           IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Strongstown B&K Enterprises, Inc.,             :
                      Petitioner               :
                                               :
                      v.                       :    No. 400 F.R. 2013
                                               :    Submitted: October 19, 2016
Commonwealth of Pennsylvania,                  :
                     Respondent                :



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




OPINION BY
JUDGE COHN JUBELIRER                               FILED: December 21, 2016


       Strongstown B&K Enterprises, Inc. (Strongstown) has filed Exceptions
pursuant to Rule 1571(i) of the Pennsylvania Rules of Appellate Procedure, Pa.
R.A.P. 1571(i),1 to this Court’s May 20, 2016, Opinion and Order affirming the

       1
         Rule 1571. Determinations of the Board of Finance and Revenue
                                            ***
           (i) Exceptions. Any party may file exceptions to an initial determination by
       the court under this rule within 30 days after the entry of the order to which
       exception is taken. Such timely exceptions shall have the effect, for the purposes
       of Rule 1701(b)(3) (authority of lower court or agency after appeal) of an order
       expressly granting reconsideration of the determination previously entered by the
       court. Issues not raised on exceptions are waived and cannot be raised on appeal.

Pa. R.A.P. 1571(i).
Order of the Board of Finance and Revenue (BF&R) that granted in part and
denied in part Strongstown’s Petition for Reassessment of sales and use tax.
Strongstown B&K Enterprises, Inc. v. Commonwealth (Pa. Cmwlth., No. 400 F.R.
2013, filed May 20, 2016) (en banc) (Strongstown I). Specifically, we concluded
that BF&R correctly denied Strongstown any relief regarding the Department of
Revenue’s (Department) assessment of Pennsylvania’s use tax on Road Signs
installed and/or replaced by Strongstown. Id., slip op. at 11. In its Exceptions,
Strongstown asserts this Court erred because “exclusions from tax” should be
strictly construed against the Commonwealth, the Road Signs constitute a traffic
control system, the Road Signs constitute “Building Machinery and Equipment”
(BME), and the Court ignored the public policy implications of imposing sales or
use tax on construction contractors installing road signs under contracts with the
Commonwealth and its municipalities.          After careful review, we deny the
Exceptions.


I.    Background
      The underlying facts, stipulated to by the parties and set forth fully in
Strongstown I, need not be restated here. For the present analysis, it is sufficient to
note that Strongstown through construction contracts sold fabricated aluminum
road signs, posts, and associated miscellaneous hardware (collectively “Road
Signs”) to the Pennsylvania Department of Transportation (PennDOT) and to
municipalities.   (Stip. ¶¶ 7, 13, 20.)       The Road Signs were installed on
Pennsylvania roads, including the Pennsylvania Turnpike.               (Stip. ¶ 20.)
Strongstown paid tax on concrete sign foundations and related components, such
as the sleeves or brackets inserted into the foundations. (Stip. ¶ 14.) Strongstown



                                          2
purchased the Road Signs from various vendors but did not pay sales tax to those
vendors, and Strongstown used the Road Signs by installing them along
Pennsylvania roads in order to satisfy its obligations under various construction
contracts. (Stip. ¶¶ 20, 23.) Strongstown is a construction contractor, and all of
the Road Signs installed during the audit period were installed for the
Commonwealth through either PennDOT or Pennsylvania municipalities. (Stip. ¶¶
30, 31.)
        The Department performed a sales and use tax audit on Strongstown for the
period from January 1, 2008 through January 31, 2011. (Stip. ¶ 4.) Based on the
audit, the Department issued an assessment to Strongstown totaling $2,056,339.26,
of which $321,653.86 was unpaid sales tax and $1,734,685.40 was unpaid use tax;
there was also $803,118.26 in penalties and interest, and thus the total amount due
was $2,859,457.52.         (Stip. ¶ 5, Ex. A.)          Strongstown filed a Petition for
Reassessment with the Department’s Board of Appeals, seeking relief from
$625,809.21 of the use tax assessed on Road Signs furnished and installed under
contracts with PennDOT and with municipalities. (Stip. ¶¶ 6-7, Ex. B.) After a
hearing, the Board of Appeals abated the penalties by $616,901.71 but denied
Strongstown any tax relief. (Stip. ¶ 9, Ex. C.) Strongstown appealed to the BF&R,
which denied relief. (Stip. ¶¶ 10-11, Exs. D, E.)
        On appeal to this Court,2 the parties stipulated that the only question at issue
was whether Pennsylvania’s use tax was properly assessed on the Road Signs

