited to purchases made and delivered outside of Pennsylvania. We do not
agree. The language of Section 206(a) does not state that the property must be
purchased and delivered outside of Pennsylvania; it provides a credit for taxes paid
to other states on “tangible personal property or services purchased for use outside
the Commonwealth,” without restriction on where the property is purchased or first
delivered. 72 P.S. § 7206(a) (emphasis added). It is a fundamental principle of
statutory construction that each word in the statute is to be given meaning and not
be treated as mere surplusage. In re Employees of Student Services, Inc., 432 A.2d
189, 195 (Pa. 1981); Verizon Pennsylvania Inc. v. Workers’ Compensation Appeal
Board (Ketterer), 87 A.3d 942, 947-48 (Pa. Cmwlth. 2014); see also 1 Pa. C.S. §

                                         11
1921(a) (“Every statute shall be construed, if possible, to give effect to all its
provisions”). If it were the legislature’s intent to limit the credit to purchases
completed outside Pennsylvania, the words “for use” would be superfluous.
             The Commonwealth argues that the Tax Code imposes the use tax on
storage of tangible personal property regardless of where it is ultimately used, 72
P.S. § 7201(o)(1); see also 61 Pa. Code § 32.5(f), and repealed a prior provision
that excluded interim storage from taxable use. This fact does not support the
limiting of Section 206(a) to purchases and deliveries outside of Pennsylvania.
The issue here is not whether the materials at issue are subject to the use tax under
Section 202(b) of the Tax Code, but whether Section 206(a) gives Taxpayer a
credit against that tax for taxes that it paid to another state on those same materials.
The fact that the legislature has chosen to tax items stored in Pennsylvania and
collect that tax where no tax is paid to any other state does not negate a legislative
intent to grant a credit where taxes have been paid to another state whose
connection to the property is greater because the items were purchased solely for
installation or consumption in that other state.
             The Department regulation interpreting the statutory credit for taxes
paid other states, 61 Pa. Code § 31.15, does require that the taxpayer show out-of-
state purchase and delivery. This regulation provides:

             A contractor may be entitled to a tax credit against tax owed
             to the Commonwealth upon property used or consumed in this
             state. To be entitled to such credit, the following conditions
             shall be met:
              (1) Purchase and possession of the property shall be made in
             a state other than this Commonwealth; and
             (2) Sales tax shall have been legally paid upon the property to
             the other state; and



                                          12
               (3) The sales tax law of the other state must grant
               substantially the same tax credit for sales tax paid to the
               Commonwealth. …
61 Pa. Code § 31.15(a) (emphasis added). If this regulation were consistent with
the language of Section 206(a), Taxpayer would not be entitled to a credit on the
15 purchases that were initially made in or delivered to Pennsylvania.7 This
regulation, however, does not interpret the statutory language “purchased for use
outside the Commonwealth.” Instead, Section (a)(1) of the regulation imposes a
completely different criterion, the location of purchase and delivery, that is not
contained in Section 206(a). While an agency’s interpretive regulation is entitled
to deference to the extent that it tracks the meaning of the statute in question, such
a regulation cannot impose standards different from those set forth by the statute’s
language. Commonwealth v. Gilmour Manufacturing Co., 822 A.2d 676, 679-84
(Pa. 2003) (Department regulation defining state where sale occurred was
disregarded in interpreting Section 401 of the Tax Code because it was inconsistent
with the language of Section 401); Public School Employees’ Retirement System v.
Pennsylvania School Boards Association, Inc., 682 A.2d 291, 292-94 (Pa. 1996)
(regulation imposing different standard for calculating pension service credit than
that set by statute was invalid). Because 61 Pa. Code § 31.15(a)(1) is contrary to
the clear wording of Section 206(a) of the Tax Code, this subsection of the
Department’s regulation is invalid and must be disregarded.
               The Commonwealth also argues, based on case law from other
jurisdictions, that statutes providing credits for taxes paid to other states are
interpreted to give priority to the state where the first delivery or use occurs and to


