Rite Aid v. Brines Refrigeration Heating

J-A26035-21
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
RITE AID HEADQUARTERS : IN THE SUPERIOR COURT OF
CORPORATION : PENNSYLVANIA
:
:
v. :
:
:
BRINES REFRIGERATION HEATING & :
COOLING : No. 992 EDA 2021
:
Appellant :
Appeal from the Order Entered December 24, 2020
In the Court of Common Pleas of Philadelphia County Civil Division at
No(s): 200401092
BEFORE: BOWES, J., STABILE, J., and McCAFFERY, J.
MEMORANDUM BY McCAFFERY, J.: FILED MARCH 8, 2022
Brines Refrigeration Heating & Cooling (Appellant) appeals from the
order entered in the Philadelphia County Court of Common Pleas, denying its
motion to stay proceedings concerning Rite Aid Headquarters Corporation’s
(Rite Aid) complaint, or in the alternative, for a protective order to limit
discovery. On appeal, Appellant claims the underlying case involves a claim
for fraudulent collection of sales tax and therefore, it must be stayed until the
applicable taxing authorities address the issue as required by Stoloff v.
Neiman Marcus Group, Inc., 24 A.3d 366 (Pa. Super. 2011). Based on the
following, we affirm.
The trial court set forth the relevant facts and procedural history, which
were derived from the verified complaint, as follows:
J-A26035-21
[Rite Aid] is a pharmacy chain with stores located
throughout the United States including Pennsylvania. [Appellant]
is a commercial mechanical contractor that performs HVAC,
lighting, refrigeration and other general services. From 2004 to
2019, [Rite Aid] contracted with [Appellant] to perform various
maintenance and related services at its various locations in more
than 20 states, including Pennsylvania. During this time period,
various contracts were executed by the parties which set forth the
contractual relationship and obligations between [Rite Aid] and
[Appellant]. Specifically, the 2010 Master Service Agreement
[(“MSA”)] and the 2016 [MSA], in particular, required that
[Appellant]’s invoices identify “state sales tax” when applicable.
Additionally, the 2013 HVAC Agreement also included a “Retail
Facilities Invoice Procedure” which required that “All Invoices
MUST list separately the overhead and profit rate and applicable
sales or other tax, if any. Vendor shall be responsible for all
collected taxes associated with paid invoices.” Furthermore, the
2010 MSA, the 2016 MSA, the 2013 HVAC Agreement, Lighting
Agreement and the 2018 HVAC Agreement also contain[ed]
indemnification provisions and assurances that [Appellant] was in
compliance with all current federal, state and local laws and
regulations.
Since 2010, [Appellant] issued to [Rite Aid] more than
150,000 invoices which include a line item change for either “tax”,
“sales tax” and/or the name of the taxing juris[di]ction. At all
times relevant hereto, [Rite Aid] paid [Appellant]’s invoices,
including the line item charge for “tax”, “sales tax” and/or that
contained the name of the taxing authority.[1]
In January 2019, the PA Department of Revenue
(“Department”) sent [Rite Aid] the results of a sales tax audit of
[its] subsidiary Thrift Drug, Inc. covering the audit period of May
1, 2015 to February 8, 2018. As a result of the audit, the
Department assessed additional tax amounts in approximately
177 invoices that [Rite Aid] received from [Appellant] during the
relevant audit period for which the Department determined that
[Rite Aid] had not paid any PA sales or use tax for the taxable
service identified in [Appellant]’s invoices.
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1 Rite Aid purportedly paid Appellant “more than $5.1 million of ‘tax.’”
Complaint, 4/22/2020, at 2.
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Also, in 2019, the Department began a separate sales audit
of Rite Aid, Inc. [Rite Aid] retained Keystone Tax Associate’s, a
sales and use tax consulting firm, to help in reviewing the sales
and use tax Rite Aid paid to the Commonwealth of [Pennsylvania]
and related issues. In November 2019, representatives from
Keystone and Rite Aid met with the Department state tax auditors
to discuss the preliminary assessment of use tax on Rite Aid of PA
for the invoices issued by [Appellant] that included a “tax” line
item. State auditors informed Rite Aid that the Department
was unable to locate any record of [Appellant] being
registered with or licensed by the Department to collect
and remit PA sales tax. The State Auditors also informed
[Rite Aid] that the Department did not have records of
[Appellant] remitting any sales tax to the department. The
Department also informed [Rite Aid] that they did not recognize
the “tax” listed on the invoices issued by [Appellant] and paid by
[Rite Aid] because unless [Appellant] was remitting the tax to the
department using a different name, the tax listed on the invoice
had not been remitted and was not a PA sales tax.
