A divided panel of the Commonwealth Court held that a city was not prohibited from imposing its Business Privilege Tax on the gross receipts of a freight broker. S & H Transport, Inc. v. City of York, No. 165 C. D. 2014 (Pa. Commw. Oct. 15, 2014). The taxpayer contracted with its customer to provide common carrier transportation services. The taxpayer would then contract with a common carrier to transport the items, negotiating the lowest feasible price. The difference between what the taxpayer charged its customer and what the common carrier charged the taxpayer constituted the taxpayer's profit. The Local Tax Enabling Act provides:
(f) Such local authorities shall not have authority by virtue of this act
. . . .
(2) To levy, assess or collect a tax on the gross receipts from utility service of any person or company whose rates and services are fixed and regulated by the Pennsylvania Public Utility Commission or on any public utility services rendered by any such person or company or on any privilege or transaction involving the rendering of any such public utility service;
53 P.S. §6924.301(f)(2).
The majority opinion focused on the third clause “on any privilege or transaction involving the rendering of any such public utility service.” The court held that any public utility service referred to a public utility service performed by a person whose rates and services are fixed and regulated by the PUC. The court stated that the taxpayer’s services did not involve the rendering of such service.
The conclusion that the taxpayer's contract with its customer does not involve rendering a service does not seem correct; the taxpayer contracted with this customer to provide the service in question. That seems like involvement. However, a concurring opinion stated that the rates and services of trucking companies are no longer fixed and regulated by the PUC. If so, the services contracted for by the taxpayer were not within the statutory language. A dissent argued that the phrase such public utility service in the third clause did not refer back to persons whose rates and services are fixed and regulated by the PUC.