Kuharchik Construction, Inc. v. Com. of PA

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Kuharchik Construction, Inc., :
Petitioner :
:
v. : No. 486 F.R. 2015: Submitted: June 9, 2021
Commonwealth of Pennsylvania, :
Respondent :
BEFORE: HONORABLE P. KEVIN BROBSON, President Judge
HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE ELLEN CEISLER, Judge
HONORABLE J. ANDREW CROMPTON, Judge
OPINION BY
JUDGE COHN JUBELIRER FILED: October 14, 2021
Before the Court en banc are Exceptions filed by the Commonwealth of
Pennsylvania (Commonwealth) to a July 15, 2020 three-judge panel 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 Kuharchik Construction,
Inc.’s (Petitioner) Petition for Review of the use taxes imposed against it. Kuharchik
Constr., Inc. v. Commonwealth, 236 A.3d 122 (Pa. Cmwlth. 2020) (Kuharchik I).
Specifically, we concluded that Petitioner’s purchase and use of items that support
a traffic signal–specifically, signal poles, mast arms, and pedestal bases (Traffic
Signal Related Purchases)1–qualify as “building machinery and equipment” (BME)
as defined by Section 201(pp) of the Tax Reform Code of 1971 (Code), 72 P.S.
§ 7201(pp) (Section 201(pp)).2 The Commonwealth asserts that this Court erred
because: our decision that the Traffic Signal Related Purchases constitute BME
resulted from an improper statutory construction analysis that is inconsistent with
prior precedent; the holding analyzed BME as an exception to use tax rather than an
exclusion and thus improperly modified the Commonwealth’s burden; the Court
misconstrued and conflated the Commonwealth’s arguments and discussions, as
well as the relevant statutory language; and the opinion contained factual
conclusions inconsistent with or contradictory to the parties’ Joint Stipulations of
Fact (Stipulation). After careful review, we overrule the Exceptions.
I. BACKGROUND
The underlying facts, as stipulated by the parties and set forth fully in
Kuharchik I, need not be restated here. For the present analysis, it is sufficient to
state that Petitioner is a Pennsylvania corporation engaged in the electrical
construction contractor business that regularly contracts with the Commonwealth
and its subdivisions. (Stipulation (Stip.) ¶¶ 13-14.) Pursuant to construction
contracts with the Commonwealth, Petitioner purchased and installed the Traffic
1
In Kuharchik I, the “Contested Items” included signal poles with mast arms, light poles
with mast arms, camera poles with mast arms, and pedestal bases. Kuharchik I, 236 A.3d at 125.
We reversed the Board’s order in part, holding that of these contested items, only the Traffic Signal
Related Purchases were exempt from the Commonwealth’s use tax. However, we affirmed in part
because the remaining contested items were subject to the use tax. Id. at 140.
We also held that the Commonwealth’s failure to assess use taxes in a prior audit against
items related to the contested items in this matter did not equitably estop the Commonwealth from
subsequently assessing such taxes. Id. at 139-40. Because Petitioner has not filed any exceptions
to this holding, we will not address it further.
2
Act of March 4, 1971, P.L. 6, as amended, 72 P.S. § 7201(pp).
2
Signal Related Purchases in connection with the installation of traffic signals. (Id.
¶ 15.) Petitioner did not pay sales tax or remit use tax in purchasing the Traffic
Signal Related Purchases. (Id. ¶¶ 27-29.)
The Department of Revenue (Department) performed a sales and use tax audit
of Petitioner’s activities covering the period of January 1, 2011, through January 31,
2014. (Id. ¶ 4.) Based on the audit, the Department found that Petitioner had a use
tax deficiency. (Id. ¶¶ 5, 19, 19(a), 19(b), Exhibits (Exs.) A, B.) The Department
found that the Traffic Signal Related Purchases were taxable because they do not
qualify as BME. Petitioner then filed a Petition for Reassessment with the
Department’s Board of Appeals (BOA), contesting the audit’s finding as to the use
tax deficiency. (Id. ¶ 6, Ex. C.) While the BOA abated the penalties associated with
the use tax deficiency because Petitioner showed good faith and a lack of negligence,
it denied any tax relief, finding that the Traffic Signal Related Purchases are not
BME but, rather, fell within the “real estate structure” exception to the use tax, as
found in Section 201(qq) of the Code. (Id. Ex. D.) However, given that Petitioner
is a construction contractor, the BOA found that this exception is not available to
Petitioner and concluded that the Traffic Signal Related Purchases are subject to the
Commonwealth’s use tax. (Id. Ex. D at 2.) Petitioner then filed a Petition for
Review with the Board. (Id. ¶ 8, Ex. E.) The Board denied relief, agreeing with the
BOA’s conclusion that the Traffic Signal Related Purchases are not within the
definition of BME. (Id. Ex. F at 7.)
Petitioner then petitioned this Court for review of that order, asserting that the
Traffic Signal Related Purchases are exempt as BME because the items are included
under the term “traffic signals,” as defined in Section 201(pp) or, alternatively, that
the items constitute a traffic control system, which also qualifies as BME. In
3
response, the Commonwealth argued that the Traffic Signal Related Purchases do
not fit the unambiguous definition of BME, since they do not meet the “two-part
test” from Kinsley Construction, Inc. v. Commonwealth, 894 A.2d 832 (Pa. Cmwlth.
2006), but instead are “structural supports” under the “real estate structure”
exception.
In Kuharchik I, this Court agreed with Petitioner that the term “traffic signals”
in the definition of BME necessarily encompasses the Traffic Signal Related
Purchases because those items are required to support a traffic signal head for
purposes of controlling traffic. Kuharchik I, 236 A.3d at 132. After engaging in a
statutory construction analysis as to the meaning of the term “traffic signals,” we
determined that the common usage of the term is an object used to transmit
information, such as a notice or warning, to control traffic. For supportive inferences
to this meaning of the term, we looked to the sample traffic signal plan provided by
Petitioner, (Stip. Ex. H at 64), and the Department of Transportation’s (DOT)
“Traffic Signal Design Handbook” (Handbook), (Stip. Ex. L). Id. at 132-33. We
further rejected the Commonwealth’s argument that the Traffic Signal Related
Purchases cannot be BME because those items are “real estate structure” under
Section 201(qq). Id. at 134. Looking to Section 201(qq), which explicitly includes
both “structural supports” and “traffic control devices,” we reasoned that the
inclusion of traffic control related items in both the definition of BME and “real
estate structure” indicates that these definitions overlap. Id. Finding no statutory
language indicating that an item cannot be BME simply because that item may also
fall within the definition of “real estate structure,” and recognizing that the
Legislature did not include the Traffic Signal Related Purchases in the exclusions
from the definition of BME as it did “conduit,” “receptacle,” and “junction boxes,”
4
we concluded that the Traffic Signal Related Purchases were included in the
commonly used meaning of “traffic signals.” Id. at 134-35. Accordingly, we
reversed with regard to the Traffic Signal Related Purchases but affirmed with
respect to the remaining contested items.