    2
      Our review of a BF&R 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 (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
(Footnote continued on next page…)


                                                3
installed and/or replaced by Strongstown.3 (Stip. ¶ 13.) The Court examined
Section 202(b) of the Tax Reform Code of 1971 (Code),4 72 P.S. § 7202(b), which
imposes a six percent tax on the use within the Commonwealth of tangible
personal property purchased at retail, and the definition of “use” in Sections
_____________________________
(continued…)
Research v. Commonwealth, 598 A.2d 1078, 1080 n.6 (Pa. Cmwlth. 1991) (citations omitted).
The stipulation of facts is binding and conclusive upon this Court, but we may draw our own
legal conclusions from those facts. Kelleher v. Commonwealth, 704 A.2d 729, 731 (Pa. Cmwlth.
1997). 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).
     3
       The parties stipulated further that if we found that the use tax was imposed improperly on
the Road Signs, Strongstown should be reassessed at $192,349.86, plus applicable interest, and if
we found that the use tax was properly imposed, then Strongstown should be reassessed at
$818,159.07, plus applicable interest. (Stip. ¶¶ 32, 33.)
     4
       Section 202 of the Code provides, in pertinent part:

               Imposition of tax

                (a) There is hereby imposed upon each separate sale at retail of tangible
       personal property or services, as defined herein, within this Commonwealth a tax
       of six per cent of the purchase price, which tax shall be collected by the vendor
       from the purchaser, and shall be paid over to the Commonwealth as herein
       provided.
               (b) There is hereby imposed upon the use, on and after the effective date of
       this article, within this Commonwealth of tangible personal property purchased at
       retail on or after the effective date of this article, and on those services described
       herein purchased at retail on and after the effective date of this article, a tax of six
       per cent of the purchase price, which tax shall be paid to the Commonwealth by
       the person who makes such use as herein provided, except that 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 or has paid the tax imposed by this subsection (b)
       to the vendor with respect to such use. The tax at the rate of six per cent imposed
       by this subsection shall not be deemed applicable where the tax has been incurred
       under the provisions of the “Tax Act of 1963 for Education.”

72 P.S. § 7202(a), (b).




                                                  4
201(o)(1) and (17) of the Code.5              By virtue of the Stipulation and the plain
language of the Code, there was no dispute that Strongstown is a construction
contractor that purchased tangible personal property to use in Pennsylvania in
satisfaction of its obligations under various construction contracts.                   However,
Strongstown argued that the Road Signs are exempt as BME, which is defined in
Section 201(pp) of the Code as follows:

                 (pp) BUILDING MACHINERY AND EQUIPMENT.

         Generation equipment, storage equipment, conditioning equipment,
         distribution equipment and termination equipment, which shall be
         limited to the following:

               (1) air conditioning limited to heating, cooling, purification,
         humidification, dehumidification and ventilation;
               (2) electrical;
               (3) plumbing;
               (4) communications limited to voice, video, data, sound,
         master clock and noise abatement;
               (5) alarms limited to fire, security and detection;
               (6) control system limited to energy management, traffic
         and parking lot and building access;


    5
        Section 201(o)(1) and (17) of the Code provides, in pertinent part:

              (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) (emphasis added). Subsection (o)(17) was added by Section 1 of
the Act of April 23, 1998, P.L. 239, No. 45 (“Act 45”).



                                                  5
           (7) medical system limited to diagnosis and treatment
      equipment, medical gas, nurse call and doctor paging;
           (8) laboratory system;
           (9) cathodic protection system; or
           (10) furniture, cabinetry and kitchen equipment.

