On April 24, 2013, the Pennsylvania Supreme Court affirmed, without opinion, the Commonwealth Court’s decision in R & R Express v. Commonwealth, 37 A.3d 46 (Pa. Cmwlth. 2012). In R & R Express, a three-judge panel of the Commonwealth Court had upheld the results of an audit conducted by the Pennsylvania Department of Revenue under the International Fuel Tax Agreement (IFTA), which imposed a substantial tax liability against a brokerage company that failed to strictly comply with IFTA mileage and fuel documentation requirements.
R & R Express had essentially contended that the audit deficiency should be stricken because it had already paid tax on all fuel used in its motor carrier operations (at the time of purchase), and the Department’s audit methodology therefore resulted in double taxation. In the alternative, the company asserted that it should be permitted to have its tax for the audit period recomputed based on data from reporting periods subsequent to the audit period. The company argued that, since its recordkeeping procedures had improved after the audit, the data from later reporting periods represented the “best information available” to compute its additional tax due for the audit period.
Although the Commonwealth Court seemed sympathetic to the taxpayer’s situation, it agreed with the Department of Revenue’s position that strict compliance with the reporting framework set forth in the tax statute, the IFTA Agreement, and accompanying regulations and guidelines, is required.