Kuharchik Construction, Inc. v. Com. of PA

K
           IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Kuharchik Construction, Inc.,                   :
                        Petitioner              :
                                                :
                       v.                       :    No. 486 F.R. 2015
                                                :    Argued: June 9, 2020
Commonwealth of Pennsylvania,                   :
                     Respondent                 :



BEFORE:         HONORABLE RENÉE COHN JUBELIRER, Judge
                HONORABLE ELLEN CEISLER, Judge (P.)
                HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge


OPINION BY
JUDGE COHN JUBELIRER                                FILED: July 15, 2020


       Kuharchik Construction, Inc. (Petitioner) petitions for review of an Order of
the Board of Finance and Revenue (Board) dated July 21, 2015, granting in part and
denying in part Petitioner’s Petition for Review of the use taxes imposed against
certain items, “including, inter alia, traffic signals, traffic signal poles, lights, light
poles, cameras, camera poles, mast arms, pedestals, and pedestal bases” by the
Department of Revenue (Department) pursuant to Section 202(b) of the Tax Reform
Code of 19711 (Code), 72 P.S. § 7202(b). (Stipulation (Stip.) ¶ 15.) On appeal,
Petitioner seeks review of only the portion of the Board’s Order that denied
Petitioner relief from the use taxes assessed against the following four categories of
items: (1) signal poles with mast arms; (2) light poles with mast arms; (3) camera
poles with mast arms; and (4) pedestal bases (collectively, the Contested Items). (Id.
¶ 26.) Before this Court, Petitioner first argues that the Board erred in denying it

       1
           Act of March 4, 1971, P.L. 6, as amended, 72 P.S. §§ 7101-10004.
relief with respect to its purchase and use of items that support a traffic signal head,
including signal poles, mast arms, and pedestal bases, which Petitioner refers to as
its Traffic Signal Related Purchases, because those items are exempt from the
Commonwealth’s use tax as “building machinery and equipment” (BME).
Petitioner additionally argues that the Commonwealth is estopped from assessing
use taxes against any of the Contested Items because the Commonwealth did not
previously assess taxes against similar items in the past. Upon careful review, we
affirm in part and reverse in part.


   I.      Background
        As required by Rule 1571(f) of Pennsylvania Rules of Appellate Procedure,
Pa.R.A.P. 1571(f), the parties submitted Joint Stipulations of Fact (Stipulation), and
stipulated to the following relevant facts. Petitioner is a Pennsylvania corporation
engaged in the electrical construction contractor business. (Stip. ¶ 13.) In the course
of its business, Petitioner contracts with the Commonwealth and its subdivisions.
(Id. ¶ 14.) “Pursuant to some of these contracts, [Petitioner] purchased and installed
property, including, inter alia,” the Contested Items. (Id. ¶ 15.) The parties
stipulated that the Contested Items were purchased and used by Petitioner in
fulfillment of its obligations as a contractor or subcontractor under construction
contracts with the Commonwealth and its subdivisions, and that Petitioner did not
pay sales tax upon purchase of the Contested Items nor did Petitioner remit use tax
for the Contested Items. (Id. ¶¶ 27-30.)

        A. Prior Audit
        Department performed a sales and use tax audit of Petitioner’s business
activities covering the period of January 1, 2001, through December 31, 2003 (Prior


                                           2
Audit). (Id. ¶ 38.) As a result of the Prior Audit, Department issued an “Audit
Report and Basis of Assessment” finding that Petitioner had “a use tax deficiency
totaling $7,357.98.” (Id. ¶¶ 39, 42; Ex. M.) Specifically, Petitioner was found to
have a capital purchase “use tax deficiency of $7,357.98,” and an expense purchase
“use tax deficiency of $0.00.” (Id. ¶ 42(a)-(b).) With respect to the expense
purchases, the Prior Audit Report states:

      A complete examination of relevant expense acquisition transactions[]
      was performed to determine if sales tax was charged on the supplier[’]s
      documentation, or if use tax was accrued and remitted to the
      Commonwealth. Expense purchase acquisition documents were traced
      to the purchase journal to verify receipt of all invoices. The cash
      disbursement/payment vouchers were then examined to verify payment
      of sales tax charged on the supplier’s invoices. The use tax due was
      compiled, reported, and remitted to [t]he Commonwealth.

      Based upon these procedures it was determined that no use tax liability
      resulted from the complete audit of expense transactions for the audit
      period dated January 1, 2001[,] to December 31, 2003.

(Id. Ex. M, Prior Audit Report at 6.) Petitioner’s business activities during the period
of the Prior Audit included purchasing items similar to, and in the same categories
as, the Contested Items; however, a use tax deficiency was not found with respect
to those similar items. (Id. ¶¶ 45-46; Ex. N.)


      B. Current Audit
      Department again performed a sales and use tax audit of Petitioner’s business
activities covering the period of January 1, 2011, through January 31, 2014 (Current
Audit). (Id. ¶ 4.) As a result of the Current Audit, Department issued an “Audit
Report and Basis of Assessment” finding that Petitioner has “a use tax deficiency
totaling $107,136.82.” (Id. ¶¶ 5, 19; Exs. A, B.) Specifically, Petitioner was found