On January 23, 2020, during a call between representatives
of [Rite Aid] and [Appellant], [Appellant] provided [Rite Aid] with
the following information: 1) [Appellant] had not paid sales tax
for work performed in Pennsylvania to the Department or the tax
authorities in other states and 2) the itemized “tax” listed on
[Appellant]’s invoice was not actually a tax but some other charge
by [Appellant]. [Appellant] did not explain what it claimed the
line item stating “tax” represented.
The Department in connection with a closed audit, assessed
[Rite Aid] use tax, interest and fines for the work performed by
[Appellant]. In connection with an open audit, the Department
has informed [Rite Aid] that it will be assessed additional use tax
for work performed by [Appellant] even though [Rite Aid] paid the
“tax” to [Appellant] for the work.
Trial Ct. Op., 7/28/21, at 1-4 (footnotes omitted; emphasis added).
In April 2020, Rite Aid instituted a lawsuit against Appellant, raising
claims of breach of contract, fraud, unjust enrichment, and negligent
misrepresentation based on its reliance that Appellant remitted the taxes
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collected from Rite Aid to the proper state tax authorities. See Complaint,
4/22/2020, at 1-15. Rite Aid sought damages for the money Appellant
purportedly stole under the guise of a charge of “tax” on the invoices. Rite
Aid also requested a declaratory judgment, seeking an order and judgment
stating it was “entitled to indemnification from [Appellant] for any actions by
state tax authorities related to [Appellant]’s misconduct, including for any
future tax liability, losses, damages, attorney’s fees, interest and any other
cost Rite Aid may incur.” Id. at 16.
On September 9, 2020, Appellant filed a motion to stay proceedings
based on Stoloff, supra, or, in the alternative, for a protective order to limit
discovery.2 Appellant alleged that Rite Aid requested these tax payments be
returned but it could not do so based on the following assertion:
[O]nce taxes are collected by a seller like [Appellant], the taxes
become the property of the state. [Appellant] cannot simply be
ordered to pay the taxes back because the taxes would not belong
to [Appellant]. They belong to the state. [Rite Aid]’s recourse
[was] to seek redress with the state.
Appellant’s Motion to Stay Proceedings on Plaintiff’s Complaint and, in the
Alternative, to Limit Discovery, 9/9/20, at 5 (citation omitted). Rite Aid
____________________________________________
2 In addition to the motion to stay, Appellant filed one set of preliminary
objections (POs) and two sets of amended POs. Rite Aid filed responses to the
POs, its own POs to Appellant’s POs, and POs to Appellant’s answer, new
matter, and counterclaim as well as its amended answer and new matter.
Lastly, Rite Aid filed a motion for attorney fees.
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responded to the motion. The trial court reviewed the matter and denied
Appellant’s motion to stay proceedings or limit discovery.3
In January 2021, Appellant filed an application for an amendment of the
court’s order denying its motion to stay on Rite Aid’s complaint to include
language specified by 42 Pa.C.S. § 702(b),4 thereby certifying the order for
interlocutory appeal. Appellant alleged there was “substantial ground for
disagreement on the controlling issue of law which need[ed], from a practical
perspective, to be resolved before trial[.]” Appellant’s Application for an
Amendment of the Court’s Order Denying Appellant’s Motion to Stay to Certify
an Interlocutory Appeal, 1/19/2021, at ¶ 11. The trial court did not dispose
of the motion within the required 30 days and therefore, the application was
deemed denied pursuant to Pa.R.A.P. 1311.
____________________________________________
3The court’s order was dated December 23, 2020, but docketed the following
day. The court entered the order without an opinion.
4 Subsection 702(b) provides:
(b) Interlocutory appeals by permission. — When a court or
other government unit, in making an interlocutory order in a
matter in which its final order would be within the jurisdiction of
an appellate court, shall be of the opinion that such order involves
a controlling question of law as to which there is substantial
ground for difference of opinion and that an immediate appeal
from the order may materially advance the ultimate termination
of the matter, it shall so state in such order. The appellate court
may thereupon, in its discretion, permit an appeal to be taken
from such interlocutory order.