             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).
      This definition lists five general equipment types but then limits the
definition to such equipment as is listed in the ten specific subsections that follow
(“which shall be limited to the following”). Comparing the stipulated “definition”
of Road Signs (“fabricated aluminum road signs, posts, and accompanying
miscellaneous hardware”), with the language in Section 201(pp) of the Code, we
concluded that the Road Signs do not appear to fall within one of the five general
types of equipment listed in the definition of BME, which are generation, storage,
conditioning, distribution, or termination. Strongstown I, slip op. at 6. In addition,
we held that the Road Signs are not specifically listed as included within the
definition in the last paragraph as are, for example, traffic signals. Id.
      Strongstown argued that the Road Signs fall within subsection 6 of Section
201(pp), 72 P.S. § 7201(pp)(6), which defines BME in relevant part as a “control



                                           6
system limited to energy management, traffic and parking lot and building access.”
Strongstown posited that since the Road Signs work together to control traffic, they
are a “control system” for traffic, and thus exempt from the use tax as they are
BME.
       Section 201(pp)(6) of the Code describes BME as including “a control
system limited to . . . traffic . . . .,” id., and the term “system” is defined as “a
group of devices or artificial objects forming a network or used for a common
purpose,” Webster’s Third New International Dictionary 2322 (2002). However,
we found no evidence or stipulated facts regarding where specifically these Road
Signs were placed and how, beyond Strongstown’s general suggestion in its brief,
the Road Signs work together to control traffic, and thus found no evidence in the
record to support a finding that the Road Signs at issue are a control system.
Strongstown I, slip op. at 7. There was no evidence that they work together, are in
a network either with each other or with other traffic devices, or, are electrically
networked with other traffic devices to control traffic. Accordingly, we agreed
with BF&R that the Road Signs did not fit within the statutory term “control
system” as required. Id.
       Alternatively, Strongstown argued that the Road Signs should be considered
tangible personal property even after they are installed because they are often
damaged and/or subject to wear and are replaced. (Stip. ¶ 22.) In addition, the
Road Signs are easily removed from the concrete foundations, bases and fitted
sleeves into which the Road Signs are installed. Relying on Commonwealth v.
Beck Electric Construction, Inc., 403 A.2d 553 (Pa. 1979) (tangible personal
property, as opposed to real property, is not subject to sales or use tax), and Section




                                          7
204(12) of the Code, 72 P.S. § 7204(12),6 Strongstown contended they stand for
the proposition that items of tangible personal property sold to a tax-exempt entity
such as the Commonwealth are not subject to sales or use tax. Strongstown further
argued that it purchased the Road Signs from its vendors for purposes of resale to
the Commonwealth, and thus they were not taxable as “purchases for resale” under
Section 201(k) of the Code, 72 P.S. § 7201(k),7 (only “sales at retail” are subject to


       6
           Section 204(12) of the Code states:

       Exclusions from tax

       The tax imposed by section 202 shall not be imposed upon any of the following:
                              ***
            (12) The sale at retail to, or use by the United States, this Commonwealth or
       its instrumentalities or political subdivisions of tangible personal property or
       services.

72 P.S. § 7204(12).
        7
          Section 201(k) of the Code provides the following definition:

       The following words, terms and phrases when used in this Article II shall have the
       meaning ascribed to them in this section, except where the context clearly
       indicates a different meaning:
                                          ***
            (k) “SALE AT RETAIL.”

             (1)     Any transfer, for a consideration, of the ownership, custody or
      possession of tangible personal property, including the grant of a license to use or
      consume whether such transfer be absolute or conditional and by whatsoever
      means the same shall have been effected.
         (2) The rendition of the service of printing or imprinting of tangible personal
      property for a consideration for persons who furnish, either directly or indirectly
      the materials used in the printing or imprinting.
         (3) The rendition for a consideration of the service of--
              (i) Washing, cleaning, waxing, polishing or lubricating of motor vehicles
         of another, whether or not any tangible personal property is transferred in
         conjunction therewith; and
(Footnote continued on next page…)


                                                 8
sales or use tax, and purchases for resale are always excluded from sales and/or use
tax).
        However, the Court had previously found these alternative arguments
unpersuasive in Kinsley Construction, Inc. v. Commonwealth, 894 A.2d 832, 835
(Pa. Cmwlth. 2006) (the sales and use tax exclusion for construction contractors is
now limited to building machinery and equipment as set forth in Section 204(57)
of the Code and, further, that the Section 204(12) exemption is no longer available
to construction contractors) and Plum Borough School District v. Commonwealth,
860 A.2d 1155, 1159 (Pa. Cmwlth. 2004), aff’d per curiam, 891 A.2d 726 (Pa.
2006) (a construction contractor that contracts with an exempt entity is liable for
tax on all property it purchases unless the property constitutes BME under Section
204(57) of the Code, 72 P.S § 7204(57)).8 The Plum Borough Court had also
_____________________________
(continued…)
               (ii)   Inspecting motor vehicles pursuant to the mandatory requirements
          of “The Vehicle Code.”
          (4) The 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 the services are performed directly or by any means other than by coin-
       operated self-service laundry equipment for wearing apparel or household goods
       and 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: Provided, however, That this
       subclause shall not be deemed to impose tax upon such services in the preparation
       for sale of new items which are excluded from the tax under clause (26) of section
       204, or upon diaper service.