                                            3
to have a capital purchase “use tax deficiency of $1,296.60,” and an expense
purchase “use tax deficiency of $105,840.22.” (Id. ¶ 19(a)-(b); Ex. B.) With respect
to the expense purchases, the purchases at issue in this case, the Current Audit
Report, like the Prior Audit Report, states that “[a] complete use tax examination of
expenses and utilities was conducted,” which included purchases of, among other
things, the Contested Items, and the foregoing use tax deficiency was found to be
owed. (Id. Ex. B., Current Audit Report at 7-8.) The Auditor found that the
Contested Items were taxable as they did not qualify as BME as Petitioner suggested.
      Petitioner filed a Petition for Reassessment with Department’s Board of
Appeals contesting the Current Audit’s finding regarding the use tax deficiency. (Id.
¶ 6; Ex. C.) Department’s Board of Appeals abated the penalties associated with the
use tax deficiency, stating that “Petitioner [] prov[ed] good faith and lack of
negligence to warrant the abatement of the penalties,” but denied Petitioner any tax
relief. (Id. Ex. D.) The Board of Appeals found that the Contested Items were not
BME, but instead fell within the real estate structure exception to the use tax;
however, this exception was not available to Petitioner because it is a construction
contractor. (Id. Ex. D at 2.) Accordingly, the Board of Appeals concluded the
Contested Items were subject to the Commonwealth’s use tax.
      Petitioner then filed a Petition for Review with the Board, requesting, inter
alia, that the use tax assessed against the Contested Items be set aside. (Id. ¶ 8; Ex.
E.) The Board reduced the use tax deficiency to $103,998.39, but denied Petitioner
any relief with respect to the Contested Items. (Id. Ex. F.) The Board found that
Petitioner had not met its burden of demonstrating that the Contested Items fell
within the definition of BME. (Id. Ex. F at 7.) Further, the Board agreed with the
Board of Appeals’ conclusion that the Contested Items instead fell within the real



                                          4
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
Department’s Regulations, 61 Pa. Code § 32.23(b)).)


       C. Appeal to this Court
       Petitioner then filed a Petition for Review of the Board’s Order with this
Court.2 Before this Court, Petitioner only contests the use tax assessed against the
Contested Items, which totals $71,993.06.3 (Id. ¶ 24.) Specifically, on appeal
Petitioner argues that the Traffic Signal Related Purchases are exempt from the
Commonwealth’s use tax as those items constitute BME, and that the
Commonwealth is estopped from assessing use taxes against any of the Contested
Items because the Commonwealth did not assess taxes against similar items in the
Prior Audit. The Commonwealth does not contest the relief afforded by the Board
nor does Petitioner contest a portion of the assessment in the amount of $17,402.07.
(Id. ¶¶ 21, 22.) Further, the parties have stipulated that Petitioner will receive a
further reduction from the total assessment in the amount of $7,331.63. (Id. ¶ 23.)




       2
          Rule 1571(h) of the Pennsylvania Rules of Appellate Procedure, Pa.R.A.P. 1571(h),
authorizes this Court to review determinations made by the Board. 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.” Luther P.
Miller, Inc. v. Commonwealth, 

88 A.3d 304

, 308 n.5 (Pa. Cmwlth. 2014) (citations omitted).
        3
          The total contested amount is the sum of the following deficiency findings from the
Current Audit: (1) $43,178.25 for the use of signal poles with mast arms; (2) $23,192.05 for use
of light poles with mast arms; (3) $4,353.18 for use of camera poles with mast arms; and
(4) $1,209.58 for use of pedestal bases. (Stip. ¶ 24.)


                                                 5
   II.       Discussion
         A. Whether the Traffic Signal Related Purchases constitute BME.
             (1) Parties’ Arguments4
         Petitioner argues that the Traffic Signal Related Purchases are exempt from
the Commonwealth’s use tax because those items are BME. Specifically, Petitioner
asserts that the term “traffic signals,” which is included in the Code’s definition of
BME, includes the poles, mast arms, and anchor bases that support a traffic signal
head, and that they, together, constitute a traffic control system. Petitioner makes
the following three arguments in support of its interpretation that the term “traffic
signals” includes the Traffic Signal Related Purchases.
         First, citing this Court’s decision in Green Acres Contracting Company, Inc.
v. Commonwealth, 

163 A.3d 1147

, 1151 (Pa. Cmwlth. 2017) (en banc), aff’d, 

180 A.3d 1217

(Pa. 2018) (Green Acres), Petitioner argues that the term “traffic signals”
includes more than just the traffic signal head because “the signal head would not be
able to operate to direct traffic” without the Traffic Signal Related Purchases
supporting it. (Petitioner’s Brief (Br.) at 12.) As support for its position that the
Contested Items are required for the functionality of the traffic signal head,
Petitioner draws our attention to Exhibit H of the Stipulation and argues that the
sample traffic signal plan therein demonstrates that the traffic “signal head is
attached to the horizontal mast arm, which is in turn attached to a vertical pole, which
is structurally supported by a pedestal base.” (Id.) Petitioner contends that the
Traffic Signal Related Purchases serve two functions:

         (1) to elevate the signal head to a height and location in an intersection
         that allows drivers to clearly see the lights; and (2) to connect the signal

         We have combined the first two argument sections of Petitioner’s brief for ease of
         4

discussion.


                                              6
      head, via conduit, to a power source, as well as the junction box and
      control assembly that link the signal head to the larger traffic control
      system.