II. EXCEPTIONS
The Commonwealth filed Exceptions pursuant to Rule 1571(i) of the
Pennsylvania Rules of Appellate Procedure, Pa.R.A.P. 1571(i), in which it asserts
this Court erred by: (1) concluding that the Traffic Signal Related Purchases
constitute BME through an improper statutory interpretation analysis; (2) allegedly
treating BME as an exception rather than an exclusion to use tax and thus improperly
modifying the holding in Crawford Central School District v. Commonwealth, 888
A.2d 616 (Pa. 2005); (3) misconstruing the Commonwealth’s argument with regard
to “support structures” and conflating statutory terms; and (4) making certain factual
conclusions that were inconsistent with, unsupported by, or contradictory to the
Stipulation.3 We address these Exceptions in turn.
3
The Commonwealth’s Exceptions have been combined and reorganized for ease of
discussion. The Commonwealth also took exception to our “determination that Pennsylvania
Courts have [n]ever applied equitable principles to bar the Commonwealth from exercising its tax
assessment power.” (Exceptions ¶ 10 (emphasis omitted).) Given that we found in favor of the
Commonwealth with regard to this issue, holding that any representation from the Department as
to the prior audit against Petitioners would not operate to estop the Commonwealth from assessing
use taxes, Kuharchik I, 236 A.3d at 140, this Exception is not a basis for reversing our opinion.
5
A. Whether this Court erred in determining that the Traffic Signal Related
Purchases constitute BME and in our statutory interpretation analysis in
so concluding.
1. Parties’ Arguments
The Commonwealth takes exception to this Court’s legal determination that
the term “traffic signals” in the definition of BME encompasses “‘poles, mast arms,
and pedestal bases,’ ‘conduit receptacle, and junction boxes,’ or other items
‘required to support a traffic signal head for purposes of controlling traffic.’”
(Exceptions ¶ 1 (quoting Kuharchik I, 236 A.3d at 132).) First, the Commonwealth
takes exception to this Court’s statutory construction analysis in Kuharchik I.
(Exceptions ¶ 2.) The Commonwealth argues that this Court erred by employing “a
three-step process”, in which we: (1) “spliced together Merriam-Webster’s
definitions of the terms ‘traffic signal’ and ‘signal’”; (2) “syllogized that judicially-
spliced definition with [the] separately undefined term . . . ‘signal head’ to expand
that judicially-spliced definition as encompassing other ‘related items’ which are
‘functionally required’”; and (3) “re-engrafted” the relevant statutory language onto
our “syllogized-spliced definition as a post hoc exception” to arrive at the conclusion
that the term “traffic signals” encompasses the Traffic Signal Related Purchases.
(Commonwealth’s Brief (Br.) at 4.) Additionally, the Commonwealth asserts that it
was error to consider DOT’s Handbook as an aspect of our statutory construction
analysis. (Exceptions ¶ 2(a).)
The Commonwealth also contends that the Court failed to consider the factors
and presumptions of the Statutory Construction Act of 1972 (Statutory Construction
Act), 1 Pa.C.S. §§ 1501-1991. (Exceptions ¶ 2(e).) Further, the Commonwealth
asserts that “the BME definition is unambiguous” and that this Court “could have
simply denied Petitioner’s [P]etition on that basis.” (Commonwealth’s Br. at 19.)
Because we found the term “traffic signals” to be ambiguous, the Commonwealth
6
argues, this Court erred in not considering the requisite factors and presumptions
under the Statutory Construction Act. (Id. (citing 1 Pa.C.S. §§ 1921-1922).)
Specifically, the Commonwealth contends that the Court failed to consider
legislative intent, in that our “interpretation does not advance th[e] legislative goals
of certainty and clarity[.]” (Commonwealth’s Br. at 21.) Finally, because this Court
ignored these factors and presumptions, the Commonwealth avers that our statutory
interpretation analysis is inconsistent with that in East Coast Vapor, LLC v.
Pennsylvania Department of Revenue, 189 A.3d 504 (Pa. Cmwlth. 2018); Green
Acres Contracting Co., Inc. v. Commonwealth, 163 A.3d 1147 (Pa. Cmwlth. 2017);
Strongstown B&K Enterprises, Inc. v. Commonwealth, 152 A.3d 360 (Pa. Cmwlth.
2016), aff’d, 171 A.3d 252 (Pa. 2017); and Kinsley Construction, Inc., 894 A.2d 832.
(Exceptions ¶ 4; Commonwealth’s Br. at 13-14, 16-17.)
In response, Petitioner argues that the Court in Kuharchik I properly
interpreted the statute and that “[t]he Commonwealth’s exceptions merely disagree
with the [Court’s] interpretation of the statute, but offer no reason that [Kuharchik
I] should be overturned.” (Petitioner’s Br. at 2.) To the extent that the
Commonwealth argues that Kuharchik I is inconsistent with other precedential
authority, Petitioner asserts that these cases “were either already addressed in a
detailed fashion by the [Court in Kuharchik I], or are so distinguishable that they
would not have been instructive[.]” (Id. at 3.) Because we addressed the crux of the
Commonwealth’s arguments in Kuharchik I, Petitioner argues the Exceptions should
be denied. (Id. at 4-5 (citing Greenwood Gaming & Ent., Inc. v. Commonwealth,
218 A.3d 982, 988 (Pa. Cmwlth. 2019); Solar Turbines Inc. v. Commonwealth, 841
A.2d 626, 628 (Pa. Cmwlth. 2004)).) Moreover, Petitioner argues that, despite the
Commonwealth’s many Exceptions to our legal conclusions and statutory analysis,
7
it does not offer any alternative analysis in which this Court should have engaged or
any argument as to why the Traffic Signal Related Purchases should not be
considered a part of a “traffic signal” apparatus. (Id. at 8.) Petitioner further asserts
that this Court did not determine that the term “traffic signals” was ambiguous;
“rather, it simply proceeded to interpret the term according to its ‘common usage,’
given the absence of a statutory definition.” (Id. at 18-19 (quoting Kuharchik I, 236
A.3d at 131-32).) Thus, Petitioner maintains that our statutory construction was
proper and that this Court should deny the Exceptions.
In its Reply Brief, the Commonwealth argues that the Court did not apply the
plain meaning of the term “traffic signal” and that the term is ambiguous.
(Commonwealth’s Reply Br. at 2-4.) Even if unambiguous, the Commonwealth
maintains that the Court failed to interpret the term properly under Section 1903(a)
of the Statutory Construction Act, 1 Pa.C.S. § 1903(a), because we did not
specifically analyze the term as a technical or nontechnical phrase. (Id. at 6.)
Regardless of whether the Court interpreted the term as a technical or nontechnical
phrase, the Commonwealth argues that the Court either did not apply “the peculiar
and appropriate meaning of a technical term,” or that the meaning the Court deduced
was not a “common and approved usage” of the term. (Id. at 7-8.) Further, by
looking to only one dictionary definition, the Commonwealth asserts that we
“essentially suggested Merriam-Webster to be the exclusive referee for determining
the ‘common and approved usage’ of a term.” (Id. at 8-9 n.6 (emphasis in original).)
