556 A.2d 18 | Pa. Commw. Ct. | 1989
Opinion by
Carlos R. Leffler, Inc. (Taxpayer) appeals from the September 27, 1985 order of the Board of Finance and Revenue (Board) denying Taxpayer’s petition for refund of taxes paid on revenues derived from the sale of No. 2 diesel fuel oil (diesel fuel). Questions presented on appeal are whether the Oil Company Franchise Tax Act (Franchise Tax)
Taxpayer is a corporation headquartered in Richland, Pennsylvania and is engaged in the sale and importation of petroleum products into the Commonwealth of Pennsylvania. Stipulation of Facts, No. 1. Taxpayer does riot operate any refining facilities and is not involved in the manufacturing or processing of petroleum products;
On July 12, 1985, Taxpayer filed with the Board a petition for refund of taxes paid in the amount of $1,035,278.38 pursuant to the Franchise Tax during the period of January 1, 1985 through May 31, 1985. Stipulation of Facts, Nos. 3-4. On September 27, 1985, the Board denied the refund and issued the order in question whereupon petition for review to this Court followed.
Taxpayer initially argues that revenues from the sale of diesel fuel do not constitute petroleum revenues within the meaning of the Franchise Tax. Taxpayer’s challenge to the imposition of the tax is premised on the fact that the tax levied by the Franchise Tax is only against those petroleum products which are “liquid fuels” within the meaning of the Liquid Fuels Tax Act.
In support of its contention that the Board has ignored rules of statutory construction, Taxpayer claims that words of a statute may not be disregarded under the pretext of pursuing the spirit of the statute and that in construing its meaning the legislature never intended an unreasonable result; the term, “liquid fuels taxes” has an
This precise issue was recently addressed in Commonwealth v. Klinger, 369 Pa. Superior Ct. 526, 535 A.2d 1060 (1988), appeal denied, 520 Pa. 582, 549 A.2d 915 (1988), appeal denied, Pa. , A.2d (1988). In Klinger, where the taxpayer advanced essentially the same arguments as those advanced by Taxpayer with respect to interpretation of the applicable tax statutes, the Superior Court concluded that diesel fuel was subject to taxation under the Franchise Tax. Review of arguments presented by Taxpayer in the matter sub judice leads this Court to the same conclusion as that reached by the Superior Court in Klinger.
Section 9502(a) of the Franchise Act provides:
Every oil company . . . doing business in this Commonwealth, shall pay an ‘oil company franchise tax for highway maintenance and construction’ which shall be an excise tax of 60 mills upon each dollar of its petroleum revenues ....
“Petroleum revenues” are defined in Section 9501 of the Franchise Tax, 75 Pa. C. S. §9501 as all considerations derived from the first sale of petroleum products otherwise subject to liquid fuel taxes. The same section also includes diesel fuel in its definition of petroleum products.
The objective of statutory construction is to ascertain and effectuate the intent of the legislature. Section
' Applying these principles to resolve appellant’s first issue, we conclude that the General Assembly intended the oil company franchise tax to apply to the sale of diesel fuel. The Legislature imposed the tax upon an oil company’s petroleum revenues, which it defined as all consideration derived from the first sale of petroleum products otherwise subject to liquid fuels taxes. Importantly, the Legislature specifically defined petroleum products as including diesel fuel used to propel motor vehicles on the public highways. 75*311 Pa. C. S. §9501, 6th definition. If we were to adopt appellant’s construction that the tax does not apply to sales of diesel fuel, we would virtually eliminate the Legislature’s express inclusion of certain diesel fuel within the definition of petroleum products.
Id., 369 Pa. Superior Ct. at 532-33, 535 A.2d at 1061.
Nor is there any merit to Taxpayer’s argument that the phrase “otherwise subject to liquid fuels taxes” contained in the definition of petroleum revenue is a specific reference to the Liquid Fuels Tax. Pennsylvania imposes two taxes on motor fuel consumption, the Liquid Fuels Tax and the Fuel Use Tax.