(Id.) As further support for its position that the term “traffic signals” includes the
Contested Items, Petitioner cites to Exhibit L of the Stipulation, which is the
Pennsylvania Department of Transportation’s (DOT) “Traffic Signal Design
Handbook.” Petitioner asserts that this handbook “uses the term ‘traffic signal’ to
refer to the entire structure, and uses the term ‘signal head’ to refer to just the red,
green, and yellow light fixture.” (Id.) Thus, Petitioner concludes that “[b]ecause a
traffic signal is a system of components designed to direct traffic, all parts of that
system must be considered part of the term ‘traffic signals.’” (Id. at 13.)
      Second, Petitioner, again citing Green Acres, argues the Traffic Signal
Related Purchases are included within the term “traffic signals” because they are not
specifically excluded from the definition of BME. Petitioner contends that “a
number of different components make up the traffic signal system, including
conduit, wiring, junction boxes, poles, mast arms, and signal heads,” and that
because the definition of BME only excludes “certain of these components, such as
‘conduit’ and ‘junction boxes,’” the components that are not specifically excluded
from the definition are included as part of the term “traffic signals.” (Id. at 13-14.)
      Lastly, Petitioner argues that the Legislature’s intent when drafting the Code
was for the term “traffic signals” to include traffic signal related items. As support,
Petitioner cites to a bill introduced in the Pennsylvania House of Representatives
“proposing that the Code be amended to include ‘traffic signal foundations, poles
and mast arms’” because the Department’s interpretation of the term “traffic signals”
is too narrow. (Id. at 14 (quoting Stip. Ex. Q).)




                                           7
      Alternatively, Petitioner contends that if we conclude the term “traffic
signals” does not include the Traffic Signal Related Purchases, those items are still
exempt from the use tax as BME because the Contested Items are part of a traffic
control system. Noting that the Code defines BME to include traffic control systems,
Petitioner argues the Traffic Signal Related Purchases, along with the traffic signal
head, constitute a traffic control system because “[a]ll of these components are
designed to work together as a system to direct traffic.” (Id. at 16.) Specifically,
Petitioner asserts that without the Traffic Signal Related Purchases, “the [traffic]
signal head would be unable to connect to” the traffic control system. (Id. at 16-17.)
      In reviewing this matter, Petitioner contends the Commonwealth’s
interpretation of BME and more specifically the term “traffic signals” is not entitled
to deference in this case because “the Commonwealth has issued no regulations,
informal agency interpretations, or policy statements concerning the taxability of the
[Traffic Signal Related Purchases].” (Id. at 18.)
      The Commonwealth responds by arguing that the Traffic Signal Related
Purchases are not BME because the plain, unambiguous definition of the term BME
does not include the Traffic Signal Related Purchases.          The Commonwealth
disagrees that this case is akin to Green Acres because the per se list of items
included within the definition of BME does not include any of the Traffic Signal
Related Purchases. Since the Traffic Signal Related Purchases are not specifically
listed in the per se list, the Commonwealth asserts, citing Kinsley Construction, Inc.
v. Commonwealth, 

894 A.2d 832

(Pa. Cmwlth. 2006), that Petitioner must meet a
two-prong BME test for the Traffic Signal Related Purchases to qualify as BME.
The Commonwealth asserts that “under the two-part test, a specific item [] must
qualify first, as one of the five general equipment types” and “then qualify as one of



                                          8
the ten [] specifically enumerated category subtypes.”5 (Commonwealth’s Br. at 19
(emphasis omitted).) The Commonwealth concludes that since Petitioner has not
argued that the Traffic Signal Related Purchases meet the two-part test, the Traffic
Signal Related Purchases cannot constitute BME.
       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 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.6            (Commonwealth’s Br. at 14.)             The
Commonwealth also argues that Petitioner’s legislative intent argument fails
because legislative intent cannot be gleaned from bills proposed after the enactment
of a statute.


       5
          Section 201(pp) of the Code defines BME as “[g]eneration equipment, storage equipment,
conditioning equipment, distribution equipment and termination equipment, which shall be limited
to” the 10 enumerated categories of property appearing in the definition of BME. 72 P.S.
§ 7201(pp).
        6
          The real estate structure tax exemption is only available to a “charitable organization,
volunteer firemen’s organization, volunteer firefighters’ relief association[,] . . . nonprofit
educational institution, or [] a religious organization for religious purposes.” Section 204(10) of
the Code, 72 P.S. § 7204(10). As such, the real estate structure tax exemption is not available to
Petitioner as a construction contractor.


                                                9
      In its reply brief, Petitioner contends the Commonwealth “attempts to paint
[Petitioner’s] purchases as clearly and unambiguously excluded from the” definition
of BME. (Petitioner’s Reply Br. at 2.) Petitioner disagrees with the above argument
and asserts that the term “traffic signals” is ambiguous because it can be read to
mean “just the traffic signal head” or the entire traffic signal apparatus, including the
Contested Items. (Id. at 3.) Petitioner takes the position that if the Legislature had
intended to exclude the Traffic Signal Related Purchases from the definition of
BME, the Legislature would have included the Traffic Signal Related Purchases in
the list of items excluded from the definition of BME. As to the Commonwealth’s
argument that the Traffic Signal Related Purchases constitute “real estate structure,”
Petitioner asserts that the Commonwealth’s

      analysis ignores the fact that other items in the definition of “real estate
      structure” do in fact appear within the definition of [BME.] For
      example, though the definition of “real estate structure” lists BME and
      “traffic control devices” as separate items, the BME definition includes
      “control systems” for “traffic.” Additionally, though the definition of
      “real estate structure” lists BME and “millwork” as separate items, the
      BME definition includes “cabinetry,” which can also be “millwork” in
      certain circumstances.

(Id. at 5.) Further, Petitioners argue that

      the definition of BME is clear about which items should qualify only as
      “real estate structure” and not as BME. The last sentence of the BME
      definition contains a number of items that do not constitute BME, and
      proceeds to list verbatim a number of items (including “guardrail posts”
      and “pipes”) that are included as examples of real estate structure in the
      “real estate structure” definition.