42 Pa.C.S. § 702(b).
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Appellant then filed a petition for permission to appeal with this Court
pursuant to Rule 1311. In a per curiam order, this Court granted the petition
on May 21, 2021. The matter is now before us.
Appellant presents the following issue for our review:
Whether a Common Pleas case involving a claim for fraudulent
collection of sales tax must be stayed until the applicable taxing
authorities address the issue as required by this Court’s opinion in
Stoloff v. Neiman Marcus Group, Inc., 24 A.3d 366 (Pa. Super.
2011)?
Appellant’s Brief at 2.
The crux of Appellant’s argument is that the present proceedings must
be stayed pursuant to the doctrine of primary jurisdiction and this Court’s
ruling in Stoloff “which requires the stay of any civil litigation of ‘any dispute’
regarding sales tax pending exhaustion of administrative remedies with the
applicable taxing authority.” Appellant’s Brief at 4-5. Appellant avers:
This is, in part, because a seller collects sales tax as an
agent for the taxing authority and holds the funds in trust for the
taxing authority. This means a seller cannot simply return the
funds to the purchaser. Once collected, sales taxes generally
belong to the taxing authority and cannot be returned without
proceedings involving the taxing authority.
Because Rite Aid alleges [Appellant] collected sales tax from
it but failed to remit those taxes to the appropriate authorities,
this Court should direct the trial court to stay all proceedings in
the civil action until all required proceedings before the
Pennsylvania Department of Revenue are concluded. As a matter
of comity, the stay should also be applied until future proceedings
before taxing authorities outside of the Commonwealth are
concluded.
Id. at 5.
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Appellant further contends that the court’s decision was based on two
erroneous grounds. Appellant’s Brief at 6. First, Appellant alleges that the
court erred in concluding that there was “no allegation in the complaint, or
reasonable inference, that the ‘tax’ is a sales tax or that [Appellant] is holding
the tax in trust.” Id. (footnote omitted). In support of its assertion, Appellant
points to paragraph 5 of Rite Aid’s complaint, which states that “[Appellant]
collected ‘sales tax’ from Rite Aid and f[a]iled to remit it to taxing
authorities[,]” and paragraph 67 which states “‘Rite Aid reasonably believed
that the ‘tax’ listed in the invoice reflected sales tax.’” Id. (record citations
omitted). Appellant asserts:
The trust fund aspect of Stoloff is not one that arises from
the pleadings, it arises from the statute.6 Pennsylvania[’s] sales
tax statute provides that any tax collected under color of the law
is held in trust for the Commonwealth.7 The under color of law
portion of the statute is particularly relevant because, as the trial
court recognized, “[Rite Aid] is seeking a refund from [Appellant]
for charging [Rite Aid] a ‘tax’ disguised as a sales tax. To the
extent there is a dispute over whether the “tax” is sales tax or
something “disguised” as a sales tax and collected under color of
the law, the dispute must be resolved by the taxing authorities.
_______________________
6 If Stoloff is only implicated when the complaint allege[s]
the existence of a trust fund, a plaintiff could avoid Stoloff
by simply omitting a trust fund allegation.
7 72 P.S. § 7225 [(“All taxes collected by any person from
purchasers in accordance with this article and all taxes
collected by any person from purchasers under color of this
article, including all taxes paid by any person who advertises
or holds out or states, directly or indirectly, that such person
will pay the tax for the purchaser, which have not been
properly refunded by such person to the purchaser shall
constitute a trust fund for the Commonwealth, and such
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trust shall be enforceable against such person, his
representatives and any person (other than a purchaser to
whom a refund has been made properly) receiving any part
of such fund without consideration, or knowing that the
taxpayer is committing a breach of trust: Provided,
however, That any person receiving payment of a lawful
obligation of the taxpayer from such fund shall be presumed
to have received the same in good faith and without any
knowledge of the breach of trust. Any person, other than a
taxpayer, against whom the department makes any claim
under this section shall have the same right to petition and
appeal as is given taxpayers by any provisions of this
part.”)].
Appellant’s Brief at 6-7 (some footnotes omitted).