The specification of petroleum products ‘otherwise subject to liquid fuels taxes’ within the definition of petroleum revenue does not change our holding. As explained above, appellant con*312 tends that the quoted phrase refers only to the tax imposed by the Liquid Fuels Tax Act, 72 P.S. §2611(a) et seq., which applies primarily to gasoline and which does not apply to diesel fuel. We do not agree, however, that the phrase ‘liquid fuels taxes’ is a specific reference to the tax imposed by the Liquid Fuels Tax Act. If the General Assembly had intended to limit the definition of petroleum revenue to petroleum products subject to taxes imposed by the Liquid Fuels Tax Act, it could have employed a specific reference to that Act.
Id., 369 Pa. Superior Ct. at 533, 535 A.2d at 1061. Nor does it result in inconsistent use of the phrase “liquid fuels taxes” as Taxpayer asserts in its brief. Consequently, there is no merit to Taxpayer’s argument that Franchise Tax Act must fail since it violates the due process clause of both the Federal and State Constitutions because of vagueness.
Taxpayer next argues that to apply the tax as the Board suggests would violate the express requirement of the Franchise Tax that the tax only be imposed on the first sale of the petroleum product. The basis for Taxpayer’s contention is that it is impossible for the Taxpayer to determine at the time of the first sale the purpose for which the diesel fuel will be used. Taxpayer points out that the diesel fuel may be used either for motor vehicles or for home heating purposes, an outcome that goes against the requirement in the Franchise Tax that products used for residential heating are exempt and therefore results in a “catch-22” situation. See Taxpayer’s Brief, p. 20. However, Taxpayer ignores the fact that later provisions of the tax, namely Section 9502(e) of the Franchise Tax, 75 Pa. C. S. §9502(e), provide a credit for taxes paid on taxable petroleum products when it is shown that the
Taxpayer next objects to the regulations promulgated by the Department asserting that these regulations exceed the authority delegated to the Department by the legislature. The Department’s regulations define first sale as the sale of a petroleum product which occurs immediately after importation or production. 61 Pa. Code §351.1. This provision allows an importer to determine in many cases that fuel which could have been taxed under the presumption that it is taxable is in fact being sold for exempt purposes. Under this system, tax dollars stay in the Taxpayer’s pocket instead of being paid to the Commonwealth and later being returned in the form of a credit. Thus, this regulatory provision does not change the impact of any statutory provision but rather simplifies and streamlines the process. As the tax liability is exactly the same under the statutory or regulatory patterns, there is no usurpation of legislative authority by the Department nor can these regulations be viewed as going beyond the authority granted to the Department to enforce and administer the statute pursuant to Section 9506 of the Franchise Tax, 75 Pa. C. S. §9506. The fact that the legislature has not disturbed the regulations since they went into effect lends support to the Department’s interpretation. See Klinger.
And Now, this 20th day of March, 1989, the order of the Board of Finance and Revenue is affirmed. Unless exceptions are filed within thirty (30) days, the Chief Clerk of the Commonwealth Court of Pennsylvania is ordered and directed to file judgment in favor of the Commonwealth and against the taxpayer in the amount of$l,035,278.38.
Act of June 23, 1981, P.L. 98, as amended, 75 Pa. C. S. §§9501-9511.1.
Act of May 21, 1931, P.L. 149, as amended, 72 P.S. §§2611a-2611q.
Amendments were made to the definition of “petroleum revenue” by Act of December 12, 1986, P.L. 1562; however, those amendments are not relevant to the issue at hand.
Act of January 14, 1952, P.L. 1965, as amended, §§2614.1-2614.16.
The instant case is clearly distinguishable from Paris Manufacturing Co.v. Commonwealth, 505 Pa. 15, 476 A.2d 890 (1984), relied upon by Taxpayer, wherein the Supreme Court overruled Department regulations which employed a separate apportionment method than the one set forth in the statute. Moreover, cases cited by Taxpayer with respect to the delegation doctrine are inapposite to the. issue at hand.