Carson Concrete Corp. v. Tax Review Bd.
Citation | 176 A.3d 439 |
Decision Date | 21 December 2017 |
Docket Number | No. 179 C.D. 2017,No. 180 C.D. 2017,179 C.D. 2017,180 C.D. 2017 |
Parties | CARSON CONCRETE CORP., Appellant v. TAX REVIEW BOARD, CITY OF PHILADELPHIA Carson Concrete Corp., Appellant v. Tax Review Board and City of Philadelphia |
Court | Commonwealth Court of Pennsylvania |
Matthew C. Monroe, Philadelphia, for appellant
Brooke C. Darlington, Deputy City Solicitor, Philadelphia, for appellee.
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge
OPINION BY JUDGE SIMPSON
In these consolidated tax appeal cases, Carson Concrete Corporation (Carson) appeals from an order of the Court of Common Pleas of Philadelphia County1 (trial court) that affirmed decisions of the City of Philadelphia's Tax Review Board (Board). The Board denied Taxpayer's petitions to review an audit assessment bill issued by the City for: (a) Business Income and Receipts (BIR) Taxes for the years 2000–2009; and, (b) Wage Tax for the years 2001–2009. For the reasons that follow, we affirm in part (as to the underlying tax liability), and vacate and remand in part (as to interest and penalties).
Carson is a concrete construction company operating in the City of Philadelphia (City), its regional suburbs, Atlantic City, New Jersey and Miami, Florida. Carson has been in business for 47 years. Carson's president, Anthony J. Samango, Jr. (President) has been with Carson since 1968. In or about 2008, Carson moved its headquarters from Conshohocken in Montgomery County to Boothwyn in Delaware County. Carson asserted that as a result of a flood, it lost the actual contracts it had with subcontractors from 2000 to 2008. Therefore, these contracts did not make it to the relocated office.
Carson's President testified before the Board that in 2000 Carson began facing skyrocketing workers' compensation insurance rates, which were three times its competitors' rates, because of jobsite accidents. As a consequence, the business climate and culture changed dramatically. To remain competitive, Carson decided to place all its field workers on subcontractors' payrolls for cost plus a fee. Therefore, after 2000, Carson asserts it did not have any of its own employees working in the City. Rather, for the next several years, the bulk of Carson's unionized field workers were employees of subcontractors. During that time, Carson maintained a small staff of managers and administrators at its office in Boothwyn, Pennsylvania. All of the employees paid local municipal taxes.
In its decision, the Board noted, from 2000 to 2009, Carson did business in the City but did not file any BIR Tax returns, did not pay any BIR Tax, and did not pay any Wage Tax. Ultimately, the City became aware of Carson's failure to file tax returns or pay BIR or Wage Taxes.
In September 2011, the City's Department of Revenue (Department) conducted an audit assessment of Carson, which resulted in an assessment for BIR Tax liabilities and Wage Tax liabilities. Following the audit, the City assessed Carson $1,091,787.45 in BIR Tax ($65,709) and Wage Tax ($1,026,078.45) attributed to concrete construction laborers, which Carson contended were not its employees, but employees of subcontractors. With interest and penalties, the City's tax bill exceeded $4,000,000.
After the City completed the audit, Carson requested a re-audit. In support of its request, Carson identified only one subcontractor, CIP Frames. Carson also provided invoices, bank statements and checks in support of its contention that employees of subcontractors, not Carson employees, performed the work in the City. Finding discrepancies among Carson's documents, which also lacked detail, the Department denied Carson's request for a re-audit.
Carson filed two separate petitions for review with the Board challenging the assessments for both the BIR Tax and Wage Tax. After several continuances, the Board conducted a hearing on both petitions. Thereafter, the Board granted a 60–day period for the parties to submit briefs and supplement the record.
As discussed above, President testified at the hearing that in the year 2001, in response to ultra-high workers' compensation premiums resulting from past accidents, Carson placed its field workers on subcontractor payrolls and thus no longer had any of its own employees working on City projects. Bd. Hr'g, 2/10/15, at 73; Reproduced Record (R.R.) at 212a. Consequently, in 2000, Carson had 100 employees employed in the City and paid the Wage Tax for them. Id. However, the next year there were no Carson employees working in the City. Id. Rather, Carson paid the subcontractor cost plus a fee. Bd. Hr'g at 25; R.R. at 213a.
However, the City's Auditor, Lisa Bratz (Auditor) testified that the documents from CIP Frames, the only named subcontractor, appeared deceitful. In particular, Auditor testified:
[E]ach invoice matched the total on a weekly basis, but all it said was, for work done on 7/10 and then the money amount. So there was no saying where the job was, who worked on the job. There was no detail to any of the invoices. It just looked like invoices were made up.
Bd. Hr'g at 73; R.R. at 261a (emphasis added).
When asked whether these types of invoices looked like typical invoices, Auditor replied: Id.
In April 2016, after orally announcing its decision to deny Carson's review petitions, the Board issued decision letters officially denying Carson's petitions.
In its decision, the Board made the following findings:
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