Determining a Reliable Value of Property to Impose a Higher Excise Tax Retroactively
In McNeil-PPC, Inc. v. Commonwealth, 575 Pa. 50, 834 A.2d 515 (2003) the issue was simply whether during an audit the Department must adjust for the taxpayer's underpayment as well as overpayment of taxes, and if it conducts a use tax audit whether it must grant credits for sales tax overpayments.
Clearly, under McNeil-PPC, where the taxpayer had overpaid taxes to the Department, any ambiguity in tax refund and/or audit scope provisions of the applicable taxing legislation obviously should be construed, as the court did there, in favor of the taxpayer.
That, however, is not the issue before this Court.
The Department was guided by the decision in Fidelity Bank, N.A. v. Commonwealth, 165 Pa. Commw. 524, 645 A.2d 452 (Pa. Cmwlth. 1994), where the Court sanctioned the Department's use of the six-year average value as a reliable reflection of the value of a taxpayer's shares in the current tax year.
Specifically, the Court reasoned:
The values of the shares in the preceding five years is part of the calculation only to determine a reliable reflection of the value of shares to be taxed in the current year, the shares from previous years are not "retaxed".
The purpose of determining a reliable value of property subject to tax is certainly a legitimate purpose and based on the expert testimony this averaging method is a rational means to that purpose.
Moreover, the possible taxing schemes discussed in McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, Department of Business Regulation of Florida, 496 U.S. 18, 110 S. Ct. 2238, 110 L. Ed. 2d 17 (1990) specifically include retroactively imposing a higher excise tax on taxpayers who have previously paid a tax on those same products in a prior year.
Accordingly, we find no due process violation in the retroactivity of the taxing scheme imposed by the 1989 amendments. Id., 645 A.2d at 460.