7
 Although the Commonwealth characterizes all of the 16 transactions as involving a purchase or
delivery in Pennsylvania, that is not correct with respect to one of the purchases at issue, which
was delivered from Ohio directly to West Virginia and was not received by Taxpayer in
Pennsylvania. (McCort Dep. at 78; Ex. 16 at 16.)
                                               13
require that the credit be given by the state where the item was subsequently used
or moved. The statutory provisions in those cases were significantly different from
Section 206(a) and did not contain the language at issue here, “purchased for use
outside the [state].” See Chicago Bridge & Iron Co. v. State Tax Commission, 839
P.2d 303, 308-09 (Utah 1992) (credit was under Multistate Tax Compact that
provided that “[e]ach purchaser liable for a use tax on tangible personal property
shall be entitled to full credit for the combined amount or amounts of legally
imposed sales or use taxes paid by him with respect to the same property to another
State and any subdivision thereof” and Multistate Tax Commission required that
“precedence in liability shall prevail over precedence in payment”); Broadcast
International, Inc. v. Utah State Tax Commission, 882 P.2d 691, 699 (Utah App.
1994) (same); Allied Steel Co. v. Larey, 440 S.W.2d 567, 568-69 (Ark. 1969)
(statute provided that tax was not imposed “in respect to the use or consumption or
storage of tangible personal property … for use or consumption in this State upon
which a like tax equal to or greater than the amount imposed by this Act has been
paid in another state”). Because those statutes give a general credit for taxes
legally imposed or paid to other states without further prerequisites for the credit, a
rule of priority is necessary to determine which state is to give credit and which
state is to retain the collected tax. In contrast, Section 206(a) defines the credit by
the state of intended use, which requires no rule of priority to determine which
state’s tax takes precedence.
             Because Taxpayer showed that it paid use taxes of $6,975.09 to West
Virginia for materials purchased for and used in West Virginia construction
projects, Taxpayer is entitled to a credit under Section 206(a) of the Tax Code
against the assessment of Pennsylvania use taxes on those same materials and the
BFR’s reassessment must accordingly be reduced by $6,975.09.

                                          14
Torque Wrench And Traffic Control Invoices

             Taxpayer contends neither the torque wrench nor traffic control
invoices fall within the types of transactions on which the Tax Code imposes the
use tax. We do not agree.
             As noted above, Section 202(b) imposes the use tax on “use … within
this Commonwealth of tangible personal property purchased at retail … and on
those services described herein purchased at retail.” 72 P.S. § 7202(b). Section
201(k)(4) defines “[s]ale at retail” as including

             rendition for a consideration of the service of repairing,
             altering, mending, pressing, fitting, dyeing, laundering,
             drycleaning or cleaning tangible personal property other than
             wearing apparel or shoes, or applying or installing tangible
             personal property as a repair or replacement part of other
             tangible personal property except wearing apparel or shoes for
             a consideration, …. whether or not any tangible personal
             property is transferred in conjunction therewith, except such
             services as are rendered in the construction, reconstruction,
             remodeling, repair or maintenance of real estate[.]
72 P.S. § 7201(k)(4) (emphasis added). Section 201(f) defines “[p]urchase at
retail” as including “[t]he obtaining for a consideration of those services described
in subclauses (2), (3) and (4) of clause (k) of this section other than for resale.” 72
P.S. § 7201(f)(3). “Purchase at retail” is also defined as including “the rental or
lease of tangible personal property.” 72 P.S. § 7201(f)(2).
             All of the torque wrench invoices at issue state that they are for
calibration of torque wrenches or other equipment; five of these eight invoices
refer to repair of the torque wrenches in addition to calibration. (Ex. 9.) Torque
wrench repair is a repairing of tangible personal property, and therefore constitutes
a service that is subject to the use tax. 72 P.S. § 7201(f)(3), (k)(4). Calibration
would constitute an altering of the torque wrench or other equipment if the service
                                          15
provided included adjustments to the wrenches or other equipment.               While
Taxpayer claimed that the calibration was a “testing” of the torque wrenches, it
also characterized the calibration as “[m]aking sure that [the wrench] is tightened
to the proper tension” (McCort Dep. at 42-44), which would include adjustments
of the wrench where necessary. Because Taxpayer did not show that the work
encompassed by the “calibration” services was outside the scope of taxable
services under Sections 201(f)(3) and 201(k)(4) of the Tax Code, Taxpayer failed
to meet its burden of showing that the taxes on the torque wrench invoices were
improperly assessed. See 72 P.S. § 7236; Senex Explosives, Inc., 58 A.3d at 137;
Southern Pines Trucking, 42 A.3d at 1229; Fiore, 668 A.2d at 1215.
             The traffic control invoices on their face state that they are charges for
rental of temporarily placed, movable equipment that is used at Taxpayer’s
construction sites. (Ex. 10.) Because rentals of tangible personal property are
subject to the use tax, 72 P.S. § 7201(f)(2), there is no error in the assessment of
use taxes on the traffic control invoices.