(Id.) Since the Traffic Signal Related Purchases are not specifically excluded from
the definition of BME, Petitioner concludes “the definition of ‘real estate structure’
does not provide clear guidance as to whether” the Traffic Signal Related Purchases

                                              10
are BME. (Id. at 5-6.) Petitioner also takes issue with the Commonwealth’s
assertion that Petitioner has not demonstrated the Traffic Signal Related Purchases
fall within one of the five categories of items used to define BME. Petitioner argues
that it is neither “necessary [n]or useful to identify one of the five broad categories
of BME” because the Traffic Signal Related Purchases are encompassed within the
term “traffic signals,” which are specifically included within the definition of BME.
(Id. at 6.)


              (2) Analysis
       The Commonwealth’s use tax is set forth in Section 202(b) of the Code, which
imposes a six percent tax on the use within the Commonwealth of “tangible personal
property purchased at retail.” 72 P.S. § 7202(b). Section 201(o)(17) of the Code
defines “use,” in relevant part, as “[t]he obtaining by a construction contractor of
tangible personal property or services provided to tangible personal property which
will be used pursuant to a construction contract whether or not the tangible personal
property or services are transferred.” 72 P.S. § 7201(o)(17). Use tax is to be paid
by the user unless sales tax was paid on the items in question at the time of purchase.
72 P.S. § 7202(a).
       Here, the parties stipulated that Petitioner purchased the Contested Items in
the course of its business as an electrical contractor for use in fulfillment of its
obligations under contracts with the Commonwealth and its subdivisions, and that
Petitioner did not pay sales tax upon the purchase of the Contested Items nor did
Petitioner remit use tax with respect to the Contested Items. (Stip. ¶¶ 28, 29.) In
light of these stipulated facts, Petitioner’s purchase of the Contested Items was
intended to be taxed under the Code unless an exemption to the use tax applies. See



                                          11
Crawford Cent. Sch. Dist. v. Commonwealth, 

888 A.2d 616

, 620 (Pa. 2005); see also
61 Pa. Code § 32.23(b).
      Petitioner argues that its Traffic Signal Related Purchases come within the
BME exemption to the use tax. Section 204(57)(ii) of the Code provides that tax
shall not be imposed against “[t]he sale at retail to or use by a construction contractor
of” BME that is “transferred to . . . the Commonwealth or its instrumentalities or
political subdivisions.” 72 P.S. § 7204(57)(ii). BME is defined by Section 201(pp)
of the Code as follows:

      Generation equipment, storage equipment, conditioning equipment,
      distribution equipment and termination equipment, which shall be
      limited to the following:

             (1) air conditioning limited to heating, cooling, purification,
             humidification, dehumidification and ventilation;

             (2) electrical;

             (3) plumbing;

             (4) communications limited to voice, video, data, sound, master
             clock and noise abatement;

             (5) alarms limited to fire, security and detection;

             (6) control system limited to energy management, traffic and
             parking lot and building access;

             (7) medical system limited to diagnosis and treatment equipment,
             medical gas, nurse call and doctor paging;

             (8) laboratory system;

             (9) cathodic protection system; or

             (10) furniture, cabinetry and kitchen equipment.



                                           12
      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, medial 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) (emphasis added). Petitioner argues that the Traffic Signal
Related Purchases are included within the term “traffic signals,” or, alternatively,
are part of a “traffic control system,” both of which are specifically included in the
definition of BME.
      To resolve Petitioner’s argument that its Traffic Signal Related Purchases
come within the definition of BME we must engage in statutory interpretation. As
always, when engaging in statutory interpretation, we are guided by the Statutory
Construction Act of 1972, 1 Pa.C.S. §§ 1501-1991. “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 of 1972, 1 Pa.C.S.
§ 1921(a). “[T]he best indication of legislative intent is the plain language of a
statute.” Commonwealth v. Gilmour Mfg. Co., 

822 A.2d 676

, 679 (Pa. 2003). As
such, “[w]hen 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).   “A statute is ambiguous when there are at least two reasonable
interpretations of the text.” A.S. v. Pa. State Police, 

143 A.3d 896

, 905-06 (Pa.
2016).   When interpreting statutes, “[w]ords and phrases shall be construed



                                          13
according to rules of grammar and according to their common and approved usage.”
Section 1903(a) of the Statutory Construction Act of 1972, 1 Pa.C.S. § 1903(a).
       Generally, we “defer to the expertise of the agency upon which the General
Assembly has vested enforcement or interpretive responsibilities.” Perrotta v. Dep’t
of Transp., Bureau of Driver Licensing, 

110 A.3d 255

, 259 (Pa. Cmwlth. 2015).
However, no deference is given “to an agency’s interpretation of a statute where
‘there is nothing in the record indicating that the [agency] ha[s] considered and
decided [the] issue at a point prior to the instant litigation.’”                   Harmon v.
Unemployment Comp. Bd. of Review, 

207 A.3d 292

, 300 (Pa. 2019) (quoting Malt
Beverage Distribs. Ass’n v. Pa. Liquor Control Bd., 

974 A.2d 1144

, 1154 (Pa.
2009)). Here, the record discloses no regulations, informal agency interpretations,
policy statements or other indication of Department’s interpretation of “traffic
signals” prior to this case, nor does the Commonwealth argue that its interpretation
here should be given deference. Therefore, pursuant to Harmon, we will not give
deference to the Board or Department’s interpretation of the term “traffic signals,”
as set forth in their respective determinations.
       In reviewing this case we must be mindful that tax “exemptions are to be
strictly construed against the taxpayer,” Plum Borough School District v.
Commonwealth, 

860 A.2d 1155

, 1157 n.4 (Pa. Cmwlth. 2004) (emphasis added),7
and that “[t]he 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,” DS Waters of
America, Inc. v. Commonwealth, 

150 A.3d 583

, 585 (Pa. Cmwlth. 2016).