Second, Appellant complains the court erred in determining that “the
expertise of the taxing authorities is not required because Rite Aid is not
seeking a refund, [or] seeking the interpretation of any taxing regulations or
challenging any assessment.” Appellant’s Brief at 7 (footnote omitted).
Appellant maintains this position was addressed by the Stoloff Court and
rejected because “once the consumer pays the tax, that amount effectively
becomes Commonwealth property[, and] it does not matter whether the
complaint alleges the funds are held in trust or not” or “whether the ‘tax’ was
sales tax or something else.” Appellant’s Brief at 7 (citation and internal
quotation marks omitted). Appellant postulates that the “point of Stoloff is
the plaintiff is required to first seek a refund from the taxing authorities.” Id.
Based on this theory, Appellant asserts the doctrine of primary
jurisdiction is invoked and requires a stay of the proceedings on Rite Aid’s
complaint as the Department has jurisdiction over matters involving
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Pennsylvania sales tax. See Appellant’s Brief at 8-12. Appellant also suggests
that the issues in the case are “complex and require the specialized
competence of the taxing authorities.” Id. at 13. Likewise, Appellant states
that the matter should be stayed until the conclusion of any required
proceedings in sister state jurisdictions. See id. at 20-26. Lastly, Appellant
contends that it may be subject to inconsistent rulings and duplicative liability
if the proceedings are not stayed. Id. at 27-28.
We begin with our standard of review in matters involving jurisdiction:
“[I]ssues concerning the jurisdiction of the trial court . . . present questions
of law and are subject to [a] de novo [standard of] review.” Stoloff, 24 A.3d
at 369 (citation omitted).
[T]he doctrine of primary jurisdiction is concerned with promoting
proper relationships between the courts and administrative
agencies charged with particular regulatory duties. Primary
jurisdiction applies where a claim is originally cognizable in the
courts, and comes into play whenever enforcement of the claim
requires the resolution of issues which, under a regulatory
scheme, have been placed within the jurisdiction of an
administrative body; in such a case the judicial process is
suspended pending referral of such issues to the administrative
body for its views.
Ciamaichelo v. Independence Blue Cross, 909 A.2d 1211, 1218 (Pa.
2006), citing Elkin v. Bell Telephone Company of Pennsylvania, 420
A.2d 371 (Pa. 1980).
The doctrine serves several purposes, chief of which are the
benefits to be derived by making use of the agency’s special
experience and expertise in complex areas with which judges and
juries have little familiarity. Another important consideration is
the statutory purpose in the creation of the agency ─ the powers
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granted by the legislature and the powers withheld. And, another
fundamental concern is the need to promote consistency and
uniformity in certain areas of administrative policy. . . .
It is equally important to realize what the doctrine is not-it
is not simply a polite gesture of deference to the agency seeking
an advisory opinion wherein the court is free to ignore the
agency’s determination. Rather, once the court properly refers a
matter or a specific issue to the agency, that agency’s
determination is binding upon the court and the parties (subject,
of course, to appellate review through normal channels), and is
not subject to collateral attack in the pending court proceeding.
* * *
We must enter a caveat, however. Courts should not be too
hasty in referring a matter to an agency, or to develop a
“dependence” on the agencies whenever a controversy remotely
involves some issue falling arguably within the domain of the
agency’s “expertise.” “Expertise” is no talisman dissolving a
court’s jurisdiction. Accommodation of the judicial and
administrative functions does not mean abdication of judicial
responsibility. The figure of the so-called “expert” looms
ominously over our society – too much so to permit the roles of
the court and jury to be readily relinquished absent a true
fostering of the purposes of the doctrine of primary jurisdiction.
Therefore, where the subject matter is within an agency’s
jurisdiction and where it is a complex matter requiring special
competence, with which the judge or jury would not or could not
be familiar, the proper procedure is for the court to refer the
matter to the appropriate agency. Also weighing in the
consideration should be the need for uniformity and consistency
in agency policy and the legislative intent. Where, on the other
hand, the matter is not one peculiarly within the agency’s area of
expertise, but is one which the courts or jury are equally well-
suited to determine, the court must not abdicate its responsibility.
In such cases, it would be wasteful to employ the bifurcated
procedure of referral, as no appreciable benefits would be
forthcoming.
Elkin, 420 A.2d at 376-77 (citations and footnotes omitted).
