Pennsylvania’s Commonwealth Court disallowed a taxpayer’s request for a refund of sales tax paid on distribution, transmission and transition charges associated with the taxpayer’s electricity purchases. Spectrum Arena Limited Partnership v. Commonwealth, 83 F.R. 2004, decided April 18, 2007.

The taxpayer had argued that the separately stated charges for distribution and transmission were not part of the purchase price for nonresidential electricity. The court disagreed, citing the statutory definition of purchase price, which includes “the total value of anything paid . . . in complete performance of a sale at retail . . . without any deduction on account of the . . . cost or value of transportation.” Applying this definition, the court concluded that the customer’s cost in obtaining the taxable electricity included the distribution, transmission and transition charges, and that the customer could not obtain the electricity without incurring those charges. Thus, the total charge constituted the overall purchase price.

We expect this decision to be appealed. Exceptions must be filed with the Commonwealth Court by May 18, 2007. Following a decision on exceptions, the parties are expected to appeal to the Pennsylvania Supreme Court. Thus, this issue will not be finally resolved for at least a year, perhaps much longer.