       7
          Although Section 204 of the Code is titled “[e]xclusions from tax,” we have previously
interpreted the section to provide exemptions from tax rather than exclusions because the items
contained in Section 204 are intended to be taxed in the first place. Plum Borough Sch. 

Dist., 860 A.2d at 1157

.


                                               14
      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%20signal (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
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
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



                                          15
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. 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. See 72 P.S. § 7201(pp).
      The Commonwealth contends Petitioner did not attempt to classify the Traffic
Signal Related Purchases into one of the five categories of equipment constituting
BME and, therefore, Petitioner did not meet its burden of demonstrating that the
Traffic Signal Related Purchases constitute BME. However, for the reasons stated
above, 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.
      In reaching the conclusion that the Traffic Signal Related Purchases are
included within the term “traffic signals,” it is persuasive that DOT’s “Traffic Signal
Design Handbook” distinguishes the term “traffic signal,” which DOT uses to
describe the entire traffic signal apparatus, from the term “signal head,” which DOT
uses to describe just the traffic signal head. (Compare Stip. Ex. L 2.1, 2.3, 20.1 with
Stip. Ex. L 6.1.) If the Legislature intended for BME to include only the traffic
signal head, the red, yellow, and green lights, the Legislature could have used the
term “traffic signal head” instead of the term “traffic signal.”
      For example, in Green Acres, this Court was presented with a similar issue
where we were required to interpret the scope of an undefined term included within



                                          16
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-



                                           17
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], they would
have [] included [these items] in the lengthy definition” of BME.              Kinsley
Construction, 894 A.2d at 836
. After Kinsley Construction, we decided Strongstown
B&K Enterprises, Inc. v. Commonwealth, 
152 A.3d 360 
(Pa. Cmwlth. 2016). In that
case we examined, among other things, whether traffic signs were included within
the definition of BME. Citing Kinsley 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 B&K Enters., Inc., 
152
A.3d 368
. Unlike in Kinsley Construction and Strongstown B&K Enterprises, Inc.,
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.
      Notwithstanding that the definition of BME includes the term “traffic
signals,” the Commonwealth argues that the Traffic Signal Related Purchases cannot
be BME because those items are “real estate structure.”              Specifically, the
Commonwealth asserts that the Traffic Signal Related Purchases are “support
structures,” which are specifically included in the definition of “real estate
structure.” However, there is nothing in the definitional section of the Code to
indicate that each definition provided therein is exclusive. Section 201(qq) of the
Code defines the term “real estate structure” to include:



                                          18
      [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; fittings;
      pipe supports and hangers; valves; underground takes; 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) (emphasis added). Thus, the 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 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


                                          19
Related Purchases in the list of items specifically excluded from the definition of
BME as it did conduit, receptacle, and junction boxes. As such, for the reasons set
forth above, Petitioner’s Traffic Signal Related Purchases come within the BME
exemption as a “traffic signal.”8

       B. Whether the Commonwealth is estopped from assessing use taxes against
          Petitioner for the purchase and use of the Contested Items.
           (1) Parties’ Arguments
       Petitioner argues that “[t]he Commonwealth’s failure to assess use taxes” on
the whole of the Contested Items “during the Prior Audit equitably estops it from
doing so” now. (Petitioner’s Br. at 18.) Petitioner contends:

       The Commonwealth’s auditor represented in its [Prior] Audit Report
       that [Petitioner] did not owe any use taxes for the Contested Items
       during the period reviewed for the Prior Audit. It was reasonable for
       [Petitioner] to rely on the results of the Commonwealth’s audit because
       the process involved extensive pre- and post-audit conferences, the
       provision of exhaustive documentation by [Petitioner], and book and
       record surveys by the Commonwealth’s auditor relative to the
       Contested Items. . . . The [Prior A]udit and apparent seal of approval
       by the Commonwealth reasonably led [Petitioner] to engage in further
       projects involving the Commonwealth and the Contested Items such
       that [Petitioner], to its detriment, did not remit any use tax for the
       Contested Items during the time period of the Current Audit.

(Id. at 19-20.) Petitioner made a similar argument before the Board, asserting:

       If no legislation was passed, and no notification issued, it seems
       completely unreasonable to expect entities such as [Petitioner] to have
       any reason to make changes to policies and procedures regarding [s]ales


       8
          Petitioner also argues that the Traffic Signal Related Purchases are exempt from the
Commonwealth’s use tax as BME because those items are part of a “traffic control system.” In
light of our conclusion that the term “traffic signals” includes the Traffic Signal Related Purchases,
we need not address Petitioner’s argument that those items are part of a “traffic control system.”


                                                 20
      and [u]se [t]ax that have been followed diligently for years, and been
      given previous approval by the [] Department.

(Stip. Ex. C, Petition for Review to the Board at 4.) Petitioner argues that given the
extensive nature of the Prior Audit, which was reviewed by a supervisor, it
reasonably relied upon the Prior Audit, and as a result did not remit use tax or
otherwise factor the cost into its bids, which was to Petitioner’s detriment.
Moreover, Petitioner contends that “[o]ther contractors who [sic] have not
experienced the Commonwealth’s equivocation in applying its own sales and use
tax exemptions may submit a much lower bid that does not include use taxes on the
Contested Items.”    (Petitioner’s Br. at 22.)    Finally, Petitioner contends “the
Commonwealth has changed its position” abruptly and without any notice. (Id.) In
light of the representations made in the Prior Audit, Petitioner argues it “could not
have reasonably foreseen” the deficiency assessment made against the Contested
Items in the Current Audit. (Id. at 21.)
      The Commonwealth responds, citing Commonwealth v. Western Maryland
Railroad Company, 
105 A.2d 336 
(Pa. 1954), and DS Waters of America, Inc., by
arguing that the doctrine of equitable estoppel is “inapplicable against the
Commonwealth’s exercise of its taxing authority.” (Commonwealth’s Br. at 27.)
The Commonwealth further argues that even assuming arguendo that Western
Maryland Railroad Company and DS Waters of America, Inc. were wrongly
decided, Petitioner’s argument regarding equitable estoppel would still fail because
Petitioner has not demonstrated the elements for equitable estoppel.
      In its reply brief, Petitioner argues that DS Waters of America, Inc. did not
reaffirm the holding in Western Maryland Railroad Company.                     While
acknowledging that in DS Waters of America, Inc. this Court cited to Western
Maryland Railroad Company, Petitioner contends that the holding in DS Waters of