The Commonwealth finally clarifies that it does not take exception to the mere
“splicing” two terms together but with the Court’s “[s]yllogizing the judicially[-
]spliced definition” against the term “signal head” and then “[e]ngrafting separate
8
statutory language as a post-hoc exception to its syllogized-spliced definition.” (Id.
at 10 n.8 & n.9.)
2. Analysis
As we said in Kuharchik I, this Court’s statutory interpretation is guided by
the Statutory Construction Act. “The object of all interpretation and construction of
statutes is to ascertain and effectuate the intention of the General Assembly.”
Section 1921(a) of the Statutory Construction Act, 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 shall 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.” Sections 1903(a) and 1921(a) of the Statutory
Construction Act, 1 Pa.C.S. §§ 1903(a), 1921(a); Walker, 842 A.2d at 400. It is well
settled that “[w]here a court needs to define an undefined term, it may consult
definitions in statutes, regulations[,] or the dictionary for guidance, although such
definitions are not controlling.” Adams Outdoor Advert., LP v. Zoning Hearing Bd.
of Smithfield Twp., 909 A.2d 469, 484 (Pa. Cmwlth. 2006).
We first look to the provisions of the statute that are at issue. Section 201(pp)
defines BME, in relevant part, as follows:
9
“Building machinery and equipment.” Generation equipment,
storage equipment, conditioning equipment, distribution equipment
and termination equipment, which shall be limited to the following:
....
(6) control system limited to energy management, traffic and
parking lot and building access;
....
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, medical 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 “[BME]” 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) (first emphasis in original). Section 201(qq) defines “real estate
structure,” in relevant part, as follows:
“Real estate structure.” A structure or item purchased by a
construction contractor pursuant to a construction contract with:
....
(3) the Commonwealth, its instrumentalities or political subdivisions.
The term includes [BME]; developed or undeveloped land; streets;
roads; highways; parking lots; stadiums and stadium seating;
recreational courts; sidewalks; foundations; structural supports;
walls; floors; ceilings; roofs; doors; canopies; millwork; elevators;
windows and external window coverings; outdoor advertising boards
or signs; airport runways; bridges; dams; dikes; traffic control devices,
including traffic signs; satellite dishes; antennas; guardrail posts; pipes;
10
fittings; pipe supports and hangers; valves; underground tanks; wire;
conduit; receptacle and junction boxes; insulation; ductwork and
coverings thereof; and any structure or item similar to any of the
foregoing, whether or not the structure or item constitutes a fixture or
is affixed to the real estate, or whether or not damage would be done to
the structure or item or its surroundings upon removal.
72 P.S. § 7201(qq) (first emphasis in original). Construction contractors are required
to pay a use tax for the purchase or use of “real estate structure.” Section 32.23(b)
of the Department’s Regulations, 61 Pa. Code § 32.23(b). However, construction
contractors are not required to pay a use tax for BME that is transferred to the
Commonwealth or its political subdivisions. Section 204(57)(ii) of the Code, 72
P.S. § 7204(57)(ii) (Section 204(57)).
In determining that the Traffic Signal Related Purchases were within the
meaning of “traffic signals” in Kuharchik I, we explained:
The Code does not define the term “traffic signals.” In the absence of
a definition, pursuant to the rules of statutory construction, we construe
the term “traffic signals” according to its common usage. 1 Pa.C.S.
§ 1903(a). “[T]raffic signal” is defined as “a signal (such as a traffic
light) for controlling traffic.” Traffic Signal, Merriam-Webster
Dictionary, https://www.merriam-webster.com/dictionary/traffic%20
signal (last visited July 14, 2020) (emphasis added). “Signal” is defined
as “something (such as a sound, gesture, or object) that conveys notice
or warning” or “an object used to transmit or convey information
beyond the range of human voice.” Signal, Merriam-Webster
Dictionary, https://www.merriam-webster.com/dictionary/signal (last
visited July 14, 2020) (emphasis added). Thus, a traffic signal is an
object used to transmit information, such as a notice or warning, to
control traffic.
The sample traffic signal plan provided by Petitioner shows two traffic
signal heads connected to a mast arm, which is connected to a traffic
signal pole, which in turn is anchored with a pedestal base. (Stip. Ex.
H at 64.) Based upon the sample [traffic signal] plan, it is clear that the
Traffic Signal Related Purchases are required to elevate a traffic signal
head above traffic when a traffic signal apparatus is built pursuant to
11
this plan because, without the Traffic Signal Related Purchases, the
traffic signal head could not operate to control traffic. Therefore,
because a traffic signal head, containing the green, yellow, and red
lights, by itself cannot transmit signals to control traffic without it being
elevated over or near a roadway, more than merely the traffic signal
head constitutes the “traffic signal.” See Traffic Signal, Merriam-
Webster Dictionary, https://www.merriam-webster.com/dictionary/
traffic%20signal (last visited July 14, 2020). Accordingly, poles, mast
arms, and pedestal bases, in this case the Traffic Signal Related
Purchases, are encompassed within the term “traffic signals,” when a
traffic signal is built using a pole with mast arms because those items
are required to support a traffic signal head for purposes of controlling
traffic.
Kuharchik I, 236 A.3d at 132 (emphasis in original). Given this determination as to
the commonly used meaning of “traffic signals,” we rejected the Commonwealth’s
argument that Petitioner was required “to classify the Traffic Signal Related
Purchases into one of the five categories of equipment constituting BME[.]” Id. at
133. Rather, we explained that
the Traffic Signal Related Purchases are included within the term
“traffic signals,” which is specifically included within the definition of
BME. Thus, it is not necessary for Petitioner to first establish the
Traffic Signal Related Purchases fall into one of the five categories of
equipment included within BME because “traffic signals” are
specifically included in the definition of BME.
Id.
We do not find the Commonwealth’s argument persuasive with respect to any
alleged error in our employing an analysis that looks to the independent, common
usages of the words that comprise a term at issue in order to determine the meaning
of the term as a whole and then considers that meaning in light of other relevant
evidence. While the Commonwealth asserts in its Reply Brief that it is not
challenging the “splicing” of the definitions of “traffic signal” and “signal” together,
12
(Commonwealth’s Reply Br. at 10), its argument in its principal Brief suggests
otherwise. Our Supreme Court engaged in a similar statutory interpretation analysis
in A Special Touch v. Department of Labor and Industry, Office of Unemployment
Compensation Tax Services, 228 A.3d 489, 503 (Pa. 2020). There, the Supreme
Court analyzed the term “customarily engaged” as it is used in Subsection 4(l)(2)(B)
of the Unemployment Compensation Law, 43 P.S. § 753(l)(2)(B).4 The Supreme
Court looked to the individual dictionary definitions of “customarily” and “engage,”
determining the words, respectively, to mean “usually, habitually, according to the
customs; general practice or usual order of things; regularly” and “[t]o employ or
involve one’s self; to take part in; to embark on.” A Special Touch, 228 A.3d at 503
(quoting Black’s Law Dictionary 385, 528 (6th ed. 1990)). With the individual
definitions of these words in mind, the Court then determined that the phrase
“‘customarily engaged’ requires an individual to be ‘usually,’ ‘habitually,’ or
‘regularly’ ‘employed’ or ‘involved’ in activity; or ‘employed’ or ‘involved’ in
activity ‘according to the customs,’ ‘general practice,’ or ‘usual order of things.’”