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Lastly, “we look to the plaintiff’s allegations, not to the form of the
pleading or the cause(s) of action asserted, to determine whether the doctrine
of primary jurisdiction applies.” Erie Ins. Exch. V. Pa. Ins. Dep’t, 133 A.3d
102, 108 (Pa. Commw. 2016).5
With these principles concerning the doctrine of primary jurisdiction in
mind, we now turn to the case relied on by Appellant, Stoloff. There, the
appellant-buyer filed a class action lawsuit against the appellee-department
store, which arose from her purchase-by-phone of a dress from the store’s
catalog, to which the appellee-department store added a 6% sales tax.
Stoloff, 24 A.3d at 368.
In their complaint, [the a]ppellants insisted that [the appellee-
department store] regularly required its Pennsylvania customers
to pay a sales tax on clothing, even though most articles of
clothing are not subject to the Pennsylvania tax. As a result, [the
a]ppellants filed a class-action complaint against [the appellee-
department store], alleging breach of contract, unjust enrichment,
violation of the consumer protection law, and conversion, in
addition to seeking injunctive relief.
Id. (footnote omitted).
The appellee-department store filed preliminary objections claiming the
trial court lacked subject-matter jurisdiction. See Stoloff, 24 A.3d at 368.
Following a hearing on the matter, at which the court was in receipt of an
____________________________________________
5 We note we are not bound by the decisions of the Commonwealth Court.
IRS v. Blue Mountain Ministry, Inc., 265 A.3d 824, 828 n.3 (Pa. Super.
2021). Nevertheless, this decision is persuasive authority and helpful in our
review of the issue presented.
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advisory opinion by the Pennsylvania Department of Revenue, the trial court
determined the appellants did not exhaust their administrative remedies,
thereby depriving it of subject matter jurisdiction. See id. The appellants
filed an appeal, arguing that the court erroneously limited the scope of its
jurisdiction based on the following: (1) the Pennsylvania Supreme Court
provided broad jurisdiction to the trial courts; and (2) they were “not filing an
action against a government entity, but rather a private entity [and therefore,]
their claims were not subject to the statutes governing tax-refund claims from
this Commonwealth”. See id. at 368-69.
In reversing the trial court’s decision, a panel of this Court held that any
dispute involving the payment of sales tax must first be resolved by the
Department and found the doctrine of primary jurisdiction applied,6 opining:
[The a]ppellants rely on Section 7225 for the proposition
that “private parties have a duty to refund improperly collected
taxes,” and the apparent proposition that the Court of Common
Pleas properly has primary jurisdiction in this case. [The
a]ppellant’s interpretation of Section 7225 is misplaced. Section
7225 unambiguously states anyone who collects taxes that have
not been properly refunded to a purchaser must hold such amount
in a trust fund for the Commonwealth. 72 P.S. § 7225. This
language does not elevate a purchaser to the status of a private
party who may bypass administrative remedies. Reading Sections
7225 and 7252 together, we determine that once a purchaser
pays the seller a tax, whether properly or improperly imposed,
that tax effectively becomes Commonwealth property, whether
the seller transfers it to the Commonwealth or holds it in a trust
fund for the Commonwealth. See 72 P.S. § 7225 (directing that
____________________________________________
6 In conjunction with determining the doctrine of primary jurisdiction applied,
the panel concluded the trial court erred in dismissing the complaint for lack
of subject matter jurisdiction. Stoloff, 24 A.3d at 368.
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all taxes not transferred to the Commonwealth must be held in a
trust fund); 72 P.S. § 7252 (stating that the Department shall
refund all taxes paid improperly to the Commonwealth).
Accordingly, even if [the appellee-department store] failed to
forward the collected tax to the Commonwealth, it was required
to hold, in a trust fund for the Commonwealth, any tax paid by a
purchaser. See 72 P.S. § 7225. Alternatively, if [the appellee-
department store] did forward the collected tax to the
Commonwealth, then Sections 7252 and 7253 unambiguously
dictate that Appellants must seek a remedy with the Department.
See 72 P.S. §§ 7252, 7253.
In either scenario, once the consumer pays the tax, that
amount effectively becomes Commonwealth property. The
Department is thus in the best position to determine whether [the
appellee-department store] appropriately taxed the instant
consumers, as it customarily handles the overwhelming majority
of, if not all, such claims. In fact, Section 7253 mandates that the
Department cannot authorize a refund of improperly collected
taxes unless the taxpayer has filed a petition for refund with the
Department. See 72 P.S. § 7253(a).
