PA Supreme Court Rejects "Sheetz Test" for Sales Tax Purposes

by McNees Wallace & Nurick LLC

In a consolidated decision issued on December 21, 2011, the Pennsylvania Supreme Court reversed the Commonwealth Court’s 2009 decisions in Northeastern Pennsylvania Imaging Center v. Commonwealth and Medical Associates of the Lehigh Valley, P.C. v. Commonwealth, which had held that MRIs and other medical scanning systems installed in the taxpayers’ imaging centers became part of the “real estate” under the Sheetz test discussed below, so that the taxpayers were entitled to a refund of sales tax paid on their purchase and lease of installed scanning systems.  The Supreme Court held that the scanning systems retained their identity as tangible personal property after installation, but remanded the cases to the Commonwealth Court for consideration of the taxpayers’ argument that the Department of Revenue’s denial of their refund claims violated the Uniformity Clause of the Pennsylvania Constitution because the Department had granted refunds to other similarly situated taxpayers.  The Commonwealth Court did not address the Uniformity Clause issue because it had ruled in favor of the taxpayers on the merits.

More significant than the particular ruling in this case was the Supreme Court’s holding that the “test” enunciated in Commonwealth v. Beck Electric Construction, Inc., 403 A.2d 553 (Pa. 1979), rather than the standard enunciated by the Commonwealth Court in In re Appeal of Sheetz, 657 A.2d 1011 (Pa. Cmwlth. 1995), appeal denied, 666 A.2d 1060 (Pa. 1995), applies for purposes of determining whether property that is attached to real estate becomes a permanent part of the real estate for sales and use tax purposes.  This “realty-personalty” analysis determines whether a contract with a non-exempt entity for the sale and installation of property constitutes a “construction contract” (in which case the installed property is “used” by, and taxable to, the installer) or a sale of tangible personal property (in which case the installer claims the resale exclusion when purchasing the property and collects any applicable sales tax from the purchaser).

While the sales tax consequences of contracts with non-exempt entities depend on whether the property being installed becomes part of the real estate, neither the Sales and Use Tax statute nor the Department of Revenue’s regulations define the term “real estate.”  The Department’s regulation at 61 Pa. Code § 31.11 lists items that are presumed to become a permanent part of the real estate upon installation and items that are presumed to remain “tangible personal property,” but that regulation contains no explicit test for determining whether an item becomes part of the real estate.  Since the term “real estate” is not defined by statute or regulation, the parties in Northeastern and Medical Associates took the position that the common law doctrine of fixtures, as delineated in the Sheetz case, represented the proper standard.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McNees Wallace & Nurick LLC | Attorney Advertising

Written by:

McNees Wallace & Nurick LLC

McNees Wallace & Nurick LLC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.