72 P.S. § 7201(k).
        8
          Section 204(57) of the Code states, in pertinent part:

      The tax imposed by section 202 shall not be imposed upon any of the following:
(Footnote continued on next page…)


                                                  9
addressed Strongstown’s argument that the Road Signs were not taxable under
Beck Electric as follows:

             The definition of “use” found in Section 201(o)(17) of the
       Code, 72 P.S. § 7201(o)(17), which was added by Act 45 in 1998,
       provides that the term “use” includes obtaining by construction
       contractors tangible personal property or services which would be
       used pursuant to a construction contract, whether or not the tangible
       personal property is transferred. Accordingly, because under Section
       202(a) of the Code the tax is imposed on “use” of the property, a
       construction contractor who contracts with an exempt entity such as
       the School District is now liable for tax on all property the contractor
       purchases unless the property constitutes building machinery and
       equipment.

Plum Borough, 860 A.2d at 1159-60. Given the holdings in Plum Borough and in
Kinsley, and our conclusion that these Road Signs are not BME, we could not
accept Strongstown’s arguments that it is exempt from use tax because the Road
Signs are tangible personal property and sales for resale. Strongstown I, slip op. at
11.

_____________________________
(continued…)
                                             ***
           (57) The 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).



                                             10
         Finally, Strongstown argued that sound public policy requires that items sold
to the Commonwealth to be used on or near highways should not be subject to
sales or use tax. Strongstown contended that where highway contracts are being
paid for by the taxpayers, it makes no sense to impose a tax that would increase the
cost of contracts between the Commonwealth and construction companies that do
the work on the Commonwealth’s highways. We held, however, that we are bound
by the plain language of the Code and by our previous decisions interpreting the
Code, and that Strongstown’s policy argument thus should be directed to the
General Assembly. Id.
         We therefore held that the Department properly assessed the use tax on the
Road Signs and affirmed BF&R’s Order and remanded this matter to the BF&R to
reassess Strongstown’s use tax in accordance with the parties’ Stipulation unless
exceptions were filed within 30 days per the provisions of Rule 1571(i), Pa. R.A.P.
1571(i).


II.      Exceptions
         Strongstown filed Exceptions on May 26, 2016, in which it asserts this Court
erred:     (1) by failing to consider certain stipulated facts that supported the
conclusion that the Road Signs are a traffic control system; (2) by failing to
consider Section 204(57) of the Code as an “exclusion from tax” rather than an
“exemption from tax” and in determining that the Road Signs were not BME under
Section 201(pp)(6) of the Code subject to that exclusion; and (3) by ignoring the
public policy implications of imposing sales or use tax on construction contractors
installing road signs under contracts with the Commonwealth and its




                                           11
municipalities.9       (Exceptions ¶¶ 1-7.)           We will address these alleged errors
seriatim.

         A.     Strongstown asserts that we failed to consider stipulated facts that
should lead to the conclusion that the Road Signs are a Traffic Control System. In
our May 20, 2016 Opinion, we reviewed the stipulation and explained as follows:

                Based upon the paragraphs in the Stipulation that contain a
         description of the Road Signs and their characteristics, we concluded
         that the Road Signs: are “fabricated aluminum road signs, posts, and
         accompanying miscellaneous hardware” that are “often damaged
         and/or subject to wear and are therefore often replaced.” (Stip. ¶¶ 7,
         22.) Beyond these statements, the only other evidence in the
         Stipulation regarding the Road Signs and their characteristics are
         copies of photographs depicting directional signs, a speed limit sign, a
         “no turn on red” sign and a “stop here on red” sign, a “no left turn”
         sign and a stop sign. (Stip. Ex. H.) We found no evidence or
         stipulated facts regarding where specifically these Road Signs were
         placed and how, beyond Strongstown’s general suggestion in its brief,
         the Road Signs work together to control traffic.

