Appeals, Nos. 196, 214, 215, 216 and 219, Jan. T., 1953, from decrees of Court of Common Pleas No. 2 of Philadelphia County, Dec. T., 1952, Nos. 2304, 6974, 7623 and 8371 and March T., 1953, No. 1434, in Equity, in cases of J. Alden Tifft, et al. v. City of Philadelphia, et al., National Biscuit Company v. Same, Household Finance Corporation et al. v. Same, and Gerald W. Caner, et al. v. Same. Appeal, No. 214, decree reversed, reargument refused July 9, 1953; Appeals, Nos. 215 and 216, decree affirmed; Appeal, No. 196, decree affirmed, reargument refused September 30, 1953; Appeal, No. 219, decree reversed.
Abraham L. Freedman, City Solicitor, with him Jerome J. Shestack and Abraham Wernick, Deputy City Solicitors, and Robert M. Landis, First Deputy City Solicitor, for City of Philadelphia.
Charles J. Biddle, with him Leslie M. Swope, George S. Munson, David J. Smyth and Frederick H. Spotts, for plaintiffs, appellants (No. 216).
Charles J. Biddle, with him Leslie M. Swope and W. Wilson White, for plaintiffs, (Appeal No. 215).
Philip Sterling, with him Sydney S. Stern and Sterling, Stern & Levy, for plaintiffs, appellants, (No. 196).
Henry S. Drinker, with him John A. Ballard, John Mulford and Leslie M. Swope, for plaintiffs, appellants, (No. 219).
Francis J. Myers, Joseph F. McVeigh and O'Brien & Myers, filed a brief for Chamber of Commerce of Greater Philadelphia, under Rule 46.
Before Stern, C.j., Stearne, Jones, Bell, Chidsey, Musmanno and Arnold, JJ.
OPINION BY MR. CHIEF JUSTICE HORACE STERN
The present appeals challenge the validity of an ordinance of December 9, 1952, of the City of Philadelphia and question its applicability to the various taxpayers involved in these proceedings.
It has become a mere platitude to state, what has so often been proclaimed, that courts are concerned, not with the wisdom of legislation, but with the right of the legislative body to enact it, -- not with policy but with power.
The ordinance is entitled in part: "An Ordinance to provide revenue by imposing a mercantile license tax on persons engaging in certain businesses, including manufacturing, professions, occupations, trades, vocations, and commercial activities in the City of Philadelphia." It levies an annual tax on wholesale and retail dealers or vendors, manufacturers and all other persons engaged in business, at the rate of 3 mills on each dollar of the annual gross volume of business transacted. "Gross volume of business" is defined to mean, with certain exceptions, gross receipts, including both cash and credit transactions. "Business" is defined to mean "the carrying on or exercising for gain or profit within the City of Philadelphia of any trade, business, profession, vocation, or making sales to persons within the City of Philadelphia, or of any manufacturing, commercial or financial activity, service or business, including but not limited to manufacturers, brokers, wholesale dealers, or wholesale vendors, retail dealers or retail vendors"; it does not include any employment for a wage or salary. Every person desiring to engage in, or to continue to
engage in any business is required to procure a mercantile license for each of his places of business in the City, paying therefor a fee of $3 for each such place.
In the argument on these appeals an attack was made upon this legislation on the ground that the title of the ordinance is constitutionally defective and that the terms of the ordinance itself are vague and uncertain. Those criticisms, however, were apparently not seriously pressed, and, in any event, they do not merit serious discussion. Another complaint urged was that the ordinance does not limit itself to the scope of the usual mercantile license tax because, it is alleged, such taxes have "historically" been imposed only upon merchants, whereas this ordinance purports to tax also persons otherwise engaged. But, whether that fact be true or not, it is certainly wholly irrelevant because the sole question is whether the City has the power to impose the tax upon such "additional" persons and not whether preceding acts or ordinances have included them.*fn1 Moreover, the ordinance itself provides that if the tax, or any portion thereof, which it imposes shall be held by any court of competent jurisdiction to be in violation of any constitutional or statutory provisions, as applied to any person, such decision shall not affect or impair the right to impose the tax, or the validity of the tax so imposed upon other persons as therein provided.
