              IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Nedeljko Gunjak, Inc.,                  :
                  Petitioner            :
                                        :   No. 455 F.R. 2013
            v.                          :
                                        :   Submitted: November 14, 2017
Commonwealth of Pennsylvania,           :
                Respondent              :


BEFORE:     HONORABLE ROBERT SIMPSON, Judge
            HONORABLE PATRICIA A. McCULLOUGH, Judge
            HONORABLE DAN PELLEGRINI, Senior Judge


OPINION NOT REPORTED

MEMORANDUM OPINION
BY JUDGE McCULLOUGH                                      FILED: December 11, 2017


            Nedeljko Gunjak, Inc. (Taxpayer) petitions for review of the May 1, 2013
order of the Board of Finance and Revenue (Board) denying Taxpayer a reduction in
the amount of International Fuel Tax Agreement (IFTA) road tax assessed against it by
the Department of Revenue (Department).


                          Facts and Procedural History
            Taxpayer is a contract mail carrier headquartered in Mechanicsburg,
Pennsylvania. Pursuant to Taxpayer’s contract with the United States Postal Service
(USPS), USPS reimbursed Taxpayer for its fuel costs up to a predetermined amount
based on the mileage driven. To track these costs, USPS provided Taxpayer with a
fuel purchase card that records fuel purchases by truck number, amount, location, and
odometer reading as entered by the driver. This system does not track actual mileage
of the truck from pickup to delivery. (Board op. at 1-2.)
             On January 31, 2011, pursuant to an IFTA road tax audit for the period
from April 1, 2007, to March 31, 2011, the Department issued an assessment against
Taxpayer in the amount of $258,375.52, plus interest in the amount of $76,423.79. On
March 15, 2012, Taxpayer filed an appeal with the Department’s Board of Appeals.
The Board of Appeals sustained the assessment, and Taxpayer then appealed to the
Board. (Board op. at 1.)
             Before the Board, Taxpayer submitted copies of spreadsheets generated
by the fuel purchase cards, as well as copies of actual receipts. However, a review of
the spreadsheets revealed odometer readings that were consistently inaccurate,
included entries that were rounded to the nearest hundred or thousand miles, and
included entries that actually reflected negative mileage from one purchase to the next.
Taxpayer did not address findings in the audit report with respect to a lack of reporting
of travel through some states and virtually identical reports for several quarters.
Nevertheless, Taxpayer argued the documentation it provided showed that it paid tax
on all of its fuel purchases and should be credited for the same. (Board op. at 2.)
             The Board disagreed, and by decision and order dated May 1, 2013,
denied Taxpayer’s appeal. In its opinion, the Board noted that section 9603(a) of the
Motor Carriers Road Tax Act (Road Tax Act) requires every motor carrier to “pay a
road tax equivalent to the rate per gallon currently in effect on Pennsylvania liquid fuels
. . . calculated on the amount of motor fuel used in its operations on highways within
this Commonwealth.” 75 Pa.C.S. §9603(a). The Board also noted that section 9610(a)
of the Road Tax Act requires every motor carrier to keep sufficient records to “enable
the department to determine the total number of miles traveled by its entire fleet of



                                            2
qualified motor vehicles, the total number of miles traveled in this Commonwealth by
the entire fleet, the total number of gallons of motor fuel used by the entire fleet and
the total number of gallons of motor fuel purchased in this Commonwealth for the
entire fleet.” 75 Pa.C.S. §9610(a). (Board op. at 2.)
              Further, the Board cited sections 313.12 and 313.13 of the Department’s
regulations, which require every motor carrier to keep “satisfactory records” of all the
miles traveled and the fuel used in its operations “both within and without this
Commonwealth.” 61 Pa. Code §§313.12, 313.13. In the absence of adequate records
establishing the number of miles operated by a motor carrier’s vehicles per gallon of
motor fuel, the Board noted that section 9609 of the Road Tax Act deems a motor
vehicle “to have consumed one gallon of motor fuel for each four miles operated.” 75
Pa.C.S. §9609. Finally, the Board referenced section P540.200 of the IFTA Procedures
Manual which directs a motor carrier to maintain “[a]n acceptable distance accounting
system” because such a system is “necessary to substantiate the information reported
on the tax return filed quarterly or annually.”1 (Board op. at 3.)
              Ultimately, the Board concluded that the Department’s assessment “was
reasonable given the lack of documentation to support the reported figures.” Id. The
Board stated that the “recordkeeping requirements are intended to ensure that each state
receives a proper allocation of the tax paid by [Taxpayer], and applicable to any truck
that crosses state lines.” Id. Finally, the Board stated that the regulations are “readily
available on the Department’s website” and that Taxpayer had “an affirmative
obligation to familiarize [itself] with those regulations.” Id. Taxpayer thereafter filed
a petition for review with this Court.


       1
        The actual provisions of IFTA and its Procedural Manual can be found on the IFTA website
at www.iftach.org (last visited November 16, 2017).


