Anne X. Alpern, City Sol., J. F. McKenna, Jr., Pittsburgh, for City of Pittsburgh et al.
Mortimer B. Lesher, Sol., Oscar G. Peterson, Asst. Sol., Niles Anderson, Asst. Sol., all of Pittsburgh, for School District of Pittsburgh et al.
Charles Denby, Carl E. Glock, Jr. and Reed, Smith, Shaw & McClay, all of Pittsburgh, for appellee.
Before Rhodes, P. J., and Hirt, Reno, Dithrich, Ross, Arnold and Gunther, JJ.
[ 170 Pa. Super. Page 443]
H. J. Heinz Company, appellee, maintains an Employes Service Building in connection with its extensive plant in Pittsburgh. As a part of the service there provided it operates three dining rooms or cafeterias with a total seating capacity of about 1,800. These dining rooms were maintained primarily for the convenience and benefit of employes of the company. The prices paid by employes for food are lower than the charges in comparable commercial restaurants. From this service the company seeks to recover only the direct costs of the food and the labor related to preparing and serving it. Actual overhead applicable to the cafeterias would result in an operating loss in a substantial amount without regard to free meals served to employes while working overtime, the cost of which alone for the year 1947 amounted to more than $50,000.
The taxes questioned in these appeals are excise taxes for the year 1948 levied on the privilege of conducting a restaurant business, based on the gross sales of food in appellee's cafeterias. The School District of the City of Pittsburgh levied a Mercantile License Tax on the privilege under the Act of June 20, 1947, P.L. 745, 24 P.S. § 582.1; and the City of Pittsburgh imposed a like levy pursuant to its ordinance No. 488 enacted by it on the authority of the Act of June 25, 1947, P.L. 1145, 53 P.S. § 2015.1. The lower court was right in concluding that the Heinz Company is not liable for either of these excise taxes. The operation of restaurants for its employes is wholly incidental to the business of the company, namely, the manufacture and processing of food products in wide variety. Cf. Wellsboro Hotel Company's Appeal, 336 Pa. 171, 7 A.2d 334, 122 A.L.R. 1396; Fixl's Appeal, 336 Pa. 177, 7 A.2d 336.
A Mercantile License Tax as its name implies is a levy on the privilege of conducting a commercial enterprise
[ 170 Pa. Super. Page 444]
for profit. It is not a property tax. The benefits accruing to the appellee from maintaining employe cafeterias are all indirect. The Heinz Company in no sense is engaged in the restaurant business for profit. Neither the School District nor the City of Pittsburgh therefore had authority to levy these taxes based upon the sales of food in appellee's restaurants. The question of the validity of the assessments on this phase of the appeals is identical with that raised by these same appellants and decided against them in two cases involving the liability of the Duquesne Club for similar excise taxes. The restaurants in the Heinz plant, as in the Duquesne Club are not subject to Mercantile License Tax assessment, on the authority of settled principles discussed in our opinion in Duquesne Club v. City of Pittsburgh (School District of Pittsburgh), 87 A.2d 81.
A second question is raised by the city only, in its appeal. On March 15, 1948 the Heinz Company filed a return with the city as a dealer in goods which were not manufactured by it and paid a Mercantile License Tax based on the amount of the taxable gross receipts from sales admitted in the return. On May 26, 1948, the company filed an amended return and tendered payment of an additional tax based on the amended figures, which the City refused to accept. In July, 1948, the city, following an examination of the records of the company, levied an additional tax of $6,454.79, based on its computation of appellee's wholesale and retail sales for the tax year. The total taxable gross receipts from the sales as determined by the city included the proceeds of sale of food in the company's restaurants. The present equity proceeding was brought by appellee within 60 ...