Id.
Thus, this type of statutory construction analysis is not uncommon or
improper. As Petitioner argues, this Court’s analysis complied with the rules of
statutory construction by construing the term “traffic signal” “according to [its]
common and approved usage[,]” 1 Pa.C.S. §§ 1903(a), 1921(a); Walker, 842 A.2d
at 400, because “the words of the statute are not explicit” in defining that term,
1 Pa.C.S. § 1921(c).
However, the Commonwealth also asserts that the Court erred by then
expanding the definition of “traffic signals” to include other undefined terms such
4
Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. §
753(l)(2)(B).
13
as a signal head and other related items that are functionally required and “re-
engraft[ing]” other statutory language onto that definition. (Commonwealth’s Br. at
4.) For clarification, the Court’s statutory construction analysis as to the meaning of
“traffic signals” culminated with our determination that “a traffic signal is an object
used to transmit information, such as a notice or warning, to control traffic.”
Kuharchik I, 236 A.3d at 132. We then considered that definition in light of other
evidence of record, specifically, the sample traffic signal plan and the DOT’s
Handbook provided by the parties as part of the Stipulation. These support our
conclusion that the Traffic Signal Related Purchases function together as a traffic
signal under the above definition, because the sample traffic signal plan showed the
Traffic Signal Related Purchases were necessary for the traffic signal, including the
traffic signal head, to “transmit information . . . to control traffic.” Id. We discern
no error with this analysis. Further, the Commonwealth has provided no authority
for its contention that it was improper to consider the sample traffic signal plan or
the DOT’s Handbook as supporting the meaning of “traffic signal.”
In addition, as it pertains to our statutory construction analysis, the
Commonwealth asserts that the BME definition is unambiguous and that our
analysis was in error because we failed to state whether we were interpreting a
nontechnical term or a technical term under Section 1903(a) of the Statutory
Construction Act. Alternatively, if the Court determined that the term is ambiguous,
the Commonwealth argues that the Court failed to apply the requisite factors and
presumptions to interpret ambiguous terms and consider legislative intent in
determining its meaning. Under either approach, the Commonwealth maintains
that our definition was in error. We disagree.
14
The Supreme Court recently addressed a similar situation in United Blower,
Inc. v. Lycoming County Water and Sewer Authority, __ A.3d __, __ (Pa., No. 3
MAP 2021, filed September 22, 2021). There, the Supreme Court examined the
term “cost” as provided in the definition of “steel products” in Section 6 of the Steel
Products Procurement Act (Steel Act),5 73 P.S. § 1886. Applying the rules of
statutory construction, the Court explained that while “[t]he Steel Act offers no
definition of the word ‘cost,’ . . . it is a word with a ‘common and approved usage.’”
Id. at __, slip op. at 12. Rejecting arguments that the term “cost” was a term with
technical or peculiar meaning, the Court explained that such arguments did “not
render the word ambiguous.” Id. As such, the Court construed the term in
accordance with its common and approved usage and looked to dictionary
definitions of the term. This is precisely what this Court did in Kuharchik I. As
Petitioner argues, we did not opine as to whether the term was ambiguous, as it was
not necessary in order to determine the term’s meaning. Rather, because Section
201(pp) did not define “traffic signals,” we construed the term “according to [its]
common and approved usage[.]” 1 Pa.C.S. § 1903(a). Accordingly, we discern no
basis for finding that this Court’s analysis failed to comply with the rules of statutory
construction.
The Commonwealth also argues that our analysis was inconsistent with prior
precedent, specifically East Coast Vapor, 189 A.3d at 504; Green Acres, 163 A.3d
at 1147; Strongstown, 152 A.3d at 360; and Kinsley Construction, 894 A.2d at 832.
(Exceptions ¶ 4; Commonwealth’s Br. at 16-17.) The Commonwealth raised similar
arguments in Kuharchik I, also citing Green Acres, Kinsley Construction, and
Strongstown.
5
Act of March 3, 1978, P.L. 6, as amended, 73 P.S. §§ 1881-1889.
15
In Kuharchik I, we discussed these cases in turn as follows:
[I]n Green Acres, this Court was presented with a similar issue where
we were required to interpret the scope of an undefined term included
within the definition of BME. Specifically, in Green Acres, we
examined “the scope of the term ‘guardrails’ as used in the definition
of tax exempt” BME. 163 A.3d at 1148. The taxpayer in Green Acres
argued “that the term ‘guardrails,’” as used in the definition of BME,
“refers to the entire guardrail system, with the exception of guardrail
posts, which are specifically excluded.” Id. As such, the taxpayer
concluded, the “nuts, bolts, washers, and guardrail blocks, which are
necessary for the construction of the guardrails, constitute tax exempt
BME.” Id. We agreed, concluding that the term “guardrails” includes
“the nuts, bolts, washers, and guardrail blocks . . . utilized to connect
the elements of the guardrail system.” Id. at 1152. Noting that federal
and state transportation publications use the term “guardrail” to refer to
more than just the railing itself, we reasoned that the dictionary
definition and common usage of the term “guardrails” “includes the
entire guardrail system.” Id. at 1151 (emphasis omitted). We further
reasoned that the fact “[t]hat only the ‘guardrail posts’ are carved out
as taxable explains the Legislature’s decision” not to specifically list
the tax status of all of the components of a guardrail system. Id. at
1152. Accordingly, we concluded that since the definition of BME only
excluded guardrail posts, the other components of a guardrail system
“fall within the definition of ‘guardrails,’ and are therefore exempt from
use tax as BME.” Id.The Commonwealth contends that Green Acres is distinguishable from
the present matter because none of the Traffic Signal Related Purchases
are included in the per se list of items included within the definition of
BME. Instead, the Commonwealth contends this case is similar to
Kinsley Construction. However, Kinsley Construction is
distinguishable from the present case. In Kinsley Construction, we
examined, among other things, whether sound barriers and I-beams
constitute BME. We concluded that sound barriers and I-beams are not
BME, reasoning that “had the [L]egislature intended sound barriers,”
which includes I-beams that hold the sound barriers in place, “to be
considered [BME], [it] would have [] included [these items] in the
lengthy definition” of BME. Kinsley Constr[.], 894 A.2d at 836. After
Kinsley Construction, we decided Strongstown . . . , 152 A.3d [at] 360[].
