          IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Green Acres Contracting                   :
Company, Inc.,                            :
                          Petitioner      :
                                          :
                   v.                     :   No. 81 F.R. 2013
                                          :   Submitted: March 8, 2017
Commonwealth of Pennsylvania,             :
                     Respondent           :



BEFORE:      HONORABLE MARY HANNAH LEAVITT, President Judge
             HONORABLE RENÉE COHN JUBELIRER, Judge
             HONORABLE ROBERT SIMPSON, Judge
             HONORABLE P. KEVIN BROBSON, Judge
             HONORABLE ANNE E. COVEY, Judge
             HONORABLE JULIA K. HEARTHWAY, Judge
             HONORABLE JOSEPH M. COSGROVE, Judge




OPINION BY
JUDGE COHN JUBELIRER                          FILED: June 13, 2017


      Before the Court en banc are the Exceptions of Green Acres Contracting
Company, Inc. (Green Acres) to this Court’s August 10, 2016 Opinion and Order
affirming in part and reversing in part the Order of the Board of Finance and
Revenue (Board) that granted in part and denied in part Green Acres’ Petition for
Reassessment of sales and use tax.        Green Acres Contracting Co., Inc. v.
Commonwealth (Pa. Cmwlth., No. 81 F.R. 2013, filed August 10, 2016) (Green
Acres I). At issue is the scope of the term “guardrails” as used in the definition of
tax exempt “Building Machinery and Equipment” (BME). Green Acres argues
that the term “guardrails” refers to the entire guardrail system, with the exception
of guardrail posts, which are specifically excluded, and, as such, nuts, bolts,
washers, and guardrail blocks, which are necessary for the construction of the
guardrails, constitute tax exempt BME as that term is defined under Section
201(pp) of the Tax Reform Code of 1971 (Tax Code),1 72 P.S. § 7201(pp).
      The underlying facts are not in dispute and may be summarized briefly as
follows.2    Green Acres is a construction contractor engaged primarily in the
installation of highway guardrail systems, consisting of guardrail panels and
guardrail posts, and road signs for the Pennsylvania Department of Transportation
(PennDOT) and other state departments of transportation. Green Acres I, slip op.
at 1-2.     Green Acres “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 . . . .” Id., slip op. at 2. Guardrail blocks,
composed of steel, plastic, or wood, “are installed between the guardrail and each
guardrail post to increase the force that the guardrail system can withstand.” Id.
Green Acres purchased the nuts, bolts, washers, and guardrail blocks without
paying any sales tax on those items. There is no dispute that Green Acres used
nuts, bolts, washers, and guardrail blocks in the construction and installation of
guardrail systems for PennDOT and other entities.
      Section 202(b) of the Tax Code, 72 P.S. § 7202(b), imposes a six percent use
tax on the use within the Commonwealth of tangible personal property “purchased
at retail.” Tangible personal property “used pursuant to a construction contract”
constitutes a “use” subject to this tax.3 72 P.S. § 7201(o)(1) and (17). However,

      1
        Act of March 4, 1971, P.L. 6, as amended, 72 P.S. §§ 7101-10004.
      2
        A more comprehensive description of the facts is found in Green Acres I, slip op. at 1-4.
      3
        Section 201(o)(1) and (17) of the Code provides, in pertinent part:

(Footnote continued on next page…)


                                               2
tangible personal property used in a construction contract that is transferred to the
Commonwealth is exempt from state sales and use taxes if it is BME pursuant to
Section 204(57) of the Tax Code, 72 P.S. § 7204(57). BME, as defined, includes
generally “control system[s] limited to energy management, traffic and parking lot
and building access” and specifically includes “guardrails” but does “not include
guardrail posts,” as follows:

       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.

72 P.S. § 7201(pp) (emphasis added). Thus, the statute distinguishes between
“guardrails,” which are tax exempt BME, and “guardrail posts,” which are not
_____________________________
(continued…)
       (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) and (17). Subsection (o)(17) was added by Section 1 of the Act of April 23,
1998, P.L. 239.



