Fiore v. Com., Bd. of Finance and Revenue

• Decision Date: 09 December 1993
• Citation: 633 A.2d 1111,534 Pa. 511
• Parties: William M. FIORE, t/d/b/a Fiore Trucking and Contracting Company, Appellant, v. COMMONWEALTH of Pennsylvania, BOARD OF FINANCE AND REVENUE, Appellee.
• Court: Pennsylvania Supreme Court

Page 1111

633 A.2d 1111

534 Pa. 511

William M. FIORE, t/d/b/a Fiore Trucking and Contracting Company, Appellant, v. COMMONWEALTH of Pennsylvania, BOARD OF FINANCE AND REVENUE, Appellee.

Supreme Court of Pennsylvania.

Argued April 7, 1993.

Decided Nov. 5, 1993.

Reargument Denied Dec. 9, 1993.

[534 Pa. 512] Henry G. Beamer, Pittsburgh, for Wm. Fiore.

Clinton G. Smith, Jr., Harrisburg, for Bd. of F. & R.

Before NIX, C.J., and FLAHERTY, ZAPPALA, PAPADAKOS, CAPPY and MONTEMURO, JJ.

OPINION OF THE COURT

FLAHERTY, Justice.

This is an appeal by the taxpayer, William Fiore, t/d/b/a Fiore Trucking and Contracting Company (Fiore), from tax assessments for the years 1976 through 1981 entered by the Commonwealth Board of Finance and Revenue and affirmed by the Commonwealth Court. Fiore raises several challenges to the sales and use tax assessments amounting to more than $1,000,000 plus interest and penalties, attacking both procedural and substantive determinations made in these proceedings. Our exhaustive review of this voluminous record discloses that the tax assessments were, on this record, improperly determined, and we therefore vacate the order of the Commonwealth Court.

The facts underlying this controversy may be summarized as follows. The taxpayer, Fiore, is a proprietorship licensed by the Department of Revenue for sales and use tax collection and remittance. Fiore purchased liquid fuel, depreciable equipment, parts, tires, repairs, mobile homes, an airplane and other property, and also leased certain trucks, all of which provide the basis for sales and use tax assessments.

William Fiore also owned and operated other proprietorships operated under various trade names including Mill Industrial Service Company, Diamond Fuel, Diamond Excavating and Hauling, and Rolling Hills Village; William Fiore also was the sole shareholder and operator of Bill's Trucking, Inc. These various entities had overlapping business activities and records, and the intermingling of their business activities appears to be responsible in large part for the difficulties in auditing the taxpayer and assessing the taxes owed by Fiore Trucking and Contracting Company.

The taxpayer was audited by the Department of Revenue for the period January 1, 1975, through September 30, 1978, resulting in an assessment for a deficiency of $216,741.26 plus interest of $35,038.99 and a penalty of $52,609.86, or a total of $304,390.11. Fiore's appeal to the Board of Finance and Revenue resulted in abatement of the penalty but affirmance of the deficiency and interest. The deficiency of $251,780.25 was appealed to the Commonwealth Court at docket number 925 C.D. 1980.

During the pendency of the appeal of the first assessment, the department again audited Fiore, this time examining the period October, 1978 through December, 1981. The department assessed a deficiency of $831,207.28 plus interest of $226,626.01 and a penalty of $207,801.87, or a total of $1,265,635.16. The appellate boards of the department reduced the assessment to $770,495.79 plus appropriate interest and penalties. This second deficiency assessment was appealed to the Commonwealth Court at docket number 895 C.D. 1985.

The second audit resulted in an additional assessment for a fuel use tax deficiency in the amount of $81,728.57 plus interest of $24,963.68 and a penalty of $8,172.86, or a total of $114,865.62. This was affirmed in all respects by the Board of Finance and Revenue, and was appealed to the Commonwealth Court at docket number 1029 C.D. 1985.

The three appeals were consolidated in the Commonwealth Court, which affirmed the three contested orders of the Board of Finance and Revenue. Fiore v. Commonwealth, 141 Pa.Cmwlth. 578, 596 A.2d 1147 (1991), aff'd on exceptions, Fiore v. Commonwealth, 148 Pa.Cmwlth. 62, 609 A.2d 862 (1992) (en banc).

Appellant raises a variety of issues, procedural, constitutional, and evidentiary, of which we find only one to have merit. Fiore claims that he was denied procedural due process when the Commonwealth was permitted to change its basis for the tax assessments at the eleventh hour, but Fiore was not given equal procedural flexibility. The taxing authority's original position was that the taxpayer was not entitled to a public utility exclusion because he predominantly served one customer. It maintained this position throughout the first ten years of this proceeding, and prevailed before the Board of Appeals of the Department of Revenue and again before the Board of Finance and Revenue. At a later stage of the proceedings, during the appeal to the Commonwealth Court, it was determined that such a rule was erroneous, so the Commonwealth argued instead that Fiore should be denied the exclusion because of his poor record keeping and because he was not certified as a common carrier. During the ten years following the first audit, there had never been any contention that Fiore was not a common carrier, was guilty of poor record keeping, or lacked a license or certification. When the Commonwealth Court determined that a common carrier may haul predominantly for one customer, the Commonwealth was permitted to adopt the latter arguments--after discovery had ended and a mere twenty days before the evidentiary hearing in the Commonwealth Court.

Fiore argues that the proceedings constituted a denial of procedural due process. We agree. The taxing authority long labored under an erroneous conception that a common carrier could not properly serve predominantly one customer. It was successful in advocating this erroneous legal standard before the revenue boards and Fiore was compelled, throughout the proceedings, to counter this now conceded misapplication of the law. Fiore finally prevailed before the Commonwealth Court, only to be met by a barrage of new legal theories which would subject him to liability for the assessments. Fiore's de novo hearing before the Commonwealth Court, he claims, was held before he had time to prepare to address the new legal theories advanced by the Commonwealth.

The Commonwealth argues in response that Fiore had a full and fair opportunity to establish entitlement to exemption, citing the comprehensive proceedings and appeals before the Board of Appeals of the Department of Revenue and the Board of Finance and Revenue. Only after the taxpayer appealed to the Commonwealth Court, however, did the Commonwealth appear as an adversarial...