In that case we examined, among other things, whether traffic signs
were included within the definition of BME. Citing Kinsley
16
Construction, we concluded that traffic signs did not constitute BME,
reasoning that “the Legislature did not specifically list ‘traffic signs’ as
they did ‘traffic signals.’” Strongstown . . . , 152 A.3d at 368. Unlike
in Kinsley Construction and Strongstown . . . , the question here is not
whether the Traffic Signal Related Purchases are expressly included
within the Code’s definition of BME but whether the term “traffic
signals,” which is expressly included within the definition of BME,
encompasses the Traffic Signal Related Purchases. Therefore, the
present matter is similar to Green Acres in that we must interpret the
scope of an undefined term specifically listed in the per se list of items
that are BME.
Kuharchik I, 236 A.3d at 133-34 (emphasis in original). After reviewing our
analysis and those in Green Acres, Kinsley Construction, and Strongstown, we
discern no error or inconsistency that would require reversal. Indeed, just as we
determined that the nuts, bolts, washers, and guardrail blocks were comprised within
the definition of “guardrails” after determining the common usage of that undefined
term in Green Acres, 163 A.3d at 1152, we determined in Kuharchik I that the Traffic
Signal Related Purchases are within the commonly used meaning of “traffic signals.”
This is distinguishable from our analysis in Strongstown, though we did there engage
in a similar statutory construction analysis in determining the meaning of the word
“system” as it pertains to a “control system” for traffic. However, we determined in
Strongstown that the record did not provide any support that road signs fell under
that meaning. Strongstown, 152 A.3d at 368. Conversely, we concluded in
Kuharchik I that the record did support that the Traffic Signal Related Purchases
were within the meaning of “traffic signals” considering its common usage and the
sample traffic signal plan and the DOT’s Handbook. Such an analysis is even more
distinguishable from that in Kinsley Construction, as we did not there need to engage
in any statutory construction analysis to determine the common usage of an
undefined term; rather, because sound barriers and I-beams did not fall under any of
17
the enumerated inclusions to the BME definition, we concluded that the items were
not BME. Kinsley Construction, 894 A.2d at 836. Accordingly, Kuharchik I is not
inconsistent with these cases.
The Commonwealth also argues that our analysis in Kuharchik I employed an
approach similar to one we rejected in East Coast Vapor. We disagree. In East
Coast Vapor, the Department contended that the component parts, including
replacement coils, regulated mods, and tanks, that are packaged and sold separately
from the electronic cigarettes at issue, were “integral” parts that should be
considered to be comprised in the statutory definition of “electronic cigarettes,” 189
A.3d at 517-18. The statute at issue defined “electronic cigarette” as:
(1) An electronic oral device, such as one composed of a heating
element and battery or electronic circuit, or both, which provides a
vapor of nicotine or any other substance and the use or inhalation of
which simulates smoking.
(2) The term includes:
(i) A device as described in paragraph (1), notwithstanding
whether the device is manufactured, distributed, marketed or sold
as an e-cigarette, e-cigar and e-pipe or under any other product,
name or description.
(ii) A liquid or substance placed in or sold for use in an electronic
cigarette.
Section 1201-A of the Tobacco Products Tax Act, 72 P.S. § 8201-A.6 In that case,
the Court examined the taxability of items that were not purchased with the taxable
item, were not physically connected to the taxable item, and were not inherently part
of the statutory definition of the taxable item.
6
Section 1201-A of the Tobacco Products Tax Act was added by Section 18 of the Act of
July 13, 2016, P.L. 526, 72 P.S. § 8201-A.
18
On the other hand, this Court in Kuharchik I considered the taxability of the
Traffic Signal Related Purchases, items that were purchased with the taxable item,
the traffic signal head, and were physically connected to the traffic signal head. In
Kuharchik I, rather than considering whether the Traffic Signal Related Purchases
were “integral” to a “traffic signal,” we engaged in a statutory construction analysis
to determine the ordinary meaning of the term “traffic signal” because the Code does
not provide a definition. Accordingly, we disagree with the Commonwealth that
Kuharchik I is inconsistent with East Coast Vapor.
Finally, we address the Commonwealth’s assertion that Kuharchik I
determined that the term “traffic signals” included “conduit, receptacle, and junction
boxes[.]” (Exceptions ¶ 1.) After explaining our interpretation as to the common
usage of “traffic signals” and determining that the Traffic Signal Related Purchases
fell within that definition “because those items are required to support a traffic signal
head for the purposes of controlling traffic[,]” we stated: “With that being said, any
conduit, receptacle, and junction boxes, which may be included within the term
traffic signal, are subject to the Commonwealth’s use tax because these items
are specifically excluded from the definition of BME.” Kuharchik I, 236 A.3d at
132-33 (emphasis added). Accordingly, we disagree with the Commonwealth that
Kuharchik I determined that the meaning of “traffic signals” comprised these items.
In sum, the Commonwealth has not shown any basis for overturning
Kuharchik I on the basis of any allegedly improper statutory construction analysis
or that analysis being inconsistent with this Court’s precedent, and we deny these
Exceptions.
19
B. Whether this Court treated BME as exclusions rather than exemptions to
the use tax and our required exclusivity between the Code’s definitions.
1. Parties’ Arguments
The Commonwealth argues that Kuharchik I “improperly modified the
holding of Crawford . . . to essentially convert the BME exemption into an
exclusion.” (Commonwealth’s Br. at 15; Exceptions ¶¶ 3, 7.) By “shifting the
burden of proof from [Petitioner] (to prove an item qualified under the exemption)
to the Commonwealth (to prove an item was excluded from the exemption)[,]” the
Commonwealth alleges, this Court erred by not strictly construing the BME
definition against the taxpayer. (Commonwealth’s Br. at 16.) Further, the
Commonwealth also argues that this Court erred in allegedly concluding that the
Code “must explicitly indicate two separately defined terms are mutually exclusive”
and our alleged shifting of the burden of the proof to require the Commonwealth to
demonstrate exclusivity. (Exceptions ¶¶ 2(c), 2(d).) The Commonwealth asserts
that this Court was led astray by Petitioner’s argument and “wordplay” with regard
to the relevant statutory language, which the Commonwealth asserts led to our
“erroneous conclusion” that exclusivity is required and that the BME definition must
explicitly exclude certain items in order for them to qualify for the exemption.
(Commonwealth’s Br. at 7-8, 10-12.)
In response, Petitioner asserts that, rather than shifting the burden of proof,
this Court “did not force the Commonwealth to prove the [Traffic Signal Related]
Purchases were taxable—[the Court] merely interpreted the statute as it is obligated
to and determined that [Petitioner] had satisfied its burden of showing that the
[Traffic Signal Related] Purchases are subject to an exemption.” (Petitioner’s Br. at
17.) Petitioner maintains that “construing a statute against the taxpayer does not
necessarily mean that the taxpayer’s interpretation must always fail.” (Id.) For these
20
reasons, Petitioners submit that the Court did not improperly shift any burden to the
Commonwealth.
In its Reply Brief, the Commonwealth reasserts that the Court “erred by
requiring the Commonwealth to prove the [Traffic Signal Related Purchases] were
not exempt.” (Commonwealth’s Reply Br. at 11 (emphasis in original).)