                                                3
tax exempt BME. However, the statute does not specify the tax status of the nuts,
bolts, washers, and guardrail blocks, all of which are necessary for guardrail
system construction.
       The Department of Revenue (Department) performed a sales and use tax
audit on Green Acres for the period from January 1, 2007 through March 31, 2010.
Based on the audit, the Department issued an assessment to Green Acres totaling
$413,145.24, plus interest, of which $357.81 was unpaid sales tax, $410,091.43
was unpaid use tax, and $2,696.00 was unpaid Allegheny County use taxes; there
was also $46,865.24 in penalties. Pertinent here, Green Acres filed a Petition for
Reassessment with the Department’s Board of Appeals, seeking relief from
$129,354.81 of the use tax assessed on nuts, bolts, and washers that it used in
constructing and installing its guardrail systems and $16,116.27 for guardrail
blocks contending they were excluded as BME. While the Board of Appeals
reduced the total assessment to $410,233.41, plus interest, it denied Green Acres
any tax or penalty relief. Green Acres appealed to the Board, which abated the
penalties, but rejected Green Acres’ requested relief regarding, among other things,
the nuts, bolts, washers, and guardrail blocks.4 Green Acres then appealed to this
Court for review of the Board’s Order.5

       4
           The Board provided relief with respect to other items upon which use taxes were
assessed, “resulting . . . in a total tax deficiency reassessment of $374,565.66, plus interest.”
Green Acres I, slip op. at 4. The other items for which relief was granted are not at issue in this
appeal. For a discussion of these items, see id., slip op. at 3-4.
        5
          Our review of a Board determination is governed by Rule 1571 of the Pennsylvania
Rules of Appellate Procedure, Pa. R.A.P. 1571, which authorizes this Court to rule on the record
made before it or on the stipulation of facts made by the parties. In this circumstance, we
exercise the broadest scope of review, E. Diversified Metals Corp. v. Commonwealth, 297 A.2d
167, 168 (Pa. Cmwlth. 1972), because, “[a]lthough this Court hears such cases in its appellate
jurisdiction, 42 Pa. C.S. § 763, this Court functions essentially as a trial court.” PICPA Found.
for Educ. and Research v. Com., 598 A.2d 1078, 1080 n.6 (Pa. Cmwlth. 1991) (citations
(Footnote continued on next page…)


                                                4
       On August 10, 2016, this Court issued an Order affirming the Board’s use
tax assessment on the nuts, bolts, washers, and guardrail blocks used in the
construction and installation of guardrail systems and reversed on other grounds
not pertinent to these Exceptions.          Specifically, after review of the statutory
provisions, this Court concluded that, because the Tax Code did not list “guardrail
systems” as BME, but only “guardrails,” and because “guardrail posts,” which are
an essential part of a guardrail system, are excluded as BME, it was the
Legislature’s intent to exempt as BME only the horizontal rails of guardrails.
Green Acres I, slip op. at 7. Based on this conclusion, the Court found that the
term “guardrails” only encompasses the nuts, bolts, and washers, which are
“internal components” used to connect horizontal guardrail panels, while guardrail
blocks and the nuts, bolts, and washers used to connect guardrail panels to
guardrail posts are not tax exempt BME under Section 204(57) of the Tax Code.
Id., slip op. at 8. However, because Green Acres could not quantify the amount or
percentage of nuts, bolts, and washers used only for attachment of horizontal
guardrail panels, it did not prove the amount of the $129,354.81 assessment
attributable to the exempt nuts, bolts, and washers. Id., slip op. at 9.
       In its Exceptions, Green Acres argues that it was error to conclude that nuts,
bolts, and washers are tax exempt only insofar as they are used to connect
horizontal guardrail panels because the term “guardrails” refers to the entire
guardrail system, not just the horizontal elements of guardrails. Examining the
structure of the BME definition, Green Acres argues that “guardrails” are included
_____________________________
(continued…)
omitted). The issue presented in this case poses a question of statutory construction, for which
our review is plenary. Malt Beverages Distrib. Ass’n v. Pa. Liquor Control Bd., 918 A.2d 171,
175 (Pa. Cmwlth. 2007), aff’d, 974 A.2d 1144 (Pa. 2009).