                                           21
America, Inc. was based upon collateral estoppel, which is a distinct legal theory
from equitable estoppel. Citing In re Estate of Leitham, 
726 A.2d 1116 
(Pa. Cmwlth.
1999), and Department of Revenue, Bureau of Sales and Use Tax v. King Crown
Corporation, 
415 A.2d 927
, 930 (Pa. Cmwlth. 1980), Petitioner contends that “this
Court has applied equitable estoppel to the Commonwealth’s taxing power on
numerous occasions.” (Petitioner’s Reply Br. at 11.)


      (2) Analysis
      “The doctrine of estoppel is an equitable remedy that may be asserted against
the government in this jurisdiction.” Chester Extended Care Ctr. v. Dep’t of Pub.
Welfare, 
586 A.2d 379
, 382 (Pa. 1991). “[E]quitable estoppel recognizes that an
informal promise implied by one’s words, deeds, or representations[,] which leads
another to rely justifiably thereon to his own injury or detriment, may be enforced
in equity. The two essential elements of equitable estoppel are inducement and
justifiable reliance on that inducement.” Belleville v. David Cutler Grp., Inc. 
118
A.3d 1184
, 1199 (Pa. Cmwlth. 2015) (citations omitted). It is well established that
when examining whether the elements of equitable estoppel are present

      [t]he inducement may be words or conduct and the acts that are induced
      may be by commission or forbearance provided that a change in
      condition results causing disadvantage to the one induced. More
      important, the laws require that . . . [t]he representation or conduct must
      of itself have been sufficient to warrant the action of the party claiming
      the estoppel.


Id. (quoting Zitelli 
v. Dermatology Educ. & Research Found., 
633 A.2d 134
, 139
(Pa. 1993)) (emphasis omitted). In summary, for equitable estoppel to be found here,
Petitioner would have to show the Commonwealth: “(1) intentionally or negligently
misrepresented some material facts, (2) knowing or having reason to know that the

                                          22
[Petitioner] would rely on that misrepresentation, [] (3) thereby induc[ing]
[Petitioner] to act to [its] detriment.” Borkey v. Township of Centre, 
847 A.2d 807
,
811 (Pa. Cmwlth. 2004). “[T]he burden rests on the party asserting the estoppel to
establish such estoppel by clear, precise[,] and unequivocal evidence.” Eagleview
Corp. Ctr. Ass’n v. Citadel Fed. Credit Union, 
150 A.3d 1024
, 1032 (Pa. Cmwlth.
2016) (quoting Blofsen v. Cutaiar, 
333 A.2d 841
, 844 (Pa. 1975)).
      While equitable estoppel may be asserted against the government, “estoppel
will not lie against the government where the acts of the governmental entity’s
employees or agents are in violation of positive law.” County of Beaver ex. rel.
Beaver Cty Bd. of Comm’rs v. Sainovich, 
96 A.3d 421
, 431 (Pa. Cmwlth. 2014).
Importantly for this case, our Supreme Court has held the Commonwealth cannot be
estopped from collecting taxes that erroneously were not collected or were under-
assessed in the past. In Western Maryland Railroad Company, our Supreme Court
declined to apply the doctrine of equitable estoppel to preclude the Commonwealth’s
attempt to collect corporate taxes from a company which, “for a period of over 20
years” did not pay taxes legally due and owing because an officer in the Department,
“who, acting under a mistaken impression of the applicable law, either did not
impose the taxes or compromised them for lesser amounts than were properly 
due.”
105 A.2d at 340
. The Court explained that the company

      should not now be allowed to claim that because of [] mistaken
      indulgence and errors of administrative practice no taxes can be
      imposed by the Commonwealth for any subsequent years.[] It is a
      fundamental legal principle that a State or other sovereignty cannot be
      estopped by any acts or conduct of its officers or agents in the
      performance of a governmental as distinguished from a proprietary
      function. No errors or misinformation of officers or agents can estop
      the government from collecting taxes legally due.




                                        23

Id. at 340-41 
(internal footnote omitted). Thus, pursuant to Western Maryland
Railroad Company, the Commonwealth cannot be estopped from assessing new or
future taxes legally due against a taxpayer merely because those taxes were
erroneously not assessed in the past.
       In DS Waters of America, Inc., we relied on this general principle to reject a
taxpayer’s collateral estoppel argument, holding “that [] Department was not
estopped from assessing a use tax against DS Waters due to a decision of an
administrative board issued to a predecessor in interest regarding its operating during
a separate tax 
year.” 150 A.3d at 592
.
       Petitioner challenges the Department’s reliance on Western Maryland
Railroad Company and its progeny, contending that subsequent to this line of cases,
“this Court has applied equitable estoppel to the Commonwealth’s taxing power on
numerous occasions.” (Petitioner’s Reply Br. at 11.) In support, Petitioner cites In
re Estate of Leitham and King Crown Corporation.
       Petitioner is correct that, in very limited circumstances, the Court has applied
equitable principles to the Commonwealth’s taxing power. Although In re Estate of
Leitham involved the doctrine of laches,9 and not equitable estoppel, and so is not
precisely on point, our discussion there is instructive. In In re Estate of Leitham, we
examined whether Department could assess additional taxes on an estate more than
eight years after the estate filed its inheritance tax return. The Court first examined
the six-month time frame for Department to take certain actions, as mandated by
statute, unless additional time is requested, which did not occur, and found
Department’s actions untimely. In re Estate of 
Leitham, 726 A.2d at 1118-19
. Even

       9
         “A party asserting laches must establish two essential elements: (1) a delay arising from
the complaining party’s failure to exercise due diligence and (2) prejudice to the asserting party
resulting from the delay.” Nigro v. City of Philadelphia, 
174 A.3d 693
, 699 (Pa. Cmwlth. 2017).


