Jerry's Bar, Inc. v. Commonwealth
172 A.3d 1196
Pa. Commw. Ct.2017Background
- Jerry’s Bar, a Delaware County retail bar/restaurant, purchased manufacturer-brand beer through distributors that were licensed to distribute in the City of Philadelphia.
- Distributors located in Philadelphia delivered the beer to Jerry’s Bar in Delaware County and charged a 2% City of Philadelphia sales tax, which they remitted to the Commonwealth.
- Jerry’s Bar claimed the purchases were for resale and sought a refund of $1,778.42 in Philadelphia sales tax for transactions from Sept. 1, 2010–Aug. 28, 2013.
- The Board of Appeals denied the refund; the Board of Finance and Revenue affirmed; Jerry’s Bar appealed to the Commonwealth Court.
- The Liquor Code (Sections 431(b) and 441(e)) restricts from whom a licensee may purchase certain beers by geographic distribution rights, which required Jerry’s Bar to buy some beers from Philadelphia-based distributors.
- The Department’s regulations treat local sales tax as imposed at the retailer’s place of business (point of sale) and exclude sales of malt or brewed beverages to retail dispensers from the resale exemption.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether City of Philadelphia sales tax applies when distributor in Philadelphia sells and delivers beer to a Delaware County retailer | Jerry’s Bar: Tax not owed because purchase is for resale and retailer is not Philadelphia-based | Commonwealth: Local tax imposed at point of sale (retailer’s place of business); delivery within Commonwealth subjects sale to Philly tax when distributor is in Philadelphia | Held: Tax applies — sale occurred in-Commonwealth and is subject to Philadelphia tax because distributor in Philadelphia sold and delivered the beer |
| Whether purchases for resale by a retail dispenser are exempt from local sales tax | Jerry’s Bar: Purchases are for resale to its customers, so exempt | Commonwealth: Resale exemption expressly excludes sales of malt or brewed beverages to retail dispensers or retail liquor licensees | Held: No resale exemption; purchases by retail dispenser are taxable |
| Whether being required by Liquor Code to buy from Philadelphia distributors renders tax unconstitutional or improper | Jerry’s Bar: Statutory distribution scheme forces purchases from Philadelphia distributors and unfairly imposes tax burden | Commonwealth: Procedural posture and briefing waived any constitutional challenge; statutory scheme does not exempt tax | Held: Constitutional and broader challenges were undeveloped/waived; not resolved on merits; refund denied |
| Proper appellate vehicle to challenge the Liquor Code geographic-distribution rules | Jerry’s Bar: Attempted to challenge effect of Liquor Code via refund proceeding | Commonwealth: Board of Finance and Revenue review is not the correct forum for collaterally attacking the Liquor Code | Held: Such challenges are not properly raised in a refund appeal and were not addressed substantively |
Key Cases Cited
- City of Philadelphia v. Commonwealth, 838 A.2d 566 (Pa. 2003) (PICA enacted to aid financial stability of Philadelphia; PICA taxes operate alongside Tax Reform Code)
- Tool Sales & Serv. Co. v. Board of Finance & Revenue, 637 A.2d 607 (Pa. 1993) (appeals from Board of Finance & Revenue are de novo)
- Scott Elec. Co. v. Commonwealth, 692 A.2d 289 (Pa. Cmwlth. 1997) (Commonwealth Court functions as trial court on de novo review)
- Van Duser v. Unemployment Compensation Bd. of Review, 642 A.2d 544 (Pa. Cmwlth. 1994) (issues not raised in statement of questions involved are waived)
- D.Z. v. Bethlehem Area School District, 2 A.3d 742 (Pa. Cmwlth. 2010) (issue waived where appellant failed to develop legal argument)