                                               5
as a “control system,” with the “guardrail posts” carved out from that category, just
as “insulation and ductwork” are carved out of the category of “air conditioning.”
(Green Acres’ Br. at 9.) Because “guardrail posts” are a carve-out from the
broader category of “guardrails,” Green Acres contends that everything else that is
part of the “guardrails,” other than the posts, remain exempt, including the
horizontal elements (guardrail panels), guardrail blocks, and connecting materials
(nuts, bolts, and washers).
      In cases requiring the interpretation of statutes, we are guided by the
Statutory Construction Act of 1972,6 which directs that “[t]he object of all
interpretation and construction of statutes is to ascertain and effectuate the
intention of the General Assembly.” 1 Pa. C.S. § 1921(a). “The clearest indication
of legislative intent is generally the plain language of a statute.” Walker v. Eleby,
842 A.2d 389, 400 (Pa. 2004). “When the words of a statute are clear and free
from all ambiguity, the letter of it is not to be disregarded under the pretext of
pursuing its spirit.”      1 Pa. C.S. § 1921(b).      However, we employ statutory
construction “[w]hen the words of the statute are not explicit.”             1 Pa. C.S.
§ 1921(c). In doing so, the general rule is that “[w]ords and phrases [are to] be
construed . . . according to their common and approved usage[,]” and “[e]very
statute [is to] be construed, if possible, to give effect to all its provisions” to assure
“that no provision is reduced to mere surplusage.” 1 Pa. C.S. §§ 1903(a), 1921(a);
Walker, 842 A.2d at 400.
      The plain language of the statute provides that “guardrails” are considered
tax exempt BME, while “guardrail posts” are not. The term “guardrails” is not
defined in the Tax Code; however, “guardrail” is defined in the dictionary as “a

      6
          1 Pa. C.S. §§ 1501-1991.



                                            6
railing for guarding against danger or trespass,” Webster’s Third New International
Dictionary 1007 (2002), or “a barrier . . . placed along the edge of a highway at
dangerous points,” Merriam-Webster’s Collegiate Dictionary 554 (11th ed. 2003).
“Barrier” is defined as “something material that blocks or is intended to block
passage,” Merriam-Webster’s Collegiate Dictionary 100 (11th ed. 2003), and
“railing” is defined as “a barrier consisting of a rail and supports,” id. at 1027
(emphasis added); Webster’s Third New International Dictionary 1875 (2002) (“a
barrier (as a fence or balustrade) consisting of a rail and supports”). A barrier or
railing is, thus, composed of both horizontal and vertical elements, which, when
constructed, function as a system.         Green Acres observes that “[g]uardrail
construction and installation is subject to strict federal and state Department of
Transportation engineering specifications.” (Green Acres’ Reply Br. at 5 n.2.) We
note that both federal and state publications describe guardrails as a “system.” See,
e.g., Guardrail 101, Federal Highway Admin. (U.S. Dep’t of Transp., Dec. 10,
2014), https://www.fhwa.dot.gov/guardrailsafety/guardrail101.pdf (last visited
June 12, 2017) (stating that “[g]uardrails function as a system, which includes the
guardrail itself, the posts, the soil that the posts are driven in, the connection of the
guardrail to the posts, the end terminal, and the anchoring system at the end
terminal. All these elements have a bearing in how the guardrail will function
upon impact.”); Roadside Safety Pocket Guide, Pub. 652 (12-10), at 8 (Pa. Dep’t
of Transp., 2010 ed.), https://www.dot.state.pa.us/public/pubsforms/Publications/P
ub%20652.pdf (last visited June 12, 2017) (listing the different types of guardrail
systems, including flexible guardrail systems and semi-rigid guardrail systems).
Without the entire guardrail system in place, including the horizontal panels, nuts,
bolts, washers, guardrail blocks, and vertical posts, a guardrail would not function