                                               24
if the statute did not provide for a specific time period for Department to act, the
Court found the equitable doctrine of laches would apply as there was both a delay
arising from Department’s failure to use due diligence, and prejudice to the estate
resulting from the delay as the estate was closed and all assets distributed.
 Id. at
1119.

        The Court recognized the historical reluctance of courts to apply doctrines of
estoppel to the government, and, similar to sovereign immunity, found that there has
been some modification.
 Id. at 1120. 
Nonetheless, we cautioned that courts “will
require a stronger showing when estoppel is asserted against a governmental entity
than when it is asserted against an individual.”
 Id. (emphasis added). 
The Court
affirmed that “modern advances in case law left intact the principle which the
Supreme Court enunciated in . . . Western Maryland Railroad Company,” which was
“failure to collect the tax in the past is no bar to present collection.” In re Estate
of 
Leitham, 726 A.2d at 1120 
(emphasis added). However, in In re Estate of
Leitham, the estate did not seek “insulation from future tax liability,” but instead to
“estop the [ ] claim for taxes previously due,” which Department had failed to claim
with due diligence for eight years.
 Id. Therefore, the 
holding in Western Maryland
Railroad Company did not apply, and the Court held that Department was estopped
from assessing additional taxes against the estate. In re Estate of 
Leitham, 726 A.2d
at 1119
.
        Petitioner also directs us to King Crown Corporation, in which the Court
applied equitable estoppel against the Commonwealth. In King Crown Corporation,
an assistant attorney general sent a letter to the taxpayer appearing to accept a
compromise and settlement agreement for sales taxes owed. The Commonwealth
attempted to renege on the settlement and compromise agreement, arguing that the



                                          25
proper authorities had not approved the agreement. The taxpayer argued that the
Commonwealth was equitably estopped from reneging on the agreement. We noted
that

       [e]quitable estoppel is a doctrine of fundamental fairness, dependent on
       the particular facts of each case; it arises when “a party, by acts or
       representations intentionally or through culpable negligence, induces
       another to believe that certain facts exist and such other relies and acts
       on such belief, so that the latter will be prejudiced if the former is
       permitted to deny the existence of such facts.”

King Crown 
Corporation, 415 A.2d at 929 
(quoting Bd. of Educ. of Sch. Dist. of
Phila. v. Phila. Fed’n of Teachers Local No. 3, AFT, AFL-CIO, 
397 A.2d 1273
, 1280
(Pa. Cmwlth. 1979)). Applying the doctrine, the Court stated that “[e]stoppel here
thus depends on the reasonableness of [the taxpayer]’s belief that a settlement had
been agreed upon, and the existence of intent or ‘culpable negligence’ on the part
of the Commonwealth’s agent in creating that belief.”
 Id. at 930 
(emphasis added).
The Court found relevant the testimony of the taxpayer’s officer, which was
corroborated by a certified public accountant (CPA) retained by the taxpayer, that
the assistant attorney general who wrote the letter had told the officer that he could
not make the decision, but the agreement had to be presented to someone else, and
he would get back to taxpayer in a week. The taxpayer received the letter a week
later, and it was consistent with the earlier discussion. In addition, we noted that the
taxpayer had been remitting monthly payments in compliance with the agreement
since that time. In reviewing the letter, the Court found it communicated the
Commonwealth’s acceptance of the settlement, reasoning the letter “[wa]s consistent
with a belief that the assistant attorney general had in fact secured the proper
approvals, and was informing [the taxpayer] of the Commonwealth’s decision. . . .”

Id. We, therefore, 
concluded the taxpayer’s belief, “that a valid compromise had

                                          26
been agreed upon, is fully reasonable . . . [and] that the necessary approvals had been
secured. . . .”
 Id. Since the 
Commonwealth had the files, nothing indicated that the
taxpayer should not have believed what the letter said, and there was nothing that
would give rise to a suspicion that the assistant attorney general was acting outside
his authority.
 Id. Upon review 
of these facts, we determined that “estoppel [wa]s
appropriate to preclude the Commonwealth from denying the validity of the
[agreement], and likewise from repudiating the agreement.”
 Id. In doing 
so, we
concluded “[t]he estoppel herein emanates from the . . . letter of the [a]ssistant
[a]ttorney [g]eneral” who had apparent authority to accept the agreement and that
the taxpayer justifiably relied upon that letter and so made the monthly payments set
forth in the agreement.
 Id.
      Consistent with 
Western Maryland Railroad Company and DS Waters of
America, Inc., the equitable doctrine of estoppel generally does not prevent the
Commonwealth from pursuing taxes that are owed. W. Maryland R.R. 
Co., 105 A.2d
at 340-41
; DS Waters of America, 
Inc., 150 A.3d at 592
. However, as King Crown
Corporation and In re Estate of Leitham have shown, the application of equitable
estoppel is “dependent on the particular facts of each case.”            King Crown
Corporation, 415 A.2d at 929
. Applying the law to the facts presented here, we
cannot conclude that Petitioner has shown, through “clear, precise[,] and
unequivocal evidence,” that equitable estoppel should apply. Eagleview Corp. Ctr.
Ass’n, 150 A.3d at 1032 
(citation omitted).
      First, we recognize that Petitioner is not arguing that laches would apply here,
as the estate did in In re Estate of Leitham, where Department waited more than eight
years to pursue taxes, despite an express statutory provision providing only six
months, 726 A.2d at 1118-19
, because here, there is no allegation that the Current