2. Analysis
First, we address the Commonwealth’s argument regarding our allegedly
improper burden shifting. The Commonwealth argues that our opinion modified the
holding in Crawford, 888 A.2d at 620, by shifting the burden to the Commonwealth
to show that an item is taxable. We disagree.
In Crawford, this Court recognized that the sales and use tax exemption for
construction contractors is limited to BME as set forth in Section 204(57), explaining
that statutory provisions that excuse the taxation of items that are normally within
the subject of taxation create exemptions that “must be strictly construed against the
taxpayer.” 888 A.2d at 621. However, we differentiated between an exclusion and
an exemption more thoroughly in Plum Borough School District v. Commonwealth,
860 A.2d 1155 (Pa. Cmwlth. 2004). There, we explained:
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 . . . , 342 A.2d 119, 122 (Pa.
Cmwlth. 1975). The legal effect of that distinction is that exemptions
are to be strictly construed against the taxpayer; exclusions are to
be construed against the taxing body. Equitable Gas Co. v.
Commonwealth . . . , 335 A.2d 892 (Pa. Cmwlth. 1975). However,
“[w]hether a taxing provision is an ‘exemption’ . . . or an ‘exclusion’ .
. . is not controlled by what it is called, but by its language and the effect
21
of that language.” Adelphia House P[’]ship v. Commonwealth . . . , 709
A.2d 967, 970 (Pa. Cmwlth. 1998).
Id. at 1157 n.4 (emphasis added) (third and fourth alterations in original). Thus, a
provision is properly analyzed as an exemption where the Court determines, while
strictly construing the provision against the taxpayer, that the item at issue is “within
the scope of the general language of the statute imposing the tax[.]” Id.In Kuharchik I, we acknowledged that we were required to “be mindful that
tax exemptions are to be strictly construed against taxpayer, and that the burden
is on the taxpayer to prove that the transaction sought to be taxed is either not within
the Code or is subject to an exemption[.]” Kuharchik I, 236 A.3d at 132 (emphasis
in original) (internal quotations and citations omitted). We then engaged in the
statutory construction analysis discussed above, concluding that Petitioner met its
burden in showing that the Traffic Signal Related Purchases fell “within the scope
of the general language” of the term “traffic signals” in the BME definition. Plum
Borough, 860 A.2d at 1157 n.4. Thus, we did not improperly shift the burden to the
Commonwealth but, rather, applied the law to determine that the Traffic Signal
Related Purchases were subject to the BME exemption and, therefore, that Petitioner
had met its burden. Accordingly, we disagree with the Commonwealth that
Kuharchik I shifted the burden to it or that we modified the holding in Crawford.
Next, we address the Commonwealth’s argument that Kuharchik I required
exclusivity between the Code’s definitions of BME and “real estate structure.” In
our opinion, we stated:
[T]he Code defines “real estate structure” to include BME, evidencing
that an item that is BME can also be considered “real estate structure.”
Id. Additionally, the Code defines “real estate structure” to include
“traffic control devices.” Id. Seeing that traffic control items are used
in both the definitions of BME and “real estate structure,” it is clear the
22
definitions of BME and “real estate structure” overlap. Further, while
the Traffic Signal Related Purchases are support structures in the sense
that they support and elevate the traffic signal head, the Traffic Signal
Related Purchases, for the foregoing reasons, are included within the
term “traffic signal,” which is specifically included with the definition
of BME. Absent any statutory language indicating that the Traffic
Signal Related Purchases cannot be BME simply because they may also
fall within the definition “real estate structure,” we cannot conclude the
Traffic Signal Related Purchases cannot be included in the term “traffic
signals.”
Additionally, the definition of BME does not specifically exclude the
Traffic Signal Related Purchases. If the Legislature did not intend the
Traffic Signal Related Purchases to be included within the term “traffic
signals,” or more importantly within the definition of BME, the
Legislature could have included the Traffic Signal Related Purchases
in the list of items specifically excluded from the definition of BME as
it did conduit, receptacle, and junction boxes.
Kuharchik I, 236 A.3d at 135.
After review, we disagree that our holding in Kuharchik I required the BME
definition to specifically exclude certain items in order for such purchases to not
constitute BME or required mutual exclusivity between the Code’s definitions.
Rather, we concluded that Petitioner’s burden to show that the Traffic Signal Related
Purchases constitute BME had been met given our determination that the items fell
within the commonly used meaning of “traffic signals.” We then considered the fact
that the Legislature provided for some overlap between the BME and real estate
structure definitions and that the Legislature did not specifically exclude the Traffic
Signal Related Purchases from the BME definition as factors that support our
conclusion. Because we discern no error from this analysis, we will deny these
Exceptions.
23
C. Whether the Court misconstrued the Commonwealth’s arguments and
discussions and conflated statutory language.
1. Parties’ Arguments
The Commonwealth argues that this Court misunderstood and conflated its
arguments and the relevant statutory terms in arriving at our allegedly erroneous
conclusion that “traffic signals” included the Traffic Signal Related Purchases. First,
the Commonwealth contends that the Court “altered the Commonwealth’s argument
into a generalized argument about ‘support structures’ rather than the specific
argument which analyzed the statutory language.” (Commonwealth’s Br. at 5-7;
Exceptions ¶ 9.) Because we stated in Kuharchik I that the Commonwealth’s
argument was “that the Traffic Signal Related Purchases are ‘support structures’”
rather than “structural supports,” as listed in the “real estate structure” definition
under Section 201(qq), the Commonwealth asserts that the “decision was
inconsistent with the statute, incorrect[,] and should be reversed.”
(Commonwealth’s Br. at 5-7.) Further, the Commonwealth avers that our decision
“was infected by [Petitioner’s] wordplay[]” and evidenced that the Court
misconstrued and conflated the terms “traffic signal,” “traffic signal head,” “traffic
control system,” “traffic control devices,” “traffic control items,” “traffic related
purchases,” and “control systems for traffic.” (Id. at 8-9; Exceptions ¶ 2(b).)
Moreover, the Commonwealth contends that the Court misunderstood its arguments
as it pertains to the statutory “real estate structure” definition. (Exceptions ¶¶ 6, 8.)
This use of conflated language, the Commonwealth argues, shows that the Court
“misconstrued the Commonwealth’s argument[,]” which “was not so untethered or
imprecise[,]” and “thus unknowingly disregarded the verbatim statutory
language[.]” (Commonwealth’s Br. at 9-10 (emphasis in original).) The
Commonwealth contends that this misunderstanding further shows that our alleged
24
requirement for mutual exclusivity between the BME and “real estate structure”
definition was in error, as it “effectively renders the subcategories and separate
delineation of property” in those definitions “as purely tautological.” (Id. at 11-12.)
Because the Court “appears to have been led astray . . . and reached an erroneous
conclusion,” the Commonwealth maintains, “its decision should be reversed.” (Id.
at 12.)
