Fedex Ground Package Sys., Inc. v. Commonwealth, 041706 PACCA, 302 FR 2003

Docket Nº:302 FR 2003
Party Name:Fedex Ground Package Sys., Inc. v. Commonwealth,
Case Date:April 17, 2006
Court:Court of Appeals of Pennsylvania
 
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FedEx Ground Package System, Inc., Petitioner

v.

Commonwealth of Pennsylvania, Respondent

Nos. 302 F.R. 2003, 303 F.R. 2003

Court of Appeals of Pennsylvania

April 17, 2006

BEFORE: HONORABLE BERNARD L. McGINLEY, Judge HONORABLE DORIS A. SMITH-RIBNER, Judge HONORABLE JIM FLAHERTY, Senior Judge

BERNARD L. McGINLEY, Judge

Taxpayer, Fed Ex Ground Packaging System, Inc. (Petitioner) petitions for review of the Board of Finance and Revenue’s (Board) denial of its petitions for refunds of corporate net income and franchise taxes for the tax year ended May 31, 1999. Specifically, the issue involves the revenue miles apportionment fraction used to apportion Petitioner’s taxable income and value in Pennsylvania.

The relevant facts as stipulated are as follows: Petitioner is a Delaware Corporation headquartered in Moon Township, Pennsylvania. Petitioner is engaged in the business of transporting packages throughout the United States by truck. Petitioner does not charge its customers based on the number of miles that it transports a package. Rather, it uses a weight and zone-based pricing system. Therefore, the average receipts that Petitioner receives per mile for transporting packages varies by state.

Petitioner’s average receipts per mile for transporting packages everywhere (in all states combined) was $3.93 per mile during 1999. The total number of miles Petitioner transported packages everywhere (in all states combined) was 470,035,455 during 1999.

Petitioner’s average receipts per mile for transporting packages in Pennsylvania was $2.94 per mile during 1999. The total number of miles that Petitioner transported packages in Pennsylvania was 28,119,379 in 1999.

In its tax assessment for 1999, the Department computed the “denominator” of Petitioner’s revenue miles apportionment fraction by multiplying Petitioner’s average receipts everywhere ($3.93 per mile) by the total number of miles that it transported packages everywhere (470,035,455 miles). The parties agree that the denominator was computed correctly.

Petitioner, however, asserts that the Department erred when it calculated the “numerator” of the revenue miles apportionment fraction.

The “Revenue Miles Apportionment Fraction”

When the entire business of a corporation is not transacted within Pennsylvania an apportionment factor must be employed to determine the proportion of the taxpayer’s income and value subject to corporate net income and franchise taxes. Section 401(3)2.(b)(1) of the Tax Reform Code of 1971,1 which applies to truck companies such as Petitioner, requires that a special “revenue miles apportionment fraction” be applied to determine the proportion of its income and value subject to Pennsylvania tax. Section 401(3)2.(b)(1) of the Tax Reform Code provides in pertinent part:

(b) Railroad, Truck, Bus or Airline Companies.

(1) All business income of railroad, truck bus or airline companies shall be apportioned to this Commonwealth by multiplying the income by a fraction, the numerator of which is the taxpayers total revenue miles within...

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