                Section 201(pp)(6) of the Code describes BME as including “a
         control system limited to . . . traffic . . . .” The term “system” is
         defined as “a group of devices or artificial objects forming a network
         or used for a common purpose.” Webster’s Third New International
         Dictionary 2322 (2002). Again, we found no evidence in the record to
         support a finding that the Road Signs at issue are a control system.
         There is no evidence that they work together, are in a network
         either with each other or with other traffic devices, or, are
         electrically networked with other traffic devices to control traffic.

Strongstown I, slip op. at 7 (emphasis added).



    9
        We have reordered the exceptions for clarity.



                                                 12
      In its Exceptions, Strongstown argues that we did not consider that the
Commonwealth auditor called the Road Signs “traffic control signage” (Stip. ¶ 8;
Exception ¶ 2.) While we did not list specifically each paragraph of the Stipulation
in our analysis, we considered the Stipulation in its entirety. The parties stipulated
that the “auditor stated in the Narrative Report of Audit Findings that ‘Strongstown
contracted with various municipalities to supply and install traffic control
signage.’” (Stip. ¶ 8.) This description of the Road Signs as “traffic control
signage” does not support a finding that the Road Signs are a “traffic control
system.” Signs are not a system, particularly where “[t]here is no evidence that
they work together, are in a network either with each other or with other traffic
devices, or, are electrically networked with other traffic devices to control traffic.”
Strongstown I, slip op. at 7.
      Strongstown next argues that $625,809.21 in use tax was assessed on the
Road Signs (Stip. ¶ 7), which indicates sign sales exceeding $10,000,000, and that
“[s]uch a large amount of sign sales indicates a system of signs.” (Exception ¶ 3.)
However, the number of signs that were sold is not indicative of whether “the signs
work together, are in a network either with each other or with other traffic devices,
or, are electrically networked with other traffic devices to control traffic” and
would be considered a “system.”          Strongstown I, slip op. at 7.        Finally,
Strongstown argues that we failed to consider the photographs of the Road Signs
(Stip. Ex. H), as evidence that the signs work together as a system. (Exceptions ¶
4.) However, we did specifically reference in our prior analysis, the photographs
of the Road Signs set forth in Stipulation Exhibit H. Strongstown I, slip op. at 7.




                                          13
These photographs of individual signs10 are not evidence of a system.                  We,
therefore, deny these Exceptions based on the contents of the Stipulation.


         B.   Strongstown next argues that the Road Signs are BME under Section
201(pp) and, therefore, should be an exclusion from tax and strictly construed
against the Commonwealth pursuant to Section 204(57), and not an exemption
from tax. (Exceptions ¶¶ 1, 5-6.) Strongstown contends that Section 204(57)
provides an “Exclusion from Tax” for “[t]he sale at retail to or use by a
construction contractor of [BME] and services thereto that are . . . transferred to the
United States or the Commonwealth or its instrumentalities or political
subdivisions.” 72 P.S. § 7204(57). It argues that we erred in our earlier opinion by
not finding it to be an exclusion from tax and therefore not strictly construing it
against the Commonwealth.
         We have reexamined our initial decision and our decision in Plum Borough,
and discern no error in either. In Plum Borough, we stated as follows:

                We note that the title of Section 204 denominates its contents as
         “exclusions from tax” and not “exemptions from tax.” Exemptions are
         items which are within the scope of the general language of the statute
         imposing the tax, Commonwealth v. Sitkin’s Junk Company, . . . 194
         A.2d 199 ([Pa.] 1963), while “exclusions are items which were not
         intended to be taxed in the first place.” Rossi v. Commonwealth of
         Pennsylvania, . . ., 342 A.2d 119, 122 ([Pa. Cmwlth.] 1975). The
         legal effect of that distinction is that exemptions are to be strictly con-
         strued against the taxpayer; exclusions are to be construed against the
         taxing body. Equitable Gas Co. v. Commonwealth of Pennsylvania, .
         . . 335 A.2d 892 [(Pa. Cmwlth.)], affirmed, . . . 347 A.2d 674 ([Pa.]
         1975). However, “Whether a taxing provision is an ‘exemption’ . . .
         or an ‘exclusion’ . . . is not controlled by what it is called, but by its
    10
    There are 10 pictures of individual Road Signs, such as “STOP HERE ON RED,” “NO
TURN ON RED,” “STOP,” directional signs, and a speed limit sign. (Stip. Ex. H.)