Petitioner argues that the Court understood and addressed the
Commonwealth’s arguments. That our opinion’s recitation of the Commonwealth’s
arguments and discussions of statutory terms was allegedly not “particular enough
or fail[ed] to quote extensively enough[,]” Petitioner maintains, is not grounds for
reversal. (Petitioner’s Br. at 9.) Petitioner asserts that the Commonwealth “point[s]
to no authority that says items must be” either BME or “real estate structure” “or any
authority that says [the Traffic Signal Related Purchases] must only qualify [as ‘real
estate structure’] and not BME.” (Id. at 10.) Because the BME definition contains
a per se list of those items that cannot be BME, Petitioner argues that the Code
“simply offers a conclusion the Commonwealth disfavors.” (Id. at 11.) Petitioner
asserts that the Commonwealth fails to understand that our decision held that the
Traffic Signal Related Purchases “are traffic signals[]” because “they are themselves
objects that are used to convey information to control traffic[.]” (Id. at 12.)
2. Analysis
We first examine this Court’s explanation of the Commonwealth’s argument
as it related to “structural supports” in Kuharchik I:
As to Petitioner’s argument that the Traffic Signal Related Purchases
are encompassed within the term “traffic signals,” the Commonwealth
disagrees. Instead, the Commonwealth suggests that the Traffic Signal
Related Purchases are “structural supports,” and, therefore, are “real
25
estate structure” not BME. Noting that Section 201(qq) of the Code, 72
P.S. § 7201(qq), defines the term “real estate structure” to include
“structural supports,” the Commonwealth asserts that the Traffic Signal
Related Purchases cannot be BME because they are included within the
term “real estate structure.” With respect to legislative intent, the
Commonwealth contends that “it is clear the [L]egislature did not
intend for structural supports to qualify for the BME exemption” since
structural supports fall within the “real estate structure” exception to
the use tax, which Petitioner does not qualify for as a construction
contractor.[] (Commonwealth’s [Principal] Br. at 14.)
Kuharchik I, 236 A.3d at 129 (footnote omitted) (alterations in original). While we
later referred to the term “support structures” in the analysis section of our opinion,
the above excerpt shows that this Court understood the Commonwealth’s argument
to be in regard to the specific statutory term “structural supports.”
Looking to our alleged conflation of the terms concerning traffic and traffic
control, the Commonwealth focuses on the following passage:
[T]he Code defines “real estate structure” to include BME, evidencing
that an item that is BME can also be considered “real estate structure.”
[72 P.S. § 7201(qq)]. Additionally, the Code defines “real estate
structure” to include “traffic control devices.” Id. Seeing that traffic
control items are used in both the definitions of BME and “real estate
structure,” it is clear the definitions of BME and “real estate structure”
overlap. Further, while the Traffic Signal Related Purchases are
support structures in the sense that they support and elevate the traffic
signal head, the Traffic Signal Related Purchases, for the foregoing
reasons, are included within the term “traffic signal,” which is
specifically included with the definition of BME.
Kuharchik I, 236 A.3d at 134 (alterations and emphasis added).
The Commonwealth argues that our use of these terms demonstrates that the
Court disregarded statutory language. We disagree. Rather, our review of the use
of these terms shows that we considered the entirety of both Section 201(pp) and
(qq) in order to draw inferences from the overlap between the items that qualify as
26
BME and “real estate structure.” Indeed, we agree with Petitioner that these
Exceptions demonstrate that the Commonwealth has misinterpreted our statutory
construction analysis as relying on the lack of exclusivity between these sections of
the statute as the reason for determining that the Traffic Signal Related Purchases
were within the common meaning of “traffic signals.” For the reasons previously
discussed, we see no error in our statutory construction analysis. Moreover, the
Commonwealth’s argument that our holding renders the subcategories and
delineation of taxable and nontaxable items tautological because we required
exclusivity between the statutes is based on a mistaken premise—that the holding
requires any such exclusivity. Given that our decision provided no such holding, as
discussed above, the Commonwealth’s argument is without merit.
Accordingly, we disagree with the Commonwealth that we misunderstood its
argument or that we conflated statutory terms and deny these Exceptions.
D. Whether this Court’s factual findings were inconsistent with, unsupported
by, or contradictory to the Stipulation.
1. Parties’ Arguments
The Commonwealth takes Exceptions to the Court’s following factual
findings in Kuharchik I: (1) that Petitioner purchased items similar to the Traffic
Signal Related Purchases “during the period of the [p]rior [a]udit,” (Exceptions
¶ 5(a)); (2) “[t]hat Petitioner suggested to the Auditor that the [Traffic Signal Related
Purchases] were not taxable because they qualified as BME[,]” (id. ¶ 5(b)); (3) that
the BOA determined that the Traffic Signal Related Purchases were not BME but
fell under the definition of “real estate structure,” which did not apply to Petitioner
as a construction contractor, (id. ¶ 5(c)); (4) that the record lacks any prior
Department interpretation as to the meaning of “traffic signals,” (id. ¶ 5(d)); (5) that
27
the Commonwealth did not argue that the Department’s interpretations were to be
afforded deference, (id. ¶ 5(e)); (6) that Exhibit H to the Stipulation shows that the
Traffic Signal Related Purchases are necessary for a traffic signal to function or is a
“sample traffic signal plan” (id. ¶ 5(f), (g)); and (7) “[t]hat the Traffic Signal Related
Purchases” are necessary “to elevate a traffic signal head above traffic[,]” (id.
¶ 5(h)).
In its brief, the Commonwealth argues first that our recitation of the BOA’s
and Board’s decisions was inconsistent with the Stipulation. (Commonwealth’s Br.
at 7, 8 n.8 (citing Kuharchik I, 236 A.3d at 126).) With respect to prior Department
interpretations of the term “traffic signals,” the Commonwealth maintains that our
statement in Kuharchik I that “‘the record discloses no regulations, informal agency
interpretations, policy statements[,] or other indication[] of the Department’s
interpretation of ‘traffic signals’ prior to this case[]’ . . . is not accurate.” (Id. at 12
(quoting Kuharchik I, 236 A.3d at 132).) The Commonwealth argues that “[t]he
record contains ample documentation demonstrating prior interpretations of the
BME definition, generally, and the poles at issue here[.]” (Id. (citing Stip. at 789-
851).) The Commonwealth contends that these interpretations show that the
Department considers the Traffic Signal Related Purchases to be taxable, non-BME
items. (Id. at 12 n.17 & n.18.) Finally, the Commonwealth argues that its principal
brief contained an argument for deference to these Department interpretations and
that our statement in Kuharchik I to the contrary was in error. (Id. at 13.) As to the
remaining Exceptions to our alleged factual mistakes in Kuharchik I, the
Commonwealth does not address or develop these arguments in its briefs.
With regard to deference to the Department’s prior interpretations, Petitioner
argues that, contrary to the Commonwealth’s position, the Commonwealth “d[id]
28
not state in its brief below that it is entitled to such deference in the instant action.”
(Petitioner’s Br. at 12-13.) Rather, Petitioner maintains that “the Commonwealth
never plainly stated that it is entitled to deference” and that “[t]he Commonwealth
can point to no regulations, interpretations, or policy statements that would entitle it
to deference.” (Id. at 13.)