                                               3
                                            Discussion
               On appeal,2 Taxpayer argues that the Board erred in failing to grant it a
reduction of the amount of IFTA road tax assessed against it by the Department. More
specifically, Taxpayer argues that the Board incorrectly applied the statutory rate of 4.0
miles per gallon (MPG) as set forth in section 9609 of the Road Tax Act and failed to
determine its tax liability on the basis of the best information available to it. We
disagree.
               As this Court explained in R & R Express, Inc. v. Commonwealth, 37 A.3d
46 (Pa. Cmwlth. 2012), aff’d, 65 A.3d 900 (Pa. 2014) (mem.):

               The [Road Tax] Act imposes a tax on fuel consumed in
               Pennsylvania by qualifying motor vehicles, which includes
               trucks and tractor trailers. See 75 Pa.C.S §9603. In
               calculating the tax, credit is given for tax paid on fuel
               purchased in this Commonwealth. 75 Pa.C.S. §9604(a). In
               order to administer and effectuate the imposition and
               collection of fuel taxes on interstate carriers, Pennsylvania
               joined the International Fuel Tax Agreement (IFTA).
               Pursuant to the IFTA, a motor carrier based in Pennsylvania
               files one tax return with the Commonwealth, its “base”
               jurisdiction, on which the tax due to all participating
               jurisdictions is reported and paid. The Commonwealth, as
               the base jurisdiction, then distributes motor fuel use taxes to
               the other member jurisdictions in which the taxpayer traveled
               and incurred liability.
37 A.3d at 47-48.
               A review of the relevant statutory provisions is required herein. Section
9603(a) of the Road Tax Act states as follows:



       2
          “This Court is entitled to the broadest scope of review when considering the propriety of an
order of the Board of Finance and Revenue because, although we hear such cases in our appellate
jurisdiction, we function essentially as a trial court.” Senex Explosives, Inc. v. Commonwealth, 58
A.3d 131, 135 n.3 (Pa. Cmwlth. 2012).


                                                  4
             Every motor carrier shall pay a road tax equivalent to the rate
             per gallon currently in effect on Pennsylvania liquid fuels,
             fuels or other alternative fuels as provided in section 9004(a),
             (b), (c) and (d) (relating to imposition of tax, exemptions and
             deductions), calculated on the amount of motor fuel used in
             its operations on highways within this Commonwealth.
75 Pa.C.S. §9603(a).
             Section 9604(a) addresses credit, providing, in pertinent part, as follows:

             Every motor carrier subject to the tax imposed under this
             chapter shall be entitled to a credit on the tax, equivalent to
             the rate per gallon of the Pennsylvania tax which is currently
             in effect, on all gasoline or other motor fuel purchased by the
             carrier within this Commonwealth for use in its operation
             either within or without this Commonwealth and upon which
             gasoline or other motor fuel the tax imposed by the laws of
             this Commonwealth has been paid by such carrier. Evidence
             of the payment of the tax in such form as may be required
             by, or is satisfactory to, the department shall be furnished by
             each carrier claiming the credit.
75 Pa.C.S. §9604(a).
             Section 9610 addresses the records to be maintained by the motor carrier,
providing, in pertinent part, that:

             Every motor carrier shall keep such records, in such form as
             the department reasonably may prescribe, as will enable the
             carrier to report and enable the department to determine the
             total number of miles traveled by its entire fleet of qualified
             motor vehicles, the total number of miles traveled in this
             Commonwealth by the entire fleet, the total number of
             gallons of motor fuel used by the entire fleet and the total
             number of gallons of motor fuel purchased in this
             Commonwealth for the entire fleet. All such records shall be
             safely preserved for a period of four years in such manner as
             to insure their security and availability for inspection by the
             secretary or any authorized employee engaged in the
             administration of this chapter.




                                            5
75 Pa.C.S. §9610. See also 61 Pa. Code §§ 313.12, 313.13 (requiring, respectively,
that every motor carrier keep satisfactory records of miles traveled both within and
without the Commonwealth and the fuel used within and without the Commonwealth).
             In this regard, section 313.14 of the Department’s regulations require that:

             Every motor carrier shall be prepared to present evidence to
             substantiate the credit claimed for payment of the liquid fuels
             tax on motor fuels purchased within this Commonwealth.
             Such evidence shall consist of invoices of the vendor of the
             [fuel] which shall show the name and address of the motor
             carrier, the point of delivery, the date of each sale, the
             number of gallons of each sale, the total monetary value of
             each sale, and the license number or unit number of the motor
             vehicle being fueled. Sales made out to cash are not
             acceptable. The Department will have the right in order to
             further substantiate the credit claimed, to require a sworn
             affidavit from the vendor stating that it has sold the specified
             number of gallons of motor fuel to the motor carrier and that
             the liquid fuels tax has been paid on such motor fuel.
61 Pa. Code §313.14.
             Furthermore, we note that the IFTA Articles of Agreement provide that,
in order to obtain credit for tax-paid purchases of fuel, the licensee must retain
supporting paperwork, such as, inter alia, a receipt, invoice, credit card receipt, or
transaction listing, showing evidence of the purchase and the amount of tax paid. See
IFTA Articles of Agreement, Art. X R1000.100. Further, the receipt “must show
evidence of tax paid directly to the applicable jurisdiction or at the pump. Specific
requirements for these receipts are outlined in the IFTA Procedures Manual Section
P550 . . . .” Id. at Art. X R1010.200. Section P550 of the Procedures Manual is also
very specific; it similarly provides that retail purchases must be supported by
acceptable documentation, such as a receipt, invoice, credit card receipt, or transaction
listing. Procedures Manual P550.220.            Moreover, like section 313.14 of the