                                             14
      language and the effect of that language.”            Adelphia House
      Partnership v. Commonwealth of Pennsylvania, 709 A.2d 967, 970
      (Pa. Cmwlth. 1998). The current Section 204 of the Tax Code is
      derived from and supplants the former Section 203 of what was
      known as the Selective Sales and Use Tax Act, Act of March 6, 1956,
      P.L. (1955-56) 1228, as amended, formerly 72 P.S. § 3403-203 (Tax
      Act). Although, like Section 204, Section 203 of the predecessor Tax
      Act was entitled “Exclusions to tax,” these “exclusions” were
      generally interpreted to constitute “exemptions” from taxation for
      items that would otherwise be considered “tangible personal
      property.” Adelphia. Moreover, Section 204 of the Code, 72 P.S. §
      7204, has also been consistently interpreted as setting forth
      exemptions to taxation. See Adelphia, 709 A.2d at 970. Additionally,
      specific to this case, the sale at retail or use of [BME] is normally
      within the scope of the general language of the tax code imposing the
      tax. It is not subject to sales tax only when it is sold or used by a
      construction contractor and the building and machinery has been
      transferred to one of the specified exempt entities. Because Section
      204(57) creates an exemption and not an exclusion from taxation,
      that section must be strictly construed against the [taxpayer].

Plum Borough, 860 A.2d at 1159 n.4 (emphasis added).
      Strongstown also reasserts its earlier argument that the Road Signs are BME
under Section 201(pp) because they should be considered a “control system” for
“traffic” where, like traffic signals, guardrails and other items explicitly defined as
BME, they control traffic. Strongstown asserts that “[t]here is no logic behind the
Commonwealth’s position that the Legislature intended to provide a tax exclusion
for traffic signals, guardrails, and medial devices, but not for Road Signs.”
(Strongstown’s Br. in Support of Exceptions at 21.) However, the Legislature did
not specifically list “traffic signs” as they did “traffic signals.” See, e.g., Kinsley,
894 A.2d at 836 (“We are constrained to agree with the Commonwealth that, had
the legislature intended sound barriers to be considered [BME], they would have
been included in the lengthy definition.”). As we could find no record evidence



                                          15
that would support the conclusion that the Road Signs work together to control
traffic as a system, we must deny these Exceptions.


       C. Strongstown, in its last Exception, reprises its argument that sound
public policy requires that items sold to the Commonwealth to be used on or near
highways should not be subject to sales or use tax. (Exceptions ¶ 7.) Because
those highway contracts are being paid for by the taxpayers, Strongstown contends
that it does not make sense to impose a tax that would increase the cost of contracts
between the Commonwealth and construction companies that do the work on the
Commonwealth’s highways. As with its argument regarding BME, Strongstown
reiterates the arguments it made in its earlier brief. In response to those arguments,
we held that we are bound by the plain language of the Code and by our previous
decisions interpreting the Code, and that Strongstown’s policy argument thus
should be directed to the General Assembly.         Strongstown I, slip op. at 11.
Strongstown offers us no reason to reconsider that conclusion, and we will deny
this Exception.


III.   Conclusion
       As we conclude that Strongstown’s assignments of error through the
Exceptions are not supported by the Code, our decisions or the stipulated record,
we deny the Exceptions.




                                       _____________________________________
                                       RENÉE COHN JUBELIRER, Judge




                                         16
        IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Strongstown B&K Enterprises, Inc.,          :
                      Petitioner            :
                                            :
                   v.                       :   No. 400 F.R. 2013
                                            :
Commonwealth of Pennsylvania,               :
                     Respondent             :


                                     ORDER


             AND NOW, this 21st day of December, 2016, the Exceptions filed by
Strongstown B&K Enterprises, Inc. (Strongstown) are DENIED. This matter is
remanded to the Board of Finance and Revenue to reassess Strongstown’s use tax
in accordance with the parties’ Stipulation filed with this Court.
             Jurisdiction relinquished.




                                          _____________________________________
                                          RENÉE COHN JUBELIRER, Judge