2. Analysis
Starting first with the Commonwealth’s Exception to our recitation of the
BOA’s and Board’s decisions in this matter, we stated the following in Kuharchik I:
The Board reduced the use tax deficiency . . . but denied Petitioner any
relief with respect to the Contested Items. ([Stip.] Ex. F.) The Board
found that Petitioner had not met its burden of demonstrating that the
[Traffic Signal Related Purchases] fell within the definition of BME.
(Id. Ex. F at 7.) Further, the Board agreed with the [BOA’s] conclusion
that the [Traffic Signal Related Purchases] instead fell within the real
estate structure exception to the use tax, which does not apply to
Petitioner “since property used by construction contractors . . . for or
on behalf of the Commonwealth or its political subdivisions[] is subject
to tax.” (Id. (quoting Section 32.23(b) of [the] Department’s
regulations, 61 Pa. Code § 32.23(b)).)
Kuharchik I, 236 A.3d at 126-27 (sixth alteration in original). In its decision, the
BOA stated that the “traffic signs along with other types of signage including the
mast arms, poles, pole bases, anchor bolts and the like would represent real estate
structure if [] Petitioner’s contract was with an exempt entity[]” but that the
exemption was not available because the items were purchased pursuant to a
construction contract. (Stip. Ex. D at 2.) Therefore, it appears that the BOA did
determine that the Traffic Signal Related Purchases fell within the real estate
structure exception. Looking to the Board’s decision, it stated that “Petitioner ha[d]
failed to demonstrate that the purchases of the poles (anchor-bolted) with mast arms
29
. . . constitute exempt traffic control systems equipment within the term [BME] as
defined in Section 201(pp)[.]” (Stip. Ex. F at 7.) The Board added that the “traffic
signs fall within the term ‘real estate structure’” under Section 201(qq). (Id.) Thus,
it appears that it was incorrect to state that “the Board agreed with the [BOA’s]
conclusion that the [Traffic Signal Related Purchases] fell within the real estate
structure exception to the use tax[,]” as the Board only explicitly held as much with
regard to traffic signs. Kuharchik I, 236 A.3d at 126.
Nonetheless, the Commonwealth has not explained how this factual
inconsistency in our recitation of the Board’s decision justifies reversal in this case.
Beyond a passing reference to this recitation in its brief, (Commonwealth’s Br. at 7-
8 n.8), the Commonwealth does not develop any argument as to how this Exception
would require us to reverse our holding. Given that this Court did not rely on the
Board’s or BOA’s determinations but instead engaged in its own de novo review7 to
determine the common usage of the term “traffic signals” and whether the Traffic
Signal Related Purchases fell within that meaning, and absent any argument
developing how this inconsistency impacted our legal determination, we disagree
with the Commonwealth that this factual inconsistency mandates reversing our
decision.
Next, we turn to the Commonwealth’s Exceptions surrounding the
Department’s prior interpretations of the term “traffic signals.” In Kuharchik I, we
stated that “the record discloses no regulations, informal agency interpretations,
policy statements, or other indication of Department’s interpretation of ‘traffic
7
In Kuharchik I, we explained that when reviewing determinations of the Board, “this
Court essentially acts as a trial court and exercises the broadest scope of review. Our standard of
review is de novo. The stipulation of facts entered into by the parties is binding on them, although
the Court may draw its own legal conclusions.” Kuharchik I, 236 A.3d at 127 n.2 (quoting Luther
P. Miller, Inc. v. Commonwealth, 88 A.3d 304, 308 n.5 (Pa. Cmwlth. 2014)).
30
signals’ prior to this case, nor does the Commonwealth argue that its interpretation
here should be given deference.” 236 A.3d at 132. The Commonwealth points to
the Stipulation, arguing that it contains ample examples of the Commonwealth’s
interpretation. (Commonwealth’s Br. at 12 (citing Stip. at 789-851).) After
reviewing these cited pages of the Stipulation and the other exhibits attached thereto,
the Court has not found any Department interpretation as to “traffic signals.” While
there are ample interpretations as to the taxability of other items such as “Power
Poles,” “Fabricated metal supports for fixtures and equipment,” “Misc clips,
angles[,] and metal,” “Support Steel,” and “Structural Steel, Joints,”
(Commonwealth’s Br. at 12 n.17), the cited parts of the Stipulation contain no
interpretation as to “traffic signals.”
To this point, the Commonwealth also argues that we erred in stating that the
Commonwealth did not argue that we were to give deference to the Department’s
interpretation as to “traffic signals.” In its principal brief on the merits filed prior to
our deciding Kuharchik I, however, the Commonwealth did not point to any specific
interpretation or specifically argue that this interpretation is to be given deference.
Rather, the Commonwealth summarily stated that “[c]ourts give deference to
interpretations of statutes by administrative agencies possessing special or expert
knowledge in complex areas of law like taxation.” (Commonwealth’s Principal Br.
at 12-13 (citations omitted).) The Commonwealth did not explain to which
Department interpretation this Court was to afford deference. Moreover, as
discussed above, given that our review of the Stipulation shows that there is no such
Department interpretation as to the taxability of “traffic signals,” this argument is
not persuasive.
31
As to the remaining Exceptions to our decision’s alleged factual
inconsistencies, the Commonwealth does not address these Exceptions in its brief or
explain how the challenged factual statements are inaccurate or contradict the
Stipulation, much less how they would justify reversal even if so. Moreover, issues
raised but not developed in an appellate brief are waived. See Singer v. Bureau of
Pro. & Occupational Affs., State Bd. of Psychology, 633 A.2d 246, 248 (Pa. Cmwlth.
1993); see also Rule 2119(a) of the Pennsylvania Rules of Appellate Procedure,
Pa.R.A.P. 2119(a) (requiring that the argument section of a brief be “be divided into
as many parts as there are questions to be argued[]” and “followed by such
discussion and citation of authorities as are deemed pertinent[]”). Accordingly, we
deny these Exceptions.
III. CONCLUSION
For the foregoing reasons, we discern no error in our prior decision, and,
therefore, we overrule the Commonwealth’s Exceptions to Kuharchik I.
_____________________________________
RENÉE COHN JUBELIRER, Judge
Judge Fizzano Cannon did not participate in the decision in this case.
32
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Kuharchik Construction, Inc., :
Petitioner :
:
v. : No. 486 F.R. 2015:
Commonwealth of Pennsylvania, :
Respondent :
ORDER
NOW, October 14, 2021, the Exceptions filed by the Commonwealth of
Pennsylvania are OVERRULED. This matter is remanded to the Board of Finance
and Revenue to reduce the use taxes assessed against Kuharchik Construction, Inc.
for the period of January 1, 2011, through January 31, 2014, in accordance with the
foregoing opinion and the parties’ Joint Stipulations of Fact filed with this Court.
Jurisdiction relinquished.
_____________________________________
RENÉE COHN JUBELIRER, Judge