In light of the fact that the taxes paid by the instant
consumers are currently in the Department’s possession, whether
in actuality or in trust, we consider the issue of whether the tax
was properly assessed to be within the Department’s jurisdiction
and well-within its expertise.
Stoloff, 24 A.3d at 372-73 (footnotes and some citations omitted)).
Turning to the present matter, the trial court first looked to the
allegations made in Rite Aid’s complaint, finding:
[I]t is clear the doctrine of primary jurisdiction does not apply.
[Rite Aid] brings this action against [Appellant] for breach of
contract and fraud arising from [Appellant]’s alleged improper
collection of a “tax” and its alleged false representation that the
“tax” collected would be remitted to the proper authorities. There
is no allegation or reasonable inference that can be drawn from
the complaint that [Appellant] is holding the “tax” in trust for the
Department or that the “tax” was a sales tax. In fact, it is alleged
that [Appellant] is not licensed or registered with the Department
and therefore could not remit the required sales tax charges.
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This action was instituted by [Rite Aid] to recoup the
allegedly unauthorized line item charge that [Appellant] imposed
upon [Rite Aid].24 [Rite Aid] is not asking for the Department to
assess sales or use tax on [it] or [Appellant]. The assessment has
already been made by the Department since the “tax” charged on
the invoice is not recognized as a sales tax by the Department.
[Rite Aid] is not asking for a refund, asking an interpretation of
any tax regulations nor challenging any tax assessment from the
Department. [Rite Aid] is seeking recourse against [Appellant] for
its allegedly improper actions independent of the Department’s
role and on matters which are properly within the expertise of this
court. Since the expertise of the Department is not implicated,
the doctrine of primary jurisdiction does not apply.
_______________________
24 [Appellant] makes various statements regarding what
the line item “tax” represents. [Appellant] stated that the
“tax” listed on the invoice issued to Rite Aid “was not
Pennsylvania sales tax paid by [Rite Aid] to [Appellant]” but
rather was the reimbursement of the sales tax paid by
[Appellant] to [its] own vendors and then passed onto [Rite
Aid] as a cost of the goods sold to [Rite Aid].
Trial Ct. Op. at 6-7 (some footnotes and record citation omitted).
The trial court further found that Stoloff was distinguishable from the
present matter, explaining:
[Rite Aid] is not seeking a tax refund from the Department of
Revenue or from an entity holding the tax in trust for the
Department. [Rite Aid] is seeking a refund from [Appellant] for
charging [it] a “tax” disguised as a sales tax. The Department of
Revenue’s expertise is not required in this action and the doctrine
of primary jurisdiction does not apply.
Trial Ct. Op. at 8.
Based on the circumstances before us, we agree with the trial court that
the doctrine of primary jurisdiction is not applicable and Stoloff is
distinguishable from the present matter for several reasons. First, Appellant
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conflates that fact that this case touches upon the failure of a party to pay a
tax with the notion that any litigation, or even any allegation, related to a tax
issue must fall under the umbrella of the Department. Likewise, Appellant
repeatedly misconstrues Rite Aid’s cause of action as a mere refund for the
paid “taxes.” Rather, this matter concerns Rite Aid’s reliance on Appellant’s
statements that the taxes, which it listed on its invoices and requested Rite
Aid pay, was ostensibly being collected and forwarded to the Department for
tax purposes. Rite Aid further alleged Appellant either fraudulently or
negligently mispresented this information because the money paid was never
deposited with the Department as a “tax.”
This leads us to our second point. Appellant focuses on two paragraphs
of an 89-paragraph complaint to support its argument that Rite Aid did allege
in its complaint that (1) the “tax” at issue was a sales tax; and (2) that
Appellant was holding the tax in trust. Rather, when looking at the complaint
in toto, this was not the case. Rite Aid’s complaint focused on a fraudulent
scheme as directed by Appellants. It specifically alleged that Appellant issued
numerous invoices to Rite Aid, which included a line item charge for “tax” in
connection with Appellant’s work, which Rite Aid paid directly to Appellant.
