[author: Sharon R. Paxton]
On May 2, 2012, a three-judge panel of the Commonwealth Court ruled in Southern Pines Trucking v. Commonwealth, 352 F.R. 2008, that an interstate trucking company was not entitled to credit in an IFTA audit for interest on tax overpayments made to various jurisdictions.
After an IFTA audit, the Pennsylvania Department of Revenue issued a Notice of Determination to Southern Pines identifying overpayments and underpayments by jurisdiction. The Notice imposed a net tax deficiency of $17,840.25 ($83,918.19 less $66,077.94 of credits for net tax overpayments made to other jurisdictions), plus interest of $18,615.24 (computed on the pre-credit deficiency of $83,918.19). Southern Pines contended that the Department had improperly charged interest on amounts owed to jurisdictions where tax was underpaid, without giving any credit for interest on the company's tax overpayments to other jurisdictions.
Under IFTA, when a motor carrier's base jurisdiction conducts an audit, it is required to determine the carrier's tax reporting compliance for every member jurisdiction in which the carrier travels. IFTA Article R1230 specifically mandates that the amount of interest due be calculated separately for each jurisdiction. The IFTA agreement also provides that "[a]n overpayment for one jurisdiction shall have no effect on the interest calculation for any other jurisdiction." As a general rule, a taxpayer is entitled to interest on an IFTA overpayment only when the taxpayer files a refund claim (and the state's obligation to pay interest on a tax overpayment does not generally begin until after the refund claim is filed). Since the disputed credits were established through an IFTA audit, and not by a taxpayer's refund request, the court ruled that the Department of Revenue lacked authority under IFTA to calculate interest on the tax credits it found during the audit.
The court also determined that Southern Pines had waived its right to challenge the auditor's method of computing credits for fuel taxes allegedly paid when its owner-operators purchased fuel used in unreported operations because it did not adequately plead the issue. Nevertheless, the court examined the merits of Southern Pines' arguments regarding double taxation and indicated that those arguments lacked merit under the court's recent decision in R & R Express v. Commonwealth.