Vehicles On Which Sales Tax Was Paid

             Taxpayer was assessed use tax on three vehicles, $1,320.00 and
$1095.00 for two Freightliner trucks and $496.83 for an F-450 truck, on the ground
that Taxpayer allegedly did not pay sales tax on the purchase of those vehicles.
(Ex. 7.) Taxpayer in fact paid $1,320.00 and $1095.00 in Pennsylvania sales tax
on the two Freightliner trucks in 2007 and 2008, respectively. (Ex. 12; Ex. 13;
McCort Dep. at 48-53.) The Commonwealth concedes that the assessments for
these two vehicles, which total $2,415.00, are in error, and that the BFR’s
reassessment must be reduced by that amount. (Respondent’s Br. at 7-8.)         With
respect to the F-450 truck, the assessment was based on the fact that Taxpayer’s

                                             16
capitalized cost of the truck, $44,432.80, was more than the invoice for the truck
on which sales tax was paid. (Ex. 7; Ex. 14.) Taxpayer has submitted documents
showing the basis for the $44,432.80 capitalized cost and supporting invoices for
work on and equipment added to this truck that show payment of the sales tax on
those items. (Ex. 14; McCort Dep. at 56-59.)
             As noted above, Section 202(b) imposes the use tax only on items on
which the user did not pay the sales tax imposed by Section 202(a). 72 P.S. §
2202(b) (“such tax shall not be paid to the Commonwealth by such person where
he has paid the tax imposed by subsection (a) of this section”). Because Taxpayer
has shown that it paid the sales tax for all three vehicles, it does not owe any use
tax with respect to these vehicles and the BFR’s reassessment must accordingly be
reduced by $2,911.83.

Conclusion

             For the foregoing reasons, the order of the BFR is affirmed as to the
use tax assessment on nuts, bolts and washers used in guardrail systems, guardrail
blocks, and the torque wrench and traffic control invoices. The order of the BFR,
however, is reversed as to the use tax assessments on the items on which Taxpayer
paid taxes to West Virginia and the three vehicles purchased by Taxpayer. The
BFR’s assessment of $372,922.73 in state use taxes must accordingly be reduced
by $9,886.92, to $363,035.81.

                                    _______________ ______________________
                                    JAMES GARDNER COLINS, Senior Judge


Judge McCullough did not participate in this decision.


                                        17
        IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Green Acres Contracting                  :
Company, Inc.,                           :
                                         :
                   Petitioner            :
                                         :
            v.                           : No. 81 F.R. 2013
                                         :
Commonwealth of Pennsylvania,            :
                                         :
                   Respondent            :


                                    ORDER

            AND NOW, this 10th day of August, 2016, the order of the Board of
Finance and Revenue in the above-captioned matter is hereby AFFIRMED insofar
as it upheld the assessment of $145,471.08 in use taxes on nuts, bolts, washers, and
guard rail blocks and the assessment of $4,408.21 in use taxes on torque wrench
and traffic control invoices. The order of the Board of Finance and Revenue is
REVERSED with respect to the assessment of $6,975.09 in use taxes on materials
that Petitioner purchased for use in West Virginia and the assessment of $2,911.83
in use taxes on vehicle purchases. Unless exceptions are filed within thirty (30)
days in accordance with the provisions of Pa. R.A.P. 1571(i), this matter is
remanded to the Board of Finance and Revenue to reduce the assessment of state
use taxes issued to Petitioner for the January 1, 2007 through March 31, 2010 audit
period to $363,035.81 in accordance with the foregoing opinion.



                                    _______________ ______________________
                                    JAMES GARDNER COLINS, Senior Judge