Even if, therefore, it should be adjudged that the tax cannot validly be applied to any particular person or persons that would not affect or impair the validity of the ordinance as to those properly subject thereto. Accordingly, it is clear that the ordinance, as such, is a valid enactment, and that the only questions requiring consideration are those concerning its applicability to persons which it assumes to tax who are engaged in certain types of business, professions, occupations, and financial activities.
The Act of August 5, 1932, special session 1932, P.L. 45, being the so-called "Sterling Act," gave authority to the council of any city of the first or second class,*fn2 for general revenue purposes, to levy, assess and collect such taxes on persons, transactions, occupations, privileges, subjects and personal property, within the limits of such city, as it should determine, except that such council should not have authority to levy, assess and collect any tax on a privilege, transaction, subject or occupation, or on personal property, which then was or might thereafter become subject to a State tax or license fee. While, therefore, this statute vested in the council of the City of Philadelphia an enormously broad and sweeping power of taxation, that grant was attended by the important limitation that no tax could be thus imposed if it duplicated the State's own imposition of a tax or license fee.*fn3 Because of that limitation National Biscuit Company, one of the present appellees, claims exemption from the City tax because, as a corporation,
it pays annually to the Commonwealth a corporate net income tax under the Act of May 16, 1935, P.L. 208, as reenacted and amended, and, as a foreign corporation, a franchise tax under the Act of June 1, 1889, P.L. 420, as amended, and also, to the School District of Philadelphia, an annual tax on gross receipts under the Act of May 23, 1949, P.L. 1669, as reenacted and amended.
Household Finance Corporation, another of the appellees, claims exemption from the City tax because, as a corporation, it pays annually to the Commonwealth a corporate net income tax under the Act of May 16, 1935, P.L. 208, as reenacted and amended, and, as a foreign corporation, a franchise tax under the Act of June 1, 1889, P.L. 420, as amended.
Household Consumer Discount Company, another of the appellees, claims exemption from the City tax because, as a corporation, it pays annually to the Commonwealth a corporate net income tax under the Act of May 16, 1935, P.L. 208, as reenacted and amended, and, as a domestic corporation, a capital stock tax under the Act of June 1, 1889, P.L. 420, as amended. Both Household Finance Corporation and Household Consumer Discount Company also pay to the School District of Philadelphia an annual tax on gross receipts under the Act of May 23, 1949, P.L. 1669, as reenacted and amended.
The Philadelphia Saving Fund Society, the Western Saving Fund Society of Philadelphia, the Beneficial Saving Fund Society of Philadelphia, and Saving Fund Society of Germantown and its Vicinity, appellees, claim exemption from the City tax because they each pay to the Commonwealth an annual tax on their net earnings or income under the Act of June 1, 1889, P.L. 420, as amended. They also pay to the School District of Philadelphia an annual tax on gross receipts under
the Act of May 23, 1949, P.L. 1669, as reenacted and amended.
The court below held that because of these various payments all of these appellees were relieved from payment of the City tax. We are not in accord with this conclusion.
In the first place, as far as the payments made to the School District of Philadelphia are concerned, it is sufficient to say that in McClelland v. Pittsburgh, 358 Pa. 448, 57 A.2d 846, we held that a tax imposed for the benefit merely of a local political subdivision, and not for general State purposes, is not to be regarded as a State tax within the meaning of that term in the "Tax Anything" Act of June 25, 1947, P.L. 1145, which, as previously stated, contained a limitation on the authority of the municipal legislative body similar to that embodied in the Sterling Act. This ruling was followed in Federal Drug Co. v. Pittsburgh, 358 Pa. 454, 57 A.2d 849.