                                          27
Audit was in any way untimely. Nonetheless, the Court in In re Estate of Leitham
confirmed that failure to collect taxes in the past does not bar current or future
collection. Unlike in In re Estate of Leitham, where Department sought to go back
and assess additional taxes for a certain tax period eight years after the relevant tax
return was filed, the issue presented in this case is whether taxes are due for the
Current Audit period, which is still being litigated. As the Court stated in In re Estate
of Leitham, the general principle set forth in Western Maryland Railroad Company
that estoppel does not bar the Commonwealth from pursuing taxes was “left intact”
and the “failure to collect the tax in the past is no bar to present collection.” In re
Estate of 
Leitham, 726 A.2d at 1120
. Instantly, Department is seeking to tax the
Contested Items that were purchased during the Current Audit period, not the Prior
Audit period. Had Department been seeking to collect use taxes owed on the items
similar to the Contested Items which had been purchased during the period of the
Prior Audit, In re Estate of Leitham may be applicable, but that is not the case here.
      This case is also unlike King Crown Corporation where the Department was
estopped from assessing taxes based upon a settlement agreement that applied to the
tax period at issue. In that case, there was considerable evidence to support that a
representation was made, upon which the taxpayer reasonably relied. There was the
testimony of the taxpayer’s officer, which was corroborated by a CPA, about
discussions with the assistant attorney general; a letter from the assistant attorney
general received a week later, as promised, which was consistent with the earlier
discussion; and the taxpayer’s remittance of payments consistent with the
agreement. King Crown 
Corporation, 415 A.2d at 930
. Based upon these acts, we
held it was reasonable for the taxpayer to believe that the assistant attorney general
secured the necessary approval of the agreement.
 Id. Here, the 
quantum of evidence



                                           28
is significantly less. There was no representation in the Prior Audit Report that the
use tax would not be assessed against the Contested Items in a future audit. At
most, Department, through its auditor, represented that Petitioner did not owe use
tax on items similar to the Contested Items during the Prior Audit period. Again,
Department is not seeking to assess use tax against those items from the Prior Audit.
We require a “stronger showing” to apply the doctrine of estoppel against the
government and its taxing authority. In re Estate of 
Leitham, 726 A.2d at 1120
.
Unlike the estate in In re Estate of Leitham or the taxpayer in King Crown
Corporation, Petitioner did not make that stronger showing here.
      This matter is akin to DS Waters of America, Inc., wherein the taxpayer was
seeking to assert estoppel on the basis of representations an administrative board
made to the taxpayer’s predecessor-in-interest during a separate tax 
year. 150 A.3d
at 592
. Although here, there is no predecessor-in-interest involved, the principle
remains the same: a taxpayer cannot rely upon an earlier audit to prevent it from
paying taxes assessed in a subsequent audit. As explained by the Supreme Court in
Western Maryland Railroad Company, a taxpayer “should not be allowed to claim
that because of [] mistaken indulgence and errors of administrative practice no taxes
can be imposed by the Commonwealth for any subsequent 
years.” 105 A.2d at 340
-
41 (emphasis added). Although we are sympathetic to Petitioner because it was
following an interpretation of the use tax provisions that it thought was correct, and
was not aware of the Department’s current interpretation, based upon our Supreme
Court’s precedent as well as our own, we cannot conclude that any representation
made in the Prior Audit Report, to the extent one was made, could estop the
Department from seeking to assess taxes on similar items 10 years later.




                                         29
   III.   Conclusion
      Accordingly, we conclude the Traffic Signal Related Purchases, as used in the
present matter, are BME and, as such, are exempt from the Commonwealth’s use tax
pursuant to Section 204(57)(ii) of the Code. We further conclude that because the
Commonwealth is not estopped from assessing use taxes on the Contested Items, the
Contested Items, other than the Traffic Signal Related Purchases, are subject to the
Commonwealth’s use tax.


                                       _____________________________________
                                       RENÉE COHN JUBELIRER, Judge

Judge Fizzano Cannon did not participate in the decision in this case.




                                         30
        IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Kuharchik Construction, Inc.,              :
                        Petitioner         :
                                           :
                    v.                     :   No. 486 F.R. 2015
                                           :
Commonwealth of Pennsylvania,              :
                     Respondent            :


                                     ORDER


      NOW, July 15, 2020, the July 21, 2015 Order of the Board of Finance and
Revenue (Board), entered in the above-captioned matter, is hereby AFFIRMED in
part and REVERSED in part. Consistent with this Court’s Opinion in this case, the
Board’s Order is affirmed with respect to the use taxes assessed against the light and
camera poles, the corresponding mast arms, and any pedestal bases used to anchor
the light and camera poles. The Board’s Order is reversed with respect to the use
taxes assessed against the poles, mast arms, and pedestal bases used to support traffic
signal heads. Unless exceptions are filed within 30 days pursuant to Pennsylvania
Rule of Appellate Procedure 1571(i), Pa.R.A.P. 1571(i), this matter is remanded to
the Board 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
Court’s Opinion in this case.


                                        _____________________________________
                                        RENÉE COHN JUBELIRER, Judge

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