A manufacturer (taxpayer) establishes that its rentals of wooden pallets, used to transport products from its plant to its warehouse, were exempt from sales and use tax as wrapping supplies. The Pennsylvania Department of Revenue has traditionally incorporated returnable pallets within the scope of “returnable containers,” which are taxable for sales and use tax purposes unless used for delivery of product to the ultimate consumer.
The taxpayer persevered in convincing the Pennsylvania Commonwealth Court that a pallet did not fall within the definition of a “container” under the plain meaning of the word, which is a receptacle (as a box or jar) or a formed or flexible covering for the packing or shipment of articles, goods or commodities. As presented to the Court, the taxpayer must use cardboard slip sheets, corner posts and stretch wrap to cover and hold products placed on a pallet, which is merely a wooden frame with boards attached to it. Without question, the entire unit load will “contain” the product. However, by itself, the Court determined that the pallet is only part of the container.
For more information on this Commonwealth Court case, see Proctor & Gamble Paper Products Company v. Pennsylvania.
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