In the second place, as to the payments made to the Commonwealth of capital stock taxes, corporate net income taxes, foreign corporation franchise taxes, and taxes on net earnings or income, it need merely be pointed out that all those taxes have been held, many times, to be property taxes. In an opinion by Mr. Justice LINN, who cited many previous authorities so holding, the capital stock tax was again declared in Murray v. Philadelphia, 364 Pa. 157, 166, 71 A.2d 280, 284, to be a tax on the property of the corporation, and so likewise (following Blauner's Inc. v. Philadelphia, 330 Pa. 342, 198 A. 889, and Philadelphia v. Samuels, 338 Pa. 321, 12 A.2d 79) the corporate net income tax (p. 169, A. p. 286), the franchise tax (p. 170, A. p. 286), and (following Kelley v. Kalodner, 320 Pa. 180, 187, 181 A. 598, 601) a tax on net earnings or income (p. 175, A. p. 289). On the other hand, the authorities are equally
numerous to the effect that a mercantile license tax is not a tax on property or income, but an excise tax upon the privilege of transacting business measured by the gross volume of business annually transacted: Knisely v. Cotterel, 196 Pa. 614, 46 A. 861; Commonwealth v. Harrisburg Light & Power Co., 284 Pa. 175, 130 A. 412; Commonwealth v. Globe Furnishing Co., 324 Pa. 180, 188 A. 170; Commonwealth v. McKinley-Gregg Automobile Co., 345 Pa. 544, 28 A.2d 919; Commonwealth v. Bailey, Banks & Biddle Co., 20 Pa. Superior Ct. 210; H.J. Heinz Co. v. School District of Pittsburgh, 170 Pa. Superior Ct. 441, 87 A.2d 85. Since clearly, therefore, a mercantile license tax is not a duplication of any of the property taxes paid by appellees to the Commonwealth, the City of Philadelphia is not prohibited by reason of any limitation on its power contained in the Sterling Act from imposing such a tax on corporations otherwise subject thereto. Indeed it was definitely so decided in Federal Drug Co. v. Pittsburgh, 358 Pa. 454, 57 A.2d 849, where the mercantile license tax imposed by an ordinance of the City of Pittsburgh was upheld; it was there concisely and categorically stated in an opinion by Mr. Justice ALLEN M. STEARNE, speaking for a unanimous court, that a mercantile license tax did not duplicate or conflict with either the corporate net income tax or the foreign corporation franchise tax. The court below was of the opinion that this holding in the Federal Drug case was overruled, or at least impaired, by the decision in the Murray case. Nothing could be further from the truth. The ordinance held invalid in the Murray case attempted to tax dividends received by persons on shares of stock in corporations paying these various property taxes, and it was held that, since such dividends represented merely a distribution of the net income of the corporation, a tax thereon was a property tax and therefore a duplication of the property
taxes paid by the corporation to the Commonwealth. What was held in the Federal Drug case was that, the mercantile license tax not being a property tax, it was not a duplication of the property taxes paid by the corporation. An analysis of the two cases makes this distinction entirely clear and there is not the slightest basis for the contention that they are other than in complete accord.
We hold, therefore, that corporations otherwise subject to the city mercantile license tax are not exempt therefrom by reason of the provisions of the Sterling Act merely because they pay property taxes to the Commonwealth. But these appeals require careful consideration of claims to exemption from the tax imposed by the City ordinance based on another reason than that heretofore discussed, namely, the payment to the Commonwealth of alleged "license fees," the Sterling Act providing that the council of the city shall not have authority to levy a tax on a privilege, transaction, subject or occupation "which is now or may hereafter become subject to a State tax or license fee." The City earnestly argues that this prohibition should not be held applicable because, it alleges, the City had the power to impose a mercantile license tax under the wide authority granted it by the Act of August 25, 1864, P.L. 1030, which act, it is claimed, is still in force, and the Sterling Act gave the City no additional power in that respect; it is argued that the limitation contained in the Sterling Act on the City's authority to tax should be deemed applicable only to those powers given by the Sterling Act which had ...