                                           7
or serve the purpose for which the system was designed: as a railing or barrier to
prevent against danger on roadways.
       The definitions and common usage of the term “guardrails,” thus refers to
more than the horizontal elements and includes the entire guardrail system as it is
constructed and installed along a road and/or highway. This understanding of
“guardrails” fits well within the structure of the BME definitional section, which
establishes a tax exemption for “guardrails” and excludes (thus making taxable),
simply “guardrail posts.” That only the “guardrail posts” are carved out as taxable
explains the Legislature’s decision not to specify the taxable status of the various
other parts of the guardrail system or differentiate between different types of
guardrail systems.7
       The Commonwealth disagrees that any nuts, bolts, washers, and guardrail
blocks should be included within the definition of “guardrails.” It argues in its
brief that there is no distinction between the nuts, bolts, washers, and guardrail
blocks used to connect the horizontal elements and those that are used to connect
the guardrail panels to the posts and that the Court erred in finding that any of
them constitute BME. We now interpret the statute as not distinguishing between

       7
          There is not just one type of “guardrail system.” Green Acres’ Controller explained in
his deposition testimony that there are different types of guardrail systems, at least one of which
includes blocks between the panels and the posts in order to strengthen the system as a whole
and allow it to withstand greater force. (See Dep. of Green Acres Controller, James T. McCort,
at 25-26 (identifying 2-S type and 2-W type guardrail systems, one of which, 2-S, uses blocks
between the guardrail and the post); see also Green Acres Filing of Trial Type Evidence, filed
Dec. 23, 2015, Ex. 1 (providing photos of 2-S and 2-W guardrails).) In addition, there can be an
“end terminal” and anchoring system used. See Guardrail 101, Federal Highway Admin. (U.S.
Dep’t of Transp., Dec. 10, 2014), https://www.fhwa.dot.gov/guardrailsafety/guardrail101.pdf
(last visited June 12, 2017). The Legislature did not distinguish between different types of
guardrail systems, such as those that use blocks and those that do not, for purposes of the BME
definition.



                                                8
the nuts, bolts, washers, and guardrail blocks used to connect the different parts of
the guardrail system to each other. Therefore, after our further review, we hold
that only the guardrail posts are excluded from BME, and the nuts, bolts, washers,
and guardrail blocks Green Acres utilized to connect the elements of the guardrail
system together fall within the definition of “guardrails,” and are therefore exempt
from use tax as BME.
      Accordingly, we grant Green Acres’ Exceptions.




                                       _____________________________________
                                       RENÉE COHN JUBELIRER, Judge



Judge McCullough did not participate in the decision in this case.




                                         9
       IN THE COMMONWEALTH COURT OF PENNSYLVANIA


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


                                       ORDER


      NOW, June 13, 2017, the Exceptions of Green Acres Contracting Company,
Inc., filed in the above-captioned matter, are GRANTED. This Court’s August 10,
2016 Order is VACATED in part insofar as it upheld the Board of Finance and
Revenue’s (Board) assessment of $145,471.08 in use taxes on nuts, bolts, washers,
and guardrail blocks, and is otherwise CONFIRMED. The Order of the Board is
REVERSED with respect to its assessment of $145,471.08 in use taxes on nuts,
bolts, washers, and guardrail blocks. Judgment shall be entered in favor of the
Commonwealth in the amount of $217,564.73.




                                        _____________________________________
                                        RENÉE COHN JUBELIRER, Judge
