Anne X. Alpern, City Sol., Pittsburgh, J. F. McKenna, Jr., Asst. City Sol., Mortimer B. Lesher, School Sol., Oscar G. Peterson, Asst. School Sol., Niles Anderson, Asst. School Sol., all of Pittsburgh, for appellants.
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 427]
Under the Act of June 20, 1947, P.L. 745, 24 P.S. § 581.1, et seq., the School District of the City of Pittsburgh levied a Mercantile License Tax on Duquesne Club for the year 1948. The tax was based on the gross receipts from sales of food, liquor, cigars and cigarettes, and from the operation of its billiard room. Under Ordinance No. 488 of the City of Pittsburgh the city levied a like Mercantile License Tax against the appellee club for the year 1948 based also upon its gross receipts from the same services, except the sale of liquor. The ordinance was adopted on the authority of the Act of June 25, 1947, P.L. 1145, 53 P.S. § 2015.1 which specifically
[ 170 Pa. Super. Page 428]
excluded services subject to a State tax or license fee. Duquesne Club attacked the levy in each instance for want of power to tax. In the equity proceeding brought by the club against the city the lower court, after hearing, enjoined the collection of the tax as prayed for in appellee's bill. In the appeal of Duquesne Club, under the Act, from the mercantile tax levied by the appellant school district the assessment was adjudged null and void and was set aside. Identical principles control both of the present appeals; we will dispose of them together.
There is little dispute as to the facts: Duquesne Club is a corporation chartered by the common pleas of Allegheny County in 1881. The declared purpose for which it was incorporated is 'the maintenance of a club for social enjoyment'. It has a dues-paying resident membership of 1500 and non-resident members numbering 550. It maintains a modern club house in Sixth Avenue in the City of Pittsburgh where it supplies many services for the comfort and convenience of its members and their guests. In its numerous dining rooms it serves as many as 1000 meals each day. The gross receipts from the sale of food alone, for the year 1948, amounted to about $596,000. The prices charged in the regular dining rooms of the club for this and other service, though somewhat lower, are comparable with the prices in the best restaurants and hotels in Pittsburgh. The receipts from the other services supplied by the club, here involved, are substantial in amount. But because of the scope and exceptional quality of the services rendered, the operations of the club are conducted at a loss. The charge for food, for example, would result in a loss if weighted with any part of general overhead expense. The loss is absorbed by the dues paid by members of both classes. This fact has a bearing on the question whether Duquesne
[ 170 Pa. Super. Page 429]
Club was operating a business subject to the tax but it is not decisive of the question. Com. v. McKinley-Gregg Auto Co., 345 Pa. 544, 28 A.2d 919, 143 A.L.R. 582.
The above Act of June 20, 1947 is the source of the text of the city ordinance which the city appropriated bodily from that Act. The language and provisions of both are almost identical except as to the rate of the tax -- in the ordinance fixed at 2 mills and in the Act at 1 mill on annual gross sales. The tax is imposed by § 4 of the Act, 24 P.S. § 582.4 and by § 4 of the ordinance, in this language: 'Every person engaging in any of the following occupations or businesses * * * shall pay an annual mercantile license tax at the rate set forth: * * * Retail vendors, or dealers in goods, wares and merchandise; all persons engaged in conducting restaurants or other places where food, drink or refreshments are sold, and all persons conducting places of amusement * * *.'
The tax contemplated by the Act as well as by the ordinance in question is a levy imposed on the privilege of conducting a particular kind of business. It is an excise tax on the privilege of doing business and not a property tax on income, although measured by the whole volume of annual gross return from the business. Since a mercantile license tax is a tax on the mode of doing business it is not a tax upon persons. Com. v. Thomas Potter, Sons & Co., 159 Pa. 583, 28 A. 492. Accordingly we are concerned here not with taxes on persons conducting restaurants but only on ...