Tax Developments

October 31, 2011

Pennsylvania Court Holds Pallets Are Not Containers and May Be Eligible for Sales Tax Exemption.

Recently, the Commonwealth Court of Pennsylvania (“Court”) reversed the Pennsylvania Board of Finance and Revenue’s (“Board”) decision and held that pallets are not “containers” for sales tax purposes. If the Court’s decision in Proctor & Gamble Paper Products Co. v. Commonwealth of Pennsylvania (No. 786 F.R. 2009, decided October 13, 2011) is not overturned on appeal, returnable pallets may qualify for Pennsylvania’s sales tax exemption for wrapping supplies purchased or used by the seller.

The wrapping supplies exemption specifically excludes returnable containers. The law defines “returnable containers” as items designed to deliver property to customers more than one time. Because the law does not define “containers,” the Court used the plain meaning and common description of a “container,” which is a receptacle or a formed or flexible covering for packing or shipping goods. Based on this definition, the Court determined that pallets alone are flooring, not containers. Because pallets are not returnable containers, the Court reversed the Board’s decision that the pallets did not qualify for the sales tax exemption for wrapping supplies. The State of Pennsylvania has 30 days in which to appeal the decision.


Dennis J. Kolumber, Jr.
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