Adelphia House Partnership v. Commonwealth
Court: Commonwealth Court of Pennsylvania; October 21, 1998; Pennsylvania; State Appellate Court
Taxpayers, consisting of Adelphia House Partnership, Sylvania House Partnership, and Joseph Eisenstadt, filed exceptions to a Commonwealth Court decision that denied their request for a sales tax refund on utilities purchased for residential tenants. Taxpayers own two apartment buildings in Philadelphia, where residential tenants pay a monthly rental fee that includes utilities. They purchase electricity and natural gas in bulk, which is subject to a six-percent sales tax under Section 202 of the Tax Reform Code of 1971. The court clarified that the Tax Code exempts utilities from sales tax only if purchased directly by the user for residential use. It ruled that the utilities purchased by the Taxpayers for residential tenants constituted non-residential use, thus making them taxable. This interpretation aligns with the precedent set by the Pennsylvania Supreme Court in Aldine Apartments, which held that a landlord's utility purchases on behalf of tenants do not qualify as residential use. The Taxpayers argued that the definition of tangible personal property should exclude residential utilities from taxation and contended that amendments made to the Tax Code in 1991 warranted a different interpretation. However, the court maintained that the existing case law, particularly Aldine Apartments and Summit House Condominium, remained authoritative despite the amendments. Ultimately, the court overruled all Taxpayers' exceptions and affirmed its prior order, entering judgment in favor of the Commonwealth. The ruling reinforces the principle that utilities purchased by landlords for tenants are considered for commercial purposes and are subject to sales tax.