                                            6
Department’s regulations, the Procedures Manual requires that a receipt contain a
minimum detail of information, including the vehicle identity, purchaser’s name, date
of purchase, seller’s name and address, amount purchased, and price paid per gallon or
liter. Id. at P550.300.
             However, without such records, section 9609 of the Road Tax Act
mandates that the Department impose a presumed consumption rate of 4.0 MPG. This
section provides, in full:

             In the absence of adequate records or other evidence
             satisfactory to the department showing the number of miles
             operated by a motor carrier’s qualified motor vehicles per
             gallon of motor fuel, any such qualified motor vehicle shall
             be deemed to have consumed one gallon of motor fuel for
             each four miles operated.

75 Pa.C.S. §9609.
             Additionally, Art. XII R1210.100-200 of the IFTA Articles of Agreement
provides:

             In the event that any licensee . . . fails to maintain records
             from which the licensee’s true liability may be determined,
             the base jurisdiction shall . . . [o]n the basis of the best
             information available to it . . . determine the tax liability of
             the licensee for each jurisdiction . . . .
(Emphasis added.) Article XII R1210.300 further provides that:

             The base jurisdiction shall, after adding the appropriate
             penalties and interest, serve an assessment . . . upon the
             licensee in the same manner as an audit assessment or in
             accordance with the laws of the base jurisdiction. The
             assessment made by a base jurisdiction pursuant to this
             procedure shall be presumed to be correct and, in any case
             where the validity of the assessment is questioned, the
             burden shall be on the licensee to establish by a fair



                                            7
             preponderance of evidence that the assessment is erroneous
             or excessive.
(Emphasis added.)
             In the present case, Taxpayer argues that its logs demonstrated the number
of miles operated by its trucks and that its fuel receipts demonstrated the number of
gallons of motor fuel it purchased, such that the Department did not have to rely on
statutorily presumed consumption rate of 4.0 MPG set forth in section 9609 of the Road
Tax Act. However, Taxpayer ignores the Board’s findings that the documentation
Taxpayer provided showed odometer readings that were “consistently inaccurate,”
included “obvious roundings to the nearest hundred or thousand miles, and negative
mileage from one purchase to the next.” (Board op. at 2.) The Board also found that
Taxpayer failed to address the audit findings “concerning a lack of travel through some
states and virtually identical reports for several quarters.” Id. More importantly,
Taxpayer has provided this Court with no records to review to contradict the auditor’s
findings which formed the basis for the assessment. Indeed, Taxpayer stipulated that
it “has not offered or supplied any supplemental documents involving or tending to
establish total or jurisdictional truck mileage actually traveled, or documentation of
fuel purchases including tax-paid purchases.” (Joint Stipulation at ¶4.) Thus, we
cannot say that the Department erred in applying the statutorily presumed consumption
rate of 4.0 MPG.
             Taxpayer also argues that the information it supplied to the auditor as to
the actual fleet MPG, from which the auditor determined the jurisdiction miles and fuel
miles, constitutes the best information available to calculate its tax liability under
IFTA. Again, however, Taxpayer failed to provide this information to the Court.
Moreover, the Department notes in its brief that it actually used the IFTA provisions
when it accepted Taxpayer’s reported mileage traveled total as part of the audit


                                          8
findings. However, the Department correctly states that Taxpayer cannot rely on
IFTA’s general provisions to alter the audited consumption factor of 4.0 MPG or to
allow undocumented fuel purchase credits.        IFTA, the Road Tax Act, and the
Department’s regulations include specific provisions discussing the detailed
recordkeeping requirements for motor carriers seeking a credit for the tax paid on fuel
purchases. Taxpayer simply did not meet its burden in this case.
             Accordingly, the Board’s order is affirmed.




                                           ________________________________
                                           PATRICIA A. McCULLOUGH, Judge




                                          9
             IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Nedeljko Gunjak, Inc.,                    :
                  Petitioner              :
                                          :    No. 455 F.R. 2013
             v.                           :
                                          :
Commonwealth of Pennsylvania,             :
                Respondent                :



                                      ORDER


             AND NOW, this 11th day of December, 2017, the order of the Board of
Finance and Revenue, dated May 1, 2013, is hereby affirmed. Unless exceptions are
filed within 30 days pursuant to Pa. R.A.P. 1571(i), this order shall become final.




                                              ________________________________
                                              PATRICIA A. McCULLOUGH, Judge