Rite Aid’s Complaint at 2. Rite Aid then averred Appellant failed to remit that
money to the proper tax authorities in Pennsylvania. See id. It further
alleged:
35. In 2019, in connection with a tax audit by the PA Department
of Revenue, Rite Aid learned that [Appellant] had not remitted to
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the PA Department of Revenue the taxes [Appellant] had collected
from Rite Aid for work [Appellant] had performed in Pennsylvania.
In fact, according to the PA Department of Revenue, [Appellant]
was not registered with the PA Department of Revenue and did
not have a Pennsylvania sales tax license, in violation of
Pennsylvania law. Without a valid sales tax license, a vendor
cannot remit the required sales tax charges, as required by
Pennsylvania law.
36. Because [Appellant] failed to remit the sales tax it collected,
the PA Department of Revenue has informed Rite Aid that it is
assessing a use tax on Rite Aid for its transactions with [Appellant]
during the audit period.
37. Upon learning that [Appellant] was not registered for sales
tax with the PA Department of Revenue and had never remitted
to the PA Department of Revenue the sales tax it had collected
from Rite Aid in Pennsylvania, Rite Aid’s representatives
attempted to contact [Appellant] on or about November 25, 2019,
December 3, 2019, December 9, 2019, December 13, 2019 and
January 3, 2020.
38. After repeatedly failing to respond to Rite Aid’s attempts to
get information about the sales tax collected by [Appellant], [its]
representatives agreed to have a call with Rite Aid’s
representatives on or about January 15, 2020.
39. On the January 15, 2020 call, when Rite Aid’s representatives
asked for information related to [Appellant’s] collection and
remittance of sales tax in Pennsylvania, [Appellant’s]
representatives ─ includ[ing] [Appellant’s] president Marty Brin ─
refused to answer Rite Aid’s questions, claiming that they were
waiting to hear from their accountants and attorneys.
40. On or about January 23, 2020, Rite Aid’s representatives had
another call with representatives of [Appellant], including Marty
Brin and an attorney representing [Appellant]. On that call,
[Appellant’s] representatives informed Rite Aid that [it] had not
paid sales tax for work performed in Pennsylvania to the PA
Department of Revenue or to the tax authorities in other states.
Instead, [Appellant’s] representatives falsely claimed ─ in direct
contradiction with the unequivocal language in [Appellant’s] own
invoices and requirements in the Agreements between Rite Aid
and [Appellant] ─ that the itemized “tax” listed on [its] invoices
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was not actually a tax, but some other charge by [Appellant].
Unsurprisingly, [Appellant] could not explain what the “tax”
charges were.
41. Based on [Appellant’s] representations on January 23, 2020
that the itemized “tax” listed on [its] invoices was not actually a
tax, [Appellant] has not remitted the tax it collected from Rite Aid
to any state tax authorities and now falsely claims that the
itemized “tax” on [its] invoices did not reflect a tax.
Id. at 7-9.
Based on these averments, it is evident that Rite Aid was not merely
claiming the parties’ conflict involved a tax refund issue and that Appellant
had placed the paid taxes in a trust fund. It is clear Rite Aid was alleging
Appellant purportedly committed fraud or some other tortious action because
it had not remitted the taxes to Department that it collected from Rite Aid,
and that it could not even do so because it was not registered with Department
and did not have a Pennsylvania sales tax license. Furthermore, the complaint
also indicated that Appellant had subsequently changed its position and was
now alleging that the itemized “tax” listed on the invoices was not actually a
tax, but rather, some other charge. Accordingly, Appellant’s argument has no
merit.
Moreover, Appellant’s reliance as Stoloff is misplaced for several
reasons. One, the appeal issue does not concern a request for a refund of
taxes already paid to the Department. Two, the appellants in Stoloff never
asserted that the appellee-department store did not keep the taxes at issue
in a trust fund for tax purposes as is the case here. Three, the appellants did
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not set forth causes of action for fraud and negligent misrepresentation like
Rite Aid did in its complaint. Lastly, in its brief, Appellant does not allege the
money collected is being kept in a trust fund for tax purposes in accordance
with the Sections 7225 and 7252. Therefore, contrary to Appellant’s argument
Stoloff is not controlling in this appeal.
In sum, we conclude the trial court did not err in denying its motion to
stay proceedings concerning Rite Aid’s complaint, or in the alternative, for a
protective order to limit discovery, as it had jurisdiction to review the matter.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 3/8/2022
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