“CHEP” Pallets Exempt as Wrapping Supplies

Companies which have paid Pennsylvania Sales and Use Tax on CHEP pallets should file refund claims immediately, according to McNees Wallace & Nurick LLC.  A three-judge panel of the Commonwealth Court has ruled that “CHEP” pallets qualify as exempt “wrapping supplies.” Procter & Gamble Paper Products Co. v. Commonwealth, 786 F.R. 2009, October 13, 2011.

P&G Paper rents pallets from CHEP USA. Following use, the pallets are returned to CHEP, which reconditions and then reissues the pallets.

At audit, the Pennsylvania Department of Revenue assessed Use Tax on P&G Paper’s payments for use of the pallets. On appeal, the Department’s Board of Appeals and the Board of Finance and Revenue rejected the company’s claim that the pallets are exempt “wrapping supplies” on the basis that the pallets are taxable as “returnable containers.”

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