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Commonwealth Court Denies Manufacturing Exclusion and Help Supply Services for Sales and Use Tax

April 1, 2022

In Quality Driven Copack, Inc. v. Commonwealth of Pennsylvania, No. 879 F.R. 2013 (decided December 29, 2021) (opinion not reported), the Pennsylvania Commonwealth Court (the “Commonwealth Court”) held that for the Taxpayer to qualify under the manufacturing exclusion for sales and use tax purposes, there must be a physical change in form to the product or products. The Commonwealth Court also reversed the Board of Finance and Revenue’s (the “BFR”) determination that sales and use tax was properly assessed on the Taxpayer relative to the use of help supply services and subsequently remanded the matter back to the BFR.

The Taxpayer is a Pennsylvania corporation engaged in the business of assembling pre-cooked frozen ingredients into frozen sandwiches and other entrees to be sold at wholesale.  To create its finished product, the Taxpayer would purchase the food components, blend them together, and then freeze them to be sold as frozen meals.  The Taxpayer claimed that it was engaged in manufacturing and processing for sales and use tax purposes in Pennsylvania as is defined under 72 P.S. § Section 201(c) and (d) and 61 Pa. Code § 32.1.

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