Stay up to date with sales tax: Join our mailing list!

The Pennsylvania Supreme Court determined that cellular telecommunications providers did not qualify for the sales/use tax exemption provided for manufacturers or public utility providers because the cellular providers did not produce "tangible personal property." The providers converted sound waves into signals, but this change was not considered enough to qualify for the exemption because the basic informational content remained the same. A dissenting opinion found that the cellular telecommunications providers were qualified for the exemption in reference to the General assembly's definition of "tangible personal property" which includes "cellular telecommunications service." (Bell Atlantic Mobile Systems, Inc v Commonwealth of Pennsylvania, Pennsylvania Supreme Court, Nos 103 MAP 2002 and 105 MAP 2002, March 23, 2004)


A sales and use tax audit performed on purchases made for the period of 1991 to 1994 disallowed any overpayments in its calculation, stating that the overpayment claims were not filed within the three-year statute. The taxpayer's request for a reduction in the assessment was denied. However, the Supreme Court unanimously overturned both the Department and the lower court stating that "Once a taxpayer is audited it doesn't have to seek a refund for overpayments during the audit period because it is the duty of the auditor to ensure that the proper amount of tax was collected, which necessarily requires that the audit take into account situations where the taxpayer overpaid tax or paid tax it did not have to during the audit period." [McNeil-PPC, Inc. v. Commonwealth of Pennsylvania , J-53-2003, No. 99 MAP 2002, (Pa. Supreme Court, Middle District, October 22, 2003); McNeil-PPC, Inc. v. Commonwealth of Pennsylvania , No. 353 F.R. 1998, Commonwealth Court of Pennsylvania, June 28, 2000. Decision was overturned by Pennsylvania Supreme Court on October 22, 2003.]


Stone and oil used in the product of asphalt are taxable if the asphalt is used for contracts with the state for highway improvements. In most cases a manufacturing exemption would be applicable since the stone and oil and being produced into asphalt. However, the highway improvements are considered construction projects where materials are being affixed to real property, thus making the taxpayer ineligible to use the manufacturing exemption. (Golden Eagle Construction Company Inc. v. Commonwealth of Pennsylvania, Pennsylvania Commonwealth Court, No. 339 F.R.2000, December 10, 2002)


A Pennsylvania manufacturer contested that their equipment, used at their distribution facility, was essential in the production of its product and that the equipment met the criteria for classes of equipment to which the exemption applies, so therefore should qualify for the state’s manufacturing exemption. The court maintained that the manufacturer’s purchase of equipment for its distribution facility was subject to use tax because the products were not changed in any way after they reached the distribution facility and because the facility was not engaged in manufacturing activities. The shelves, forklifts, conveyors, and packing equipment were also not used to ship the company’s products to retail customers, but rather to other manufacturers and distributors who were not “ultimate consumers” as defined by the statute. (AMP, Inc. v. Pennsylvania, Pennsylvania Commonwealth Court, No. 837 F.R. 1998, February 22, 2002)



Scroll to Top