PA Supreme Court Affirms That Shipping Pallets are Not Taxable, Creating Refund Opportunity for Purchasers


The Pennsylvania Supreme Court has affirmed that returnable shipping pallets are not subject to the state's sales and use tax. The Commonwealth Court’s decision in favor of taxpayers on this issue is now final, and any taxpayers who have paid tax on pallets should consider filing a claim for refund.

At the Commonwealth Court, the Department of Revenue argued that pallets were taxable because they are "returnable containers" that are expressly carved out of the wrapping supply exemption. As authority, the Department cited its own May 9, 2008 letter ruling concluding that returnable pallets were subject to tax in Pennsylvania. Based on that letter ruling, vendors had begun charging tax on the lease of the pallets.

The taxpayer, Procter & Gamble, pointed to a multitude of dictionary definitions and industry standards that support its position that, regardless of whether a pallet is "returnable," pallets are simply not "containers." Further, the taxpayer relied on 58 years of regulatory history, during which time the Department only identified items that had volume, like barrels, boxes